In this episode, host Francois Marchand is joined by George Moulos—CEO at Ecommerce Brokers—to talk about what you need to look at when you’re considering buying an ecommerce business, how to get your business ready when it’s time to sell, and how a broker can help facilitate both sides of the transaction.
- George’s background [1:37]
- At Ecommerce Brokers – they help people buy and sell online businesses – 80% of their sales are million dollar Shopify businesses, as well as marketing agencies.
- They’ve been selling businesses for 11 years now.
- It’s an industry that’s developing as ecommerce and online economies develop.
- There are a lot of advantages and freedoms with purchasing online businesses.
- You can start it up with very little cash.
- What factors should you consider when buying an ecommerce business? [4:17]
- You have to have a good understanding of who you are as a buyer. The majority of their buyers are US-based with middle to upper-class incomes. A lot have limited or no knowledge of online retail but want a piece of the pie of the ecommerce world. Some might be good at a specific type of skill and want to use their skills for this type of business.
- Most buyers don’t have a sophisticated understanding of all the parts of an online business.
- They’re really good at negotiating deals at Ecommerce Brokers.
- What you should be considering:
- What kind of brand equity does your business have? Is it recognizable? Buyer’s are asking: “Should I buy this business or could I start it on my own?”
- How good is the seller? Do they have their financials in order? Are they communicating well? The integrity of the seller is very important.
Some sellers talk about the potential of the business and what it could do in 12 months, but buyers just want to know what has been done, not what could happen.George Moulos
- Could Ecommerce Brokers do all of this due diligence for the buyer? [14:18]
- Yes. They are looking for red flags.
- First step for Ecommerce Brokers is sourcing the businesses to buy. He’s looked at almost all businesses over $100K listed online in the last 10 years. So he knows what’s good.
- They send a list of potential companies to the buyer and the buyer identifies the business they’re interested in.
- George’s team will hop on a call with the seller and gather all the necessary information. And will work on negotiating. They always leave the calls with a better deal.
- It’s hard to check out and analyze a business – so they do a macro level summary of the business and help advise and strategize.
- They generally don’t show businesses that they don’t like – but in one case the buyer had brought a business to them he was interested in. The buyer loved the business but George recommended that he don’t buy it and presented some red flags.
The biggest thing that buyers need to know is there’s so many great businesses out there at great prices – just be patient.George Moulos
- What should ecommerce business owners pay attention to when they consider selling their ecommerce business? [21:18]
- Get your financials in order and make sure they’re honest and clear (i.e., if you’re the seller and you work a 40 hour week, the net profit might not account for a manager’s salary that the buyer would have to pay).
- Increase the defensibility of your business – trademarks, patents, exclusivity agreements, etc. Buyers will be asking if they could just create the same business for less.
- Take yourself away from the business. Once a buyer purchases a business, suddenly they need to operate the business. As a buyer you want to know that the seller’s role has been hired out or they have prepared you for how to run the business yourself.
- Tools [25:05]
- George suggests Shopify – he believes they’re superior.
- In preparing your business, you want to make sure you’re opening yourself up to the most amount of buyers – and most are comfortable with Shopify.
- You want to make sure that you’re running some ads, that you have email marketing software, and that it’s profitable. If a seller hasn’t done any paid ads, then that’s not a good thing. A buyer wants to come in with some cash and put money into ads – if you haven’t validated that it’s profitable to run ads then that is not necessarily a good sign for a buyer.
- Clean, engaged social media. You don’t want to have any bans or red flags from social media platforms.
- If you’ve bought followers or traffic in any way – these things will be found.
- What are the best ways to find potential buyers for an ecommerce business? [28:25]
- Brokers are great for your bigger businesses.
- The online M&A world has developed. If you’re selling a business under $100K then you should probably sell it on your own, especially since brokers charge about a 10% commission.
- Once you get into the $100K+ margin – a broker will make your life easier since you need to run your business while selling. A broker also has the network and are already on the marketplaces – they have the reach.
- Use a broker that’s great at what they do (i.e., a SaaS broker, or an ecommerce broker) – look at written testimonials.
Meet Our Guest
George Moulos is an Australian serial entrepreneur who was selected for the Forbes 30 Under 30 Greece in 2020. After starting and selling online businesses in Sydney, Australia he started working exclusively in the online M&A industry through his boutique M&A firm www.Ecommerce-Brokers.com. In the following 11 years George and the Ecommerce Brokers team have focus on the North American market and helped clients buy and sold over 500 businesses and many millions in total deal value. He has spoken at universities and events across Europe about M&A and entrepreneurship.
Brokerages are great for your bigger listings because every type of niche and every type of online business has their own particular way to sell nowadays.George Moulos
Resources from this episode:
- Subscribe to the newsletter to get our latest articles and podcasts
- Connect with George on LinkedIn and YouTube
- Check out Ecommerce Brokers and George’s personal website
Related articles and podcasts:
Read the Transcript:
We’re trying out transcribing our podcasts using a software program. Please forgive any typos as the bot isn’t correct 100% of the time.
Francois Marchand: You can start an ecommerce business, or you can buy an ecommerce business. And sometimes, it's time to sell your ecommerce business. So how do you do this? What are the things you need to investigate when it's time to buy or sell?
Welcome to The Ecomm Manager Podcast. Our mission is to help you succeed in your ecommerce journey with helpful advice from the experts who made it big. I'm your host, Francois Marchand.
Now today I'm joined by George Moulos, he's the Founder of Ecommerce Brokers—a company that helps entrepreneurs buy and sell ecommerce businesses. We'll be chatting about what you need to look at when you're considering buying an ecommerce business, how to get your business ready when it's time to sell, and of course, how a broker can help facilitate both sides of the transaction.
So stay tuned as we dive deep into best practices for buying and selling an ecommerce business, and how ecommerce professionals can do it right.
So George, welcome to The Ecomm Manager Podcast. I'm so happy to have you on the show today. I'm just so fascinated by the idea of buying and selling ecommerce businesses. It's not something I'm super familiar with, I'll be honest with you. And I'm not sure how much our audience is familiar with the process at large.
So why don't you tell us a little bit about what you do and what Ecommerce Brokers as a company does, just to give us a quick overview of what's happening here.
George Moulos: Absolutely. Well, firstly, thanks for having me on. It's an honor to be on the Ecomm Manager Podcast. So to keep it simple, generally speaking, at Ecommerce Brokers we help people buy and sell online businesses.
So that can be ecommerce, your standard Shopify businesses or your Amazon FBA businesses, but can also be affiliate sites, content sites, SaaS businesses apps. But look, for the most part, about 80% of our sales are million dollar Shopify businesses and also marketing agencies. So, generally speaking as a, I guess a kind of an overview, the last, and we've been operating, well, we've been selling businesses for 11 years now.
That's when I saw my first business, and the industry has definitely changed. I mean, when I started, I didn't even know it was an industry, let's call it online M&A, as I like to call it. Bit of a cool name for it. But yeah, it's an industry that's developing as ecommerce and online economies developing.
It's not really mainstream as an investment, let's call it. But then again, buying and selling businesses, normal businesses isn't necessarily mainstream as an investment either. The weed thing with online businesses is how many great advantages there are, how much freedom there is with it, and also there's no minimum buy-in, let's call it.
You can buy a business that's making a couple hundred bucks for a couple thousand bucks. And you can do it also with very little kind of startup cash, the kind of deals that we're doing on the buy side up to 50%, 60%, 70% seller financing or earn out, which we'll get into later. But it basically means you can start up with very little cash.
So, the options for investors are great and the freedom that these businesses give is fantastic too. So on the buy and sell side, which we both operate on the buy and sell side, it's gone really well. It's really, covid definitely helped. We're one of the only, industries where Covid was great. Yeah, it's definitely developing over time.
Francois Marchand: Yeah, obviously the pandemic kind of, we talk about this when we address a number of topics. It's reshaped the way ecommerce is growing. It's boosted it in various ways, and it's changing the face of retail and commerce period at large, right? So everything's going online.
There's more and more transactions taking place without a physical location. And obviously this is where, Ecommerce Brokers comes into play for people that want to get into ecommerce or get out of ecommerce if they've decided it's time for them to move on, they've done what they wanted to do.
So let's get into the meat of the topic today—how to buy and sell an ecommerce business? So, let's talk, considering your experience, you're the pro here. I want to know what factors should you consider if you want to buy an ecommerce business? You're an entrepreneur, you wanna start the business, you're like, Eh, I don't wanna build it from scratch. I wanna buy something that's already established. Like what kind of due diligence do I need to conduct before I buy an ecommerce business?
George Moulos: That's a great question. And we answer that almost every day for a lot of our buyers. And first thing I would say is you have to have a good understanding of who you are as a buyer.
So you know, the majority of our buyers are US based. They're, let's call it, middle to upper class in terms of income, for example. So, and usually they're about, let's call it 25, the youngest, I would say, up to 70. And a lot of them either have limited knowledge of online retail or none at all.
And they wanna make the investment or they want to, at least a piece of the pie of the online business, online ecommerce world. And some, might just be very good at specific type of marketing, Facebook ads, SEO, et cetera. And they want to, use these skills to buy a business.
So for that sort of a buyer that is great at a particular type of marketing or great at product development, or great at just recruiting, and building out a team. The type of businesses they specifically should be looking for are businesses that don't have those types of attributes.
But look, to answer your question, most generally, most buyers don't have a super sophisticated understanding of all the parts of a online business. So when we look at a business, and I'll use a recent example, we helped actually a Canadian buyer who was looking to make their first acquisition and they had, between $100k to $150k to spend.
And we said, let's start small, firstly. And so we ended up doing two acquisitions instead of one big one. And the first acquisition we did we went out to the market and my team on the buy side, we said, okay, well we have a good budget here to buy. And when I say budget, and this is the first step of finding a business to buy is really what is our budget and what does that actually mean for what we can buy?
So our first acquisition, we strategized and we said, let's spend a hundred grand on the first acquisition. Let's not, go big on the first acquisition since it was the first acquisition for this buyer. So we said, okay, we've got a hundred grand USD. What that actually means we can buy is about 200 to 250 grand worth of businesses or a business, purely because what we can do on the financing side. On the financing side, what I mean there is earn out and seller financing. And earn out basically is where you say, okay, let's say the business is worth 200 grand.
We'll pay a hundred grand upfront in cash, and then a hundred grand of value of the business will basically estimate that out over a year, and we'll pay that out of the earnings of the business. And we'll, the conditions will be, the business must make a X amount of revenue each month. And if it doesn't make that, then there is no earn out or there's a reduced earn out.
And if sometimes if there's more than the estimated revenue, they might get a bonus, the sell of that is. So earn out is a good way to get a deal across the line for sellers. It's not their favorite type of financing cause it doesn't guarantee them their payout basically.
So that's why they prefer seller financing. Seller financing is just a loan, just like a loan you'd get from the bank, except you're getting the loan from the seller. So they're guaranteed by the buyer to pay that amount out over a specific period, usually with up to 5% to 6% interest, and they need to pay that.
They'll have a promissory note. A lawyer will draw that up. But it's again, a great way to get the deal across the line for the seller. As a buyer, it's fantastic because before we could only buy a $100k business, now we can buy a $200k business and what we do at Ecommerce Brokers is we're great at negotiating.
That's our biggest, attribute is that we've done that many deals. We just had to negotiate really well, and that comes with the experience. So what we've found is that there were, the average, seller financing portion is 20%, 30%, and recently we've got 60% seller finance. So we only had to put down 40, I think it was about 42 grand for about a hundred grand business.
And then we self-finance that out over a year and a half. So the buyer doesn't actually have to shell out that much money to buy this business that was purchased. So that's the first financial standpoint. If as someone who has a hundred grand to spend, we can buy a 200, 250 grand business.
So that's already the range that we're looking at in terms of valuation. Now, in terms of valuation, the next question usually is, well, if it's a 200, 250 grand business, what does that actually mean? How much money makes on a monthly basis? I'm gonna pull out my calculator to do some quick maths. So generally speaking, let's call it a $200,000 business.
Most valuations out there, all valuations out there, sorry, are based off the multiple. And the multiple is usually between one and five x. And what that multiple is multiplied by is the trailing 12 months net profit or EBITDA. Now for a $200k business, the average multiple last year on businesses sold was I think 2.9 x.
And that's including brokerages, marketplaces, unrepresented sellers. So it's generally low. The sellers we sell for, four x or a little bit higher. So let's say 200 grand valuation is probably making about, so 200 grand valuation has divided that by the average of 2.9, so then the trailing 12 months EBITDA would probably be about $70,000.
So for $70,000 divided by 12, you can expect the business that's about $200k valuation to make about six grand a month in net profit. So that's how we can map out the actual, basically by reverse engineering the valuation, we can map out how much money this businesses make. Then it comes all the other stuff.
Now, when you're looking at a business to buy, financials come first and everything else is a very low second. Everything is very financial for buyers and it makes sense. So, and sellers understand that too. Most sellers, some sellers, they talk about the potential of the business and what it could do in 12 months and what it could do in six months. And that's interesting for buyers, but buyers really just wanna know what has been done, not what could happen.
Cause it could, like in a month, it could also go to nothing. I mean, we had a lot of stories come from other brokerages in the month of March 2020 where their business went to zero in a month. These were acquisitions and these were the bigger marketplaces that are doing higher volume numbers.
But these buyers bought these businesses and then a month later they went to zero. They were in the travels, they were, these shops were doing luggage, and of course that went to zero. So potential isn't that important at the end of the day for evaluation. So those last 12 months of the financials is the most important thing.
Then the next thing is age. How old is the business? Anything less than a year old really isn't ready to be sold. And a buyer's really uninterested. We've only sold one business over $500k that was less than a year old. One, cause we don't actually list businesses that under a year old. And number two because that business was super fast growing in the medical niche, medical device niche, which is very competitive.
So it's gotta be a year old. And I would advise any buyer to buy something at least a year old, maybe two. Generally, businesses that are sold are two to five years old. That's the sweet spot. Any businesses that's older than five to 20 years, it's one of those legacy businesses and they've got their own, quirks about them.
After age, it's really about what type of niche it is in. Is it an evergreen niche? Is it's, a fad? We see a lot of businesses that are basically pump and dump. They do great for three to six to maybe 12 months, and then they're dead. And then the last thing that's most important for serious buyers and any serious buyer will talk about this is defensibility.
Is this business, just something that, you whip together and it's been doing well? Or is it actually something that you have a trademark on that's minimum defensibility? At least have a trademark in the US and the EU. Number two is if you can get a supplier exclusivity agreement, so basically supply in China or Pakistan or India or wherever you might be sourcing from, The US, if you can get a supply exclusivity agreement, that is massively important not just to buyers, but to banks and investors.
Cuz banks and investors generally almost always don't understand how the online business world works. They never really understand valuations. They either think it's way too high or way too low. So when you show them some, like a supply exclusivity agreement, they love that. So they're gonna give your buyers, a lot more funds to make the acquisition happen.
And of course there's also patents. Now it's pretty rare for buyers to have patents, but it happens. Sorry for seller to have patents, but it happens. And look, besides that, it's, it comes to the other things too. What kind of brand equity does your business have? Is your brand recognizable? Is it just one in a million that, made three to six months buy, buy on their own?
Because that's the real question. Any buyer is asking during the searching process with, let's call it 200 grand, should I buy this business or could I make this business on my own and in six months time, be doing what this business is doing today? So after all those kind of steps, which is like I said, financials of the business and valuation.
Number two would be age, number three would be defensibility. And then beyond that, it's all the small things. It's all the, how good is the seller? Do they have their financials in order? Are they audited financials? Is the seller communicating well? Are they clear? And the other thing too is quite quickly at looking at businesses and talking to sellers, you get a good intuition of which sellers actually good, truthful, honest, have integrity.
And that's very important because you might think like, oh, I'm just gonna grab the business off them and that's it. The reality is you're probably gonna enter into 30 to 60, up to 90 days of work with this person, and you're gonna be speaking to them at least a couple times a week, maybe on a call, maybe over email. The integrity of the seller is very important as well, I would say.
Francois Marchand: I was wondering like if I was looking to buy a company, thanks to your advice, I could probably do it myself. It would require a lot of work. And this is probably where if I'm not able to look into all those little details, someone like you or the team at Ecommerce Brokers would come into play and would you be able to do all that sort of due diligence analysis for me as a buyer?
George Moulos: Definitely. So what we do at Ecommerce Brokers on the buy side is, firstly, we're looking over everything for red flags. Because as it's the online world, there's a lot more things that can go wrong, and the best comparison is buying a house. When buying a house, you can go into the house, you can walk into the house, you can look at the house, you can see, there's mold on the roof and the foundations aren't great. From an online business, it's much harder to do that, but that's what we do.
So for the first step is sourcing. My team looks at a ton of businesses every single day, and I'll look at those summaries and then I look at every business. So, and I've been looking at businesses almost every decent business listed over a hundred grand, let's say, the last seven, eight years I've looked at.
So anything really listed on the internet in especially the US, Australia, Canada, and EU, I've seen the deals and the volume of deals that I get to see gives me a good idea of what's good immediately. And so for the six to 12 month buy side programs we have, we try to give that experience to the buyer.
So we're sourcing, hundreds of businesses. We're looking at hundreds of businesses a week. We're putting those into simplified emails for our buyers. So second, can look at pros, cons, George's broker thoughts, and he's the financials. Simplified, and we give it straight to them. And very quickly they get an understanding of what's bad, what's good, and then we can jump on something and actually start negotiating very quickly.
That's the second thing we do. So our buyer will say, great, George, check out number two. This week looks great. See what you can do. Then my team or myself will hop on a call with the seller, collect all the information, which is sometimes a massive headache as well, just to get financials and PNLs in order and ready.
And then I, as I always say, we work for our fee, we work for our fee on that first or second call because we negotiate on average 10% to 60% less on price. And then we also negotiate, like I mentioned, 60% seller financing, 60% earn out. So there the price comes from something that's super hard to pay for cash upfront to it's far less.
And then also you can finance a ton of that as well. So that's the second big step. We know how to negotiate, not just because we're good at negotiating cause we've done a bunch of it, but we also have the most up-to-date industry data on what kind of deals are being done. So we can say to a seller, Hey, your business is valued at this, but the industry average for your specific niche is, 0.5% lower.
And 90% of deals last year were had some form of financing, and you're not offering any of that. So what can you do for us? We leave these calls a hundred percent of the time with a better deal. We've never said, you know what, we can't help at all. And then of course we close the deal, which is the safety part of things.
Like I mentioned, it's very hard to check out and analyze a business. So we, of course, we help out with the legal agreements, the LOI sales agreement promissory notes. Of course, our lawyer is needed for these agreements, and we have that network of great ecommerce focused lawyers. As you can imagine, the older school type of lawyers wanted to create a 700 page document, charge you per word and per email and per call at this.
There's a good breed of ecommerce focused lawyers that are fantastic that'll charge you, a reasonable rate. And we have that network across the world. Same goes for accountants and same goes for some of these due diligence services.
I, generally speaking, we do a overall kind of macro analysis of the business before and after, before enduring due diligence. And we hop on, of course calls with our buyer to actually run through everything and we go pros and cons. We do what we can to advise and as strategize. And also, like I said, pick out the red flags.
Francois Marchand: Just wanna jump in really quick and ask, how often do you have to say, don't buy this business? Does that happen a bit, a lot, or not at all?
George Moulos: Yeah, so the call that I had just before this podcast was saying, oh my God, I'm so glad we didn't buy that other business cause we're now buying a business that he absolutely loves.
So it actually doesn't happen that often because we generally don't show businesses that we don't really like. But this buyer, for example, brought one of his own businesses that he found. And we said, we're gonna dive into this. I personally hopped on a call with a seller and from the get-go, my intuition said, this is bad.
This is, something bad's gonna happen here. And I hopped off the call and I said, I talked with the buyer. And the buyer loved the business cause it was a local business. He knew it personally. And I said to him, look man, the reality is here, the financials have some big glaring holes in it, as number one.
Number two, the seller wants to move too fast, and it's concerning. Number three, and this is the worst thing that can happen, the seller is trying to play games. Like they're saying, oh, we have a couple offers this buyer, offered much more and then this buyer did this and this buyer did that.
And also, I know we agreed to this currency, but we actually mean this currency that happens to be much more than what we agreed. And that's where the lack of integrity should scare you away from a deal. And you should definitely listen to your intuition there. So I got off that call and had the call with my buyer and his whole team and I said, there's no way, you know we can move forward with this.
This is every piece of information that comes in is gets worse and worse. So they're out there. It does happen. And when we're sure about things not being good we're very clear about that. Cause the last thing we want is to have a bad reputation. We hired George to keep us safe and get a good deal and then everything went wrong.
And I think the biggest thing that buyers need to know is there's so many great businesses out there at great prices, just be patient. It's hard in the ecommerce world cause we're doing everything so fast. And one month you can two to three x your revenue in a business. And things feel like they happen overnight.
But the deal world of ecommerce is actually, it's fast in the comparison to brick and mortar world of deals, but it's actually relatively slow, and you should take your time and don't rush into things. And if you feel like you're overextending, pull back and let things pass because there's so many other great businesses out there.
Francois Marchand: Yeah. Well, the last thing you want to do is get into a situation where you're putting all this money into a business only to see it fall apart and fail. That's where doing your due diligence, analyzing the risk, and making sure that everything is financially sound and structurally sound within the business you're buying is crucial.
You can't mess around with that. So yes, I do agree. Take your time. It's your money. Don't waste it. Don't spend it too fast. Make the right decisions. We talked a little bit about how to calculate, the valuation of an ecommerce business and how to determine the asking price, how brokerage comes into play.
I wanna flip the script and ask about selling your business. So what should ecommerce business owners pay attention to when they are looking to sell? What's their part in getting prepared for that step, moving away from their business or, taking a smaller role in letting someone take over?
George Moulos: No, that's a great question. And we get that a lot from sellers. Because a lot of the time sellers will come to us and they'll say, I wanna sell my business. And we'll have to say, we can't. Your business right now is either not sellable or you could really, have a much better valuation in three months or six months. So the first thing is getting your financials in order.
Like I mentioned, on the buy side, that's the most important thing that a buyer looks at. So if your financials are a mess, you have clearing holes, or if it's too simple, right? We've seen, PnLs as revenue or sales, expenses, profit. That's not a PnL, that's a dream maybe. But you know, you need to get your financials done by an accountant because that's the only type of financials a buyer will seriously consider.
Or you can have them done, rushed at a higher expense during due diligence. So one, get that done early on the financials and make sure they're honest. Because, and on the buy side, the biggest question really is this net profit really the net profit? Because there's a few questions around that too, if the owner is working 40 hours in the business and the buyer doesn't want to have a job when they buy a business, they're gonna have to hire someone. So they need to put a manager's salary in there. If that isn't in that net profit number, that needs to be accounted for. So the financials need to be very clear.
That's the first thing. Clean them up, get an accountant, make sure they're clear and honest. Number two, increase the defensibility of your business as much as you can. And trademarks are usually things that, small things that you don't really consider and that cost a couple hundred bucks, but get them done.
Because from a buyer's perspective, like I said, the second question they might ask is for 200 grand or a million, $5 million, why don't I just start this business? 5 million bucks can buy me some great hires, put a lot of money into ad spend. If they don't even have a trademark, if they don't even have exclusivity agreements, if they don't have, strong brand equity, I could build this, right?
So building defensibility as fast as you can is very important. And the number three, I would say is like you mentioned, take yourself away from the business because one concern for every buyer is after the completion date, which we release the funds of the buyer to the seller, and we transfer the business assets.
A buyer has a business to operate now that they weren't in before, and that's a scary day. I've bought businesses. I know the feeling. It's scary. You have these people looking to you, okay, what do we do now? Like is what's changing? And your customers are waiting for your response too. So there's a lot of pressure on you.
And not to mention, you just spent a lot of money. As a buyer, you want to know that the sellers prepared for this sale and their role has been either hired out or they've properly prepared you in terms of during the due diligence period they've made a bunch of SOPs - standard operating procedure documents or videos or looms.
That's a great seller. We recently sold an agency where we had a fantastic seller who made a bunch of loom videos, word docs, and made it super simple and easy for the buyer to say, you know what? I think I could pretty much take this on from day one, and I understand how to be the CEO of this business.
And if not, as a seller, why not have a few hires that you think would be good for roles like a manager, like a CEO. The stress level of a buy comes down immediately. Cause they know as soon as this business comes into my hands, we are gonna be great. In operating this business, we know how things are done.
And then of course there's also the support period, 30 to 90 days, usually. The seller might provide support, but really, you wanna limit that by preparing beforehand.
Francois Marchand: One of the things we talked about in our interview at The Ecomm Manager, which you can find, we'll put it in the show notes, talking about how to best choose your ecommerce platform.
One of the things you mentioned in that interview, on the more technical side, what do you need to have ready when you're transitioning to selling your business? So can we address some of the factors or some of the technical elements that could scare away, let's say, potential sellers from a technical standpoint?
Because like we said, we don't have necessarily a building or a foundation or leaky roof to show off, but there might be some, technical aspects of how the platform's set up that might not be running properly or other things, within marketing systems or dashboards that are not reporting correctly.
So, in a nutshell, what kind of technical things do we need to look at from a software perspective?
George Moulos: Definitely. That's a really good question because the first thing I would say is if you have a business where you're selling products, like most ecommerce businesses, you want to really have your site on a platform that most buyers are comfortable on, which your Shopify or Amazon FBA. If you're on Amazon, you're on Amazon FBA, software's standard.
But if you are your own standalone business, you could use Shopify, WooCommerce, Magento. There's a bunch of platform, but then you have to consider, most of my buyers won't be comfortable on WooCommerce, for example. And that's why we always suggest Shopify. It's mainstream, it works. I've operated Shopify businesses.
I think they're superior. I've also operated WooCommerce businesses. I think they're inferior for that reason. But more than anything, again, in preparing your business, you wanna make sure that you are opening yourself up to the most amount of buyers, and most buyers are comfortable with Shopify.
But it's just an assumption everyone's on Shopify at this stage. In terms of other software, I would say, and even just programs and platforms, you wanna make sure that you are actually running some ads and you're on that you have some email marketing software or SMS marketing software and that it's profitable. A lot of the times sellers will come and list their businesses and they'll say, we haven't even done any paid ads.
That's not a good thing. That's not, showing us, that's not a good thing for buyers and sellers will like, this is all organic and that organic traffic and, revenue is fantastic, that's good. But the fact that you haven't validated profitable ads isn't a good thing. A buyer wants to come in, usually with some cash.
Say we're gonna put 50 grand into ads over the next six months. But if you haven't validated that, it's actually profitable to run ads on Facebook, Instagram, TikTok, Snapchat, Google Ads. That's not a good sign necessarily for a buyer. So just having some things, up and running, even if you're not great at it, just have, something up and running is good.
And of course you don't wanna have anything banned, any red flags from any social networks. That's something that we've seen in the past where we had a massive skincare brand that just had their Instagram blocked. They couldn't access it. It was like 300,000 followers and they were all organic sales, that business.
So, you don't have any of those red flags and they'll be found. You can't hide those things. So, clean, engaged, social media ads if you've bought followers or if you've bought a traffic blackout ways, these things are gonna come out. These things are gonna be found, so you wanna make sure your platforms are clean, not banned, safe, and operating and profitable.
Francois Marchand: Before we wrap, George, I wanna know if I'm a seller, if I'm ready to sell my business, what's the best way to find a potential buyer for my ecommerce business?
George Moulos: Well, I'm biased. I'm gonna say use a broker.
Francois Marchand: Right.
George Moulos: To be honest, I would say brokerages are great for your bigger listings, for your bigger businesses because every type of niche and every type of online business kind of has their own particular way to sell nowadays.
The online M&A world has developed, even if it's small in its own way. If you're gonna sell a business that's under a hundred grand, you should probably sell it on your own. And also brokers usually won't list your business because the commission kind of isn't worth it anymore. Because we charge around that 10% mark making 10 grand isn't as great as selling a 10 million business and making, even if it's not 10% right, it's still much better.
So I would say list on your marketplaces. Go through your own network. You'd be very surprised about what competitors would be willing to pay. As soon as you get into that $100k plus valuation, meaning $25k profit a year, a broker is just gonna make your life easier because you also still need to run the business while you're selling.
A lot of the times what happens is someone will get into the mentality of selling or they'll just start selling and then they come out of the business to make the sale and the business goes downhill. That's a big plus of a broker and also a broker just has that network. They have that email list, they have that reach, and usually they're already on marketplaces, so they have those connections at the marketplaces and they get you that reach anyway.
So I would say use a broker, that's great at what they do. If you're looking for a SaaS broker, go directly to a SaaS broker. If you're looking for a Shopify or FBA or agency broker, I would suggest Ecommerce Brokers, of course, cause we've specialized in that. So find your specialized broker with those video testimonials, with those written testimonials. And you wanna make sure someone who's, you have someone who's been in the business a long time, sold a bunch of businesses and has those testimonials so you know they're reputable.
Francois Marchand: And of course, using a broker, especially when you're dealing with evaluation, that's much higher than $100k.
That's where your team brings in lawyers and evaluators, and like everybody can do the analysis of the business so you don't have to do it yourself. If you're able to do it yourself, if you're a small business or your valuations in under $100k, by all means do it. But yeah, there are definitely of advantages to using a broker and there are disadvantages if you're a small business, that's totally fair too.
Before I let you go, George, and thanks again for being here. Any other insight or advice that you'd like to share about your experience in ecommerce? You've been in this world for more than a decade, and I really appreciate your time and sharing your expertise here. But what's your number one piece of advice you would give ecommerce business managers, founders, CEOs out there today?
George Moulos: Look, I would say be open to the idea of acquiring an online business. It's not mainstream, but I think it will be in five to 10 years to have a, I mean, we're all talking about side hustles and little, extra streams of income. It's only becoming normal to see a little Shopify business, a little content site as that extra source of a couple hundred bucks, couple thousand bucks a month, and it runs on its own.
You don't even need to necessarily spend that time on it. So as an alternative source of income, buying an online business is something that you can of course look into. There's a bunch of research, videos, blogs out there. We have our own, a bunch of other brokerages do as well. So yeah, take a look at buying an online business.
I think it's gonna become a much more popular way to not just generate income, but also store wealth. If you're going to buy a property that might return 5% a year, while an online business can return up to 20% to 25% a year on average. So, that would be my tip.
Francois Marchand: Is buying an ecommerce business a sounder investment than buying real estate?
George Moulos: Well, look, I would say, is the risk higher? It is higher. This property is great. At the same time, if you've bought a property already and you're looking for something you can spend a hundred grand on, right? I mean, I grew up in Australia. Buying a house in Sydney is gonna cost you a tiny studio apartment. In Sydney's gonna cost you a million bucks minimum.
Whereas a good online business that can generate, like we said, five to six, seven grand a month, it can cost a hundred grand. If you want something that's generating cash flow for less than, the price of a quarter of the price of, in the West, let's say online businesses is the way to go these days.
So of course the business website is ecommerce-brokers.com. We have a YouTube channel under my name, George Moulos, where we're making content about buying-selling businesses. And of course George Moulos' official on the Instagram. He is also where, my personal stuff is.
Francois Marchand: Fantastic. Thank you, George for being here today. And I want to thank you everybody listening out there for tuning into this episode of The Ecomm Manager Podcast.
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Until next time, I'm Francois from The Ecomm Manager and I wish you all the best in your ecommerce journey. See you later!