[ad_1]
This week we’re joined on the podcast by Jason Lee from TheFBAFlipper.com.
The FBA Flipper helps buyers to purchase reputable China-based Amazon FBA Businesses and the discussion therefore largely revolves around Amazon FBA businesses.
Jason started out in the industry working at Empire Flippers, one of the top brokers for online businesses. They sell a wide range of online businesses from Amazon FBA to affiliate sites. During this time Jason was living in China and became an expert in the Amazon FBA market specifically.
Jared Bauman is our host on the podcast, and he and Jason spend a lot of time talking about the FBA market today. He shares a lot of tips on how to start an FBA business in the current environment, focusing on the changes that have taken place since the start of the pandemic.
All in all, it’s a really interesting interview about where Amazon FBA is today and where it’s heading in the future.
Jason Lee From The FBA Flipper
Some of the other topics that are touched upon in the discussion:
- Supply chain shortage issues
- The difference between a profitable and sellable FBA business
- How to stand out with an FBA business
- How to sell an FBA business, along with timing
- The best FBA categories to AVOID
- The future of FBA – where things are going
Resources mentioned in the podcast:
Read the Full Transcript:
Jared Bauman: Hey everyone. Welcome back to the niche proceeds podcast. My name is Jared Bauman. Today. We’re joined by Jason Lee from the FBA flipper.com. You probably guessed that we’re talking Amazon FBA businesses, and it’s a really great conversation.
So Jason actually started out in this industry, working at empire flippers empire. Flippers is a, a great brokerage that sells not only FBA businesses, but a whole host of types of businesses. And we talk about his experience in selling content sites and FBA businesses. While at empire flippers.
During that time he was living in China and made a significant number of inroads. Which led him on to being an expert in the Amazon FBA market in China specifically. So we spend a lot of time talking about the FBA market today. He shares some great tips on how to start an FBA business today and this type of environment.
And certainly with all that’s gone into FBA and Amazon, since the pandemic started and said some of the supply chain shortages that have happened, he has some really great insights. What to focus on and where to stand out in today’s environment. On FBA, we talk about the difference between a profitable FBA business and a sellable FBA business, which I had never even thought about.
And the outlines are really, really clearly and basically the differences in these types of businesses. Can you share some tips on how to stand out in FBA today as a business? He gives some very practical insights on selling your FBA business, which has a lot of experience with, through his own brokerage at the FBA flipper.com.
He outlines the best time to sell which again, or some really interesting thoughts on that. And then some data behind it. He shares which categories on FBA to avoid which ones you don’t want to go in. And which ones buyers are really not interested in, in buying from. And then of course, we wrap up by talking about the future of B of FBA, where the FBA market on Amazon is going.
Where he’s seen deals come through and where he’s seen buyers come into the market. So all around a great chat about Amazon FBA, where it’s at today and what you can expect going forward. I hope you enjoy this interview with Jason Lee from the FBA flipper.com. And we’ll talk to you soon.
welcome back to the niche proceeds podcast. Today. We’re joined by Jason Lee with the FBA flipper.com. Jason, how you doing today?
Jason Lee: Doing
Jared Bauman: great. Great, great. Welcome to the podcast. You you mentioned, we were talking earlier that you’ve been a listener of the niche proceeds podcast in the past. How long have you how long have you been turned in for
Jason Lee: correct?
Yeah, I used to be at another brokerage and that’s when I heard about you guys and started following. So that was probably. Early 2018 or so.
Jared Bauman: Okay. Okay. Good. Well, let’s, let’s use that as a good segue. Bring us up to speed on who Jason is and kind of your background and what you have going
Jason Lee: on right now.
Yep, sure. So I’m, name’s Jason, I’m from Boston and I guess I’ll mention the other companies to work for empire flippers they’re great company. And quite a lot of those listeners to this podcast submit their businesses for sale to empire flippers, where I was responsible for a lot of the vetting and checking of the businesses.
And so I’m quite familiar with seeing these pursuits name come around. Yeah,
Jared Bauman: empire flippers is the name we’re quite common or we’re quite familiar with here. I’ll be, I’d love to, you know, talk a little bit about some of your experiences about, you know, at their empire flippers. What were you doing before empire flippers that got you there?
Jason Lee: Before empire flippers? I was, I guess, positive, like some of the other listeners here, a coconut cowboy, trying to achieve the digital nomad dream. I was in Chiang Mai making some coconut cash as they say, and trying to figure things out. So I, I can’t deny that. And Piper course gave me a huge break and forever grateful for them, for that learned quite a lot with them.
Yeah.
Jared Bauman: What did you, what was your what were your
Jason Lee: responsibilities at empire? It was on the vetting and valuation side. So if someone submitted a business for sale, we’d have to, of course, make sure that it was a good fit check the analytics, make sure they weren’t doing anything sketchy and just make sure across the board that it would be a good fit for the buyer.
So sometimes that involved, pulling together a profit and loss statement, of course, checking the earnings to verify the earnings, stuff like that. So
Jared Bauman: you got to see quite a good number of websites come through the pipeline. And eh, and you said you started in what? 28,
Jason Lee: correct? Sorry. In 2018. And maybe in Columbia, it was quite an experience going to you know some people in this circle.
Okay. And familiar with, I heard about them doing another podcast. And then when I explained to my parents, oh, I’m flying to Midian, Columbia to start a new job. They were raised a couple of hairs. They were like it was a kidney.
Jared Bauman: Yeah. Yeah. It’s easy.
I think that you know, you’ve been with them through certainly like a big growth period in the. Websites sale the website brokerage industry. I mean, I know it’s only a couple of years ago that that is 2018, but nonetheless, you were, you were there for a pretty dynamic period of time. I’d be, I’d love to hear just some quick thoughts from you on what you saw from a global perspective on websites that came through and maybe any, any factors that you thought separated websites or made them more attractive and made them stand out from all the rest of the ones you were viewing I’m
Jason Lee: looking at.
Yeah. So, and then Amazon earning commissions were, were higher. I do remember that there was still a correction in 2017 that happened that we would have to correct earnings for and. I, you know, when they’ve been updated back in April 20, 20, Amazon associates, their earnings permissions, there was I think, a drop-off in the popularity of the business model.
But I think during that period, it was a great time to get in, to start a niche website on some esoteric topic. And I would even notice it when, I mean, the requirements you only have to do the six months of earnings and I think minimum $5 profit a month. And even during my time there, there were people who sold a site and started a new site and were selling it again, like you know, half a year to eight months, even a year later.
So it was kind of a, a good time to be starting and flipping those sites. It’s also interesting seeing some that’s sold and then someone popular in this space and they’ve taken it over, grown it, and then they were selling it again and see some of the changes that were going on, whether the. The UI needed to be refreshed because it was before it was just a stock WordPress, or it could have been, the backlinks were cleaned up and the SEO power is even much better.
It could have been a content refresh could have been a whole number of things. So I looked at probably over 400 different websites and total, and about half of those, I would say ended up being Amazon FBA, but the other half were pretty much content sites. Those are the two most popular business models that I saw.
There’s of course, some of the SAS there’s some of the on education courses, stuff like that, but primarily content and e-commerce
Jared Bauman: I was going to say you, you took the next question right in my mouth. I mean, what, what sort of percentage of people, or what sort of percentage of sites are FBA versus content and, you know, the sales, obviously you’ve doubled down now on the FDA side of things.
So I’d be curious to hear what led you down that road and you know, why you ended up choosing FDA and what were some of the things you were seeing that, that kind of started that to feel that fire in you.
Jason Lee: So. Yes, split wise. I would say it was probably like, I mean, it’s hard to say because what was noticeable at the content sites was that there was a lot high, but more of them, but the overall dollar value was less.
And because there’d be great beginner sites, whereas FBA, you need a lot more cash to get into, to start. And also it’s heavily biased towards sure. People said submit their website, but it’s, it’s heavily biased towards, I only see those who have succeeded. Fair enough. I sort of, while at empire flippers, sores are leaning towards FBA because I developed a lot of tools internally for tackling the numbers.
It’s a lot easier to know what your cash position is on a content site, where versus when you have to deal with inventory and the timing of that. So if it’s, you know, the account payables that hasn’t yet left your account and you have to account for that. And so some of those that, that trickiness auto sellers on e-commerce didn’t actually know their numbers, they would just have an estimate of where their profit was.
Whereas content sites you had either, you know, last month, minus your hosting costs and your content costs pretty simple in terms of the profit loss. And so, whereas Amazon had all the fees and, and whatever else, advertising. So I had developed, I said that natural inclination towards developing tools to understand your numbers better on FBA.
And so that led me more towards that wallet. I’m high percent of tech like numbers. And then I decided to leave to actually start my own Amazon FBA business for a while, because I had got this itch from being there. You’re surrounded by so many great people, so many entrepreneurs that I felt I had to start my own.
And I also, when I was with them, they had this, it was kind of, you know, not for this community maybe, but for the time period, it was revolutionary to be able to work anywhere in the world. So people, people took full advantage of that, whether that was traveling Europe, Southeast Asia, et cetera. I intentionally based myself in Shenzhen China because I could see the wave of how Amazon China was courting Chinese sellers.
And I had spent some time in China before and just kind of felt. The expression, a rising tide lifts all boats. And so if I go there, there’ll be some opportunity. Just, just placing myself there based on a China right now. Oh, right now I’m in Boston. This is the family, but I was, I was based in Shenzhen from about our China actually from 2018 after training with them and while working for them until beginning of 2020, when the pandemic hit.
And at that point just, I had, I actually to be quite Frank here, it’s not like a linear test store. There was a period where I went there and I had this I’ll go over some stories, like just amazing inspiration being there, but then quite a lot of feelings. It was the market wasn’t there yet. And I personally was getting a little tired of living in China and so I felt I needed to go somewhere else.
So when I left it, wasn’t like, oh, I, you know, okay, this plan worked out immediately. It was actually probably about almost a year delay before when I left China before painting that seed and how that sort of came about to where I am now. So, yeah, for example, when I first got to Shenzhen, I had, I had been to accelerate Amazon seller conference and Ningbo, which is one of the largest ports in China.
We’re all like good to get shipped out. And I saw the Amazon official sponsored event, tens of thousands of Chinese Amazon sellers. It was just crazy how many there were the boosts were super expensive and there’s just no kind of. Place like that I can think of from the Western self world. I know there’s a lot of Amazon sellers in LA.
I know that there’s conferences like what was the one in Las Vegas a couple of months ago, prosper, but there was there’s even when I’ve seen photos of that, nothing compares to just the scale of China. And I landed in Schengen after living in Hong Jo. And I remember talking to the hostel owner in Chinese, cleaning him, what do I do for empire flippers, et cetera.
And he’s like, oh, you do something with Amazon. And this guy is probably a 21 or 23 or something like that. And he’s like, oh, I saw on Amazon. And I’m like, huh, if you don’t just fly to Southeast Asia or somewhere in Asia it’s I talked to the hostel owner, he’s also an Amazon seller. And he’s like, let me show you my products.
And it’s, you know, it wasn’t something that we would sell and here’s my business. It was electronic, cute gamer girl headphones, but it was still kind of impressive that this guy who I, my Chinese in back way at the time, and he didn’t speak hardly any English, but could be selling on Amazon. It was like mind blowing to me.
And then these later I was at a Starbucks and just be the Starbucks. I was killing some time. I could overhear people talking about Amazon PPC strategy, inventory issues, their employees, and stuff like that. And just this like center or Capitol of all this Amazon selling just blew my mind. Cause yeah, you can go to Bali or Chiang Mai and you can encounter some of these people who are doing you’re earning some summer okay.
Amount or even Austin. Right. And you can hear like, okay, you hear about this lifestyle or this, you see a foreign area start talking to them, but it’s a lot more hit or miss. Whereas there, it was not just people at Starbucks, not just the hostel owner, but every week you would see posters on Weechat for such and such Amazon training or something.
Just discounted office space for e-commerce sellers. Or it would just X providers, just the support the government’s throwing at. It was like incredible. I found out. Even in hung, Jo, which is a relatively smaller city of 8 million. I mean, it’s China, the government there, the government support was, was mindblowing.
Just like, oh, you want to rent the Marriott hotel for this conference? Okay. Yeah. We’ll pay for it. Like, we’ll give the hotels some tax breaks and we’ll let you use it for free. And then like, I dunno, that was a small one, but maybe like a hundred something people showed up 120 people there that was just an ambulant business.
And then the scale of that on in Shenzhen was a whole, there’s a whole district sort of area for just tellers. Whole the equivalent of like a chamber of commerce, but chin denim, cross-border e-commerce association, just throwing events all the time to encourage this ecosystem of, of sellers. You really don’t see the kind of government support behind that in say the states for sure.
Jared Bauman: I mean, what you’re underscoring basically is it’s such a strong. I guess demand and interest level in Amazon FBA type of businesses over in China and Southeast Asia.
Jason Lee: And particularly in China, it works well because it’s Amazon, English, it’s keyword based. You don’t, I’ve been to I went to a seller’s office space and they were using Google translate for some of their keywords they were finding.
And then also I think when I started my own Amazon business and learning how to do PPC in say Germany, I don’t speak German and have the plug it in and then kind of checking and stuff like that. But what kind of processes I was like, that makes it, so it clicked in my mind why it made, why it’s so great for Chinese to sell.
Generally I will admit there is a ceiling and plateau. ’cause they just don’t know. They don’t know beyond what they don’t know. So their ability to sell hits certain level, but for, for the most part, for their bread and butter of it I would say Chinese, it makes sense why Chinese dominate and it makes sense why Amazon Cortes the Chinese sellers to sell on their platform to cut out all of the middlemen.
No, very few of them are actually manufacturers themselves. Most people have this impression that Amazon is, is trying to get just factories to sell, but that’s not true. What I find that most Amazon sellers who are Chinese, they demographically are probably in their mid thirties or late twenties, and they have possibly some experience selling on em.
China’s domestic e-commerce market Taobao, and they apply some of those same techniques. You know, may be frowned upon on Amazon, but are perfectly legal in the China space. And some of the local competition you hear about when they do their gets brought over to Amazon, which does kind of tarnish your image, but it looks like for the sellers in China, it kind of feels like playing in the sandbox playground like preschool, it’s it.
They kind of consider it easy. When I first jumped in those who are factory owners though are usually baby boomer generation. They hit it in the nineties and their mindset is I gotta make sure I balance migrant workers and raw material costs. So they don’t think about PPC. And this one channel they think about customers come to them, they’re sung on the Alibaba platform.
So if people have that kind of impression, I would say it’s not as much as you would think. Maybe only 20 to 30% of tiny sellers are actually the factors. So let’s
Jared Bauman: talk about how this applies to somebody listening to the podcast right now. And let’s talk about really the FBA market in general, because you’re, I mean, I think a lot of people might be experienced on a localized or a, you know, a national based FBA platform, but you’re, you’re like an international guru of FBA and how Amazon interacts in, you know, all these different countries.
We’ve already talked about China, the states Germany. I’m sure if we kept going, you could probably tell us about all the different markets you have experienced. And for someone listening, what, like let’s transition into some, some practical tips. You’re like, what does this really mean for FDA and the evolution of FDA and the future of FDA?
Jason Lee: Well, every year people complain that it’s getting harder and harder to enter the FBA sign market. What worked in 2015 doesn’t work in 2016, doesn’t work in 2017, et cetera. Right. And so before you can just slap anything. And then became okay. Yeah. Trademark it. And you know, even before those arbitrage, of course, that is, that is west of the case now.
And if any course out there says that you just need $5,000 to start. I think the barrier to entry keeps going up. The expectation of the quality keeps going up, which for Amazon, that is good. And I do think that let’s say you’re listening to this. If you are interested in getting to the space and launching it, I think generally people already know that most electronics are already like too much Chinese or fashion.
No one wants to deal with that number of skews. So focus on, I would say focus on categories that are pretty unique to the U S and what I mean by that is an American has generally has a yard, so outdoor gardening stuff or things that require space are things that. Although they say the Chinese are selling on Amazon.
I find that in terms of categories, what they enter they’re underrepresented in those, they aren’t as represented as much as people would say. So if they say there’s 60% of sellers on amazon.com are based in China, I would say, if you went to the Chinese category, it would be 98% of them are Chinese. And then if you went to like the gardening, maybe 20% or 30% are based in China.
I think, although that, although Chinese will continue to be a huge presence, I think they’ve, they’re hitting a certain plateau now. What I see their businesses, they, it can be a little English, I should say. The, the images aren’t up to what we would expect sort of taken from like a first generation digital camera.
The copy is, looks like it came from China. And so there’s still opportunity out there. Now Chinese are getting every year, I noticed more willing to engage in work with. Outside resources, such as platforms, such as Upwork and Fiverr, where previously they would only want to hire in-house. So that is like, they are trying to get more savvy, but I think there’s always going to be a disconnect between them and the end customer and knowing what they really want.
So that’s an advantage. I think a westerner we’ll never, we’ll never give up and if you’re targeting the premium segment, then you can always, you can always kind of carry away or beat out the Chinese you know, cause it, the methodology I always see in their research about how to compete it’s okay.
Let me look at the number one listing or a number number one’s to 10. And let me see what’s the best elements I think it is and apply it, but that’s only, they’re only looking at the data they know, and they don’t have the imagination necessarily. I don’t say they don’t have the imagination. It’s just, they haven’t been exposed to it.
The other, what might be. A better way of doing things.
Jared Bauman: Right. Right. So let’s walk through a couple different scenarios. Let’s say that I’m you, you already touched on it. Let’s say I’m thinking about starting an FBA brand right now. I mean, you see a lot of that with, with, with, you know, with your, with your FBA business, you see a lot of successful brands.
What, what, what kind of tips would help someone stand out right now, today in what is a challenging market, especially to get
Jason Lee: started? Yes. Are you referring to what helps us stand out selling to amazon.com customers or from a, I want to exit my business perspective because those are actually two different things.
Cause you can have a really profitable Amazon business that isn’t a great business for sale. So I’ve seen those before.
Jared Bauman: We’ll talk about the differences because like I, in my head, I can think of maybe one or two differences, but I, I I’m, I’m, I’m probably missing some, what are some of those differences that make a successful Amazon store from a profitability standpoint versus a saleability state.
Jason Lee: Yep. So I’ve come across like just a handful of these in my time. Just the scale of businesses I’ve seen come through. And they’re these really interesting businesses because, so what makes a business an attractive to buy is generally a low number of skews that are highly profitable, but we call us the hero skews or follows the 80 20 principle where 20% of the skews drive 80% of the profit.
And that’s actually the sort of the case where it is with our own, my partner’s own Amazon business. But there are other businesses out there which are pretty heavily diversified. Somebody’s viewed it as diversified, but you know, it depends on which side of the coin you’re seeing. And they have hundreds of skews say 200 skews, but these, these sellers are.
They’re one in a million or one of the, I don’t want 1,000,001 in a thousand based on how many have seen where they actually code their own custom management software to manage all their skews and inventory levels and sales rate, et cetera. So they’re, they’ve, they’ve coded their own server thing. And they have a fixed, they have added 20 to 30% margin on top of this product.
And I can’t quite say what the products are, but they’re, they’re relatively commodity, no name, brand stuff that don’t stand out. But either in one case they got in early enough that it was they’ve held a position. And then what they did was. Just having a bunch of parent agents all over the, the same keyword.
So they take up all the space on Amazon search results, which Amazon frowns upon. They want you to add as a child agent. And then the other one was this technique. I heard it. I was like, wow, I would not want to be as competitive. It was he was like, I find something that’s highly profitable. And every product has a certain market cycle to it.
Right. There is someone is a category creator creates it. And then someone else sees that it’s doing well, copies it, but improves upon it a little bit. And then it kind of keeps going back and forth until you can’t reinvent the wheel, essentially at some point. And you’re, you’re stuck there. So he would get into some, you would get into the niche where it was somewhere along that inflection point where it would go from there’s traction, but it hasn’t yet been perfected.
He would go in there and perfect it, but then he had a very long-term mindset. I think a lot of Amazon sellers don’t have. He would undercut his sellers and lose money selling for two to three years, which is just like, when I did the math on how much he was doing, just a bleed out his competitors. And then once they dropped, you had patent that get a design patent for those products and then raises price.
And then, and then just be able to sort of sit on those for, for several years. And, but he was also doing it at a scale of maybe few hundred different skews. Now he didn’t start from the beginning. He would start with maybe a 10 would even for some people that sound like a lot, but his was, you know, you kind of throw kind of the venture capital strategy.
You don’t know what will stick. And even my experience with Amazon selling we’ve launched six different products. Really only one is the, the major breadwinner. So that’s kind of in any just close, whatever it doesn’t work. And then try to repeat. So it’s, as long as you break even, and earn a little bit, then you’re capping your downside risk.
So those are, those are businesses that I would say are not good for selling the business, but they’re great. They’re profitable money makers because a new owner can focus on what the grow cause they’re all kind of doing well. Now, if you’re, if you’re starting to me out, it’s really just like focus on one category and try, try, you know, either.
Can you typical thing, can you package it? Can you add some sort of, you know, Evelyn frowned upon it, but education around it? Because if you do education kind of people think maybe there’s you’re trying to get them to sign up for their emailing list and taking them off Amazon. But for example, one of our, one of our products has a recipe book attached to it.
And so that’s like a value add and. We ended up taking it down, but it was helpful for a little bit. It was actually an ad that tangible recipe, like a book cover on our west thing, but you, you have to scan the QR code to get it. So we, our product, wasn’t just a standard product. We also added the accessories into it and then raised the price.
But it was also what helped, I think, significantly was it visually stood out from the others. So before there was without giving away exactly what it was, but maybe it’s an analogy here. Maybe it’s like a tape. It was like, when you say it’s on a table and there’s an uncoated table, and then there’s a premium, it’s been lacquered wooden table.
It looks Darkwood premium. Okay. But it doesn’t come with the chairs. So like, we’d be, if you just did that kind of equivalent in a different category and that’s probably the easiest way to stand out. So we, we packaged together. Okay. Not just the premium table, but also the premium, I don’t know, chairs or tablecloth.
Whatever else goes with it.
Jared Bauman: Well, let’s transition into talking about now on the sales side, which is probably where you have the most experience with the FBA flipper.com, what are some things that make for a good account to be sold? And what are some tips for people with FBA accounts to get them ready for sale or thinking about sale?
Jason Lee: Yeah, absolutely. So most of these other states, I think we’ll probably be okay with this and probably don’t have to deal with this, this particular issue, because this is a unique thing to the market I deal with, which is Chinese tend to have multiple seller accounts. So obviously don’t have multiple seller accounts or if you do try to consolidate them into as few as possible.
So I think most people don’t bother with that. And then what else. Give a lower valuation to seasonal business seasonal businesses. It’s great. If you have a seasonal business that is, has some other seasonal products in it that balance it out, but it’s still something that’s not as preferred as something that is just evergreen most of the year, because a buyer taking it over, can’t immediately know if what their changes are doing are going to be good until that high tide high period comes back around whenever that is.
And actually the best time to sell a business is not immediately following the high season, but right before the highest season, now this, the transaction might finish after the highest season. So you collect all that money anyways, but the reason why it’s good to try to sell it before is because it gets a greater interest on the buyer pool.
Some of the other people’s thought is I’ll collect the cash, but in terms of ease of sale it’s I can tell it beforehand. And then yeah. So make sure your earnings are more, what I’m trying to get you in that is make sure your earnings are more or less stable or sort of predictable month a month. The more variance there is the less desirable.
For example, when we used to accept what was called Allie express dropship stores. So when people used the option from AliExpress with Facebook ads to a Shopify site those were terrible. Because month a month would be swings. So if you’re, if you’re a content site is like that or Amazon site like that, any of it’s like that, just figure it out to get some stability first predictability, and that’ll just make it stand out so much more in terms of valuation.
The multiple people will give for some predictable and stable as much higher. And in this current market for FPL. If you can talk about if your sales are stable, post April, when the economy reopened and most eminent illnesses took a huge dive or a correction, I should say if they’ve been stable since then, then you’re in a pretty good position stable or growing, or even, even like slight decline is okay.
Whereas before it was, you know, the only ones see growth. Now, people buyers are willing to take this new stable because they know the long-term, it’s going to be good for them. And if you can, if you’ve solved the a lot of the issues on the shipping, if you can have, well, not just to take tastings cause like freight container costs are going up, but also Amazon has restricted your inventory limit to your total account and not on a per agent basis anymore.
I think it’s a per skew basis. So if you’re a hot selling product is we have a hot selling product is selling out really fast. We actually can’t get more in because our other slow moving inventory for other products is clogging up the space, which is really annoying, really frustrating. But if you have somehow solve that either with a three PL then you’re in a position, or if you I’ve heard of some black hat techniques, which I’m not going to recommend.
So I can’t assess those, but there are other ways to supposed to increase your inventory. You know, you’re going to be in a relatively good position going for Q4 or even Q1 of next year. I thinking of selling, I want to get there’s another point I was trying to remember, but struck the, forgotten it right now.
Yeah.
Jared Bauman: Well, if you think of it, chime in, I think it’s a really interesting point. You make about selling before you hit that high season or maybe right before you hit your high season. And I had never thought about something like that before, certainly from any, any, any, whether you’re selling a content site or an FBA site, that’s a really interesting angle to take,
Jason Lee: you know, if you want to, it all depends on your personal goals.
A lot of people, a lot of sellers try to hold off through Q4 and immediately south Q1. So in this, the M and a space of exiting your business, Q1 is the, is the highest queue is the biggest time of the year for selling. And then Q2 is a little, as much less Q3 is dead slow and in Q4 picks up again. So Q1, Q4 the biggest or the best.
And if you want the most eyes with the least competitive competition in terms of who else is looking at businesses, but there’s still high demand. Q4 is probably the best time to sell because certain they have certain, all of these buyers have certain growth targets. They must hit in terms of revenue.
But a lot of these sellers are kind of holding off, whereas in Q1, the bark difficult. So a lot of activity and the
Jared Bauman: more I, the more sites and accounts and businesses that are for sale just by supply and demand the lower, the price sheet that you might be able to get on it.
Jason Lee: Well, it’s hard to say, cause over the, over the years, I would say pricing of multiples have gone up across all cost, all business models and types, even content sites.
They hadn’t gone up as fast or as crazy as FBA, but they’ve still gone up, I would say.
Jared Bauman: So who’s buying sites right now. I mean, you have a ton of experience in selling Amazon sites. What are you seeing in terms of the buying market? You have, you have a lot of experience in the Chinese market. I mean, who’s buying these types of sites.
What type of businesses are they? And you know, is there anything unique they’re looking for.
Jason Lee: Are you talking about websites, content itself? I would say I’ve kind of stepped away from that because that was, I left and proper person in March, 2020. And so what I, I do keep in touch with some of them, but in terms of FBA, I’m more familiar with it. What I do know about the website side of things, though, who’s buying it.
There is, there’s quite a number of very capable individuals who have managed to coalesce a team behind them. For example, there’s a guy in Taipei Dom Wells who has on folio. He does quite well, and he buys up content sites what his exact criteria are, have shifted over time. So I, I don’t know what they are now, but I know he’s moved less from, he used to be more towards an affiliate and he’s moved more towards taking on education courses.
So whether that’s like a fitness course ebook or video course, et cetera, those are, those are become the slightly more in demand among websites. And then he’s even dabbled into a bit of e-commerce with that might have an add on component. I think that something that we used to say, why didn’t we see more of was when I was on pocket bridge, we used to be like, why don’t we see an Amazon associates site?
It’s also doing an FBA because you know, if the Amazon associates, you know exactly what your links are going to, why don’t you just want the same product on Amazon FBA? And we would see some of that come in, but they were kind of a Jack of all trades master of none situation where, and. Erin, probably more on the e-commerce side than they were in the content site, but because they could never specialize on either.
They couldn’t really, they couldn’t really go too high. They could do. Okay. Like one of the best one I saw was a, was a sleeping website. So content about sleep pillows, mattresses uncommit, good commission on those, especially mattresses have really good commission. That’s some of the highest content I’ve seen.
And then they sold pillows and pillowcases on, on Amazon and blinked it to themselves. So but you have to be careful with that. You have to have to keep it, I believe, different or separate seller central accounts, because Amazon wants to avoid that kind of insider abuse trading with your own account.
Right. Right.
Jared Bauman: Well, okay. Let’s talk about selling FBA and your experience there. Who’s buying those. What are they looking for?
Jason Lee: Yeah, they’re looking only for hero skews. Here are a sense. So what that means, again, it goes back to the 80 20 principle something where they can see it and they can. Improve the main one.
And it’ll drive a lot of growth. So Th that’s the most, when word spread out is not attractive, not electronics, not fashion and not parts. And they mostly category agnostic. But the reason why not, those three tronics is pretty simple to explain why it’s generational. You’ve come up with new parts all the time.
Product, life cycle is very short. But you also have to deal with the different voltages kind of components. No one wants batteries. You know, exploding hoverboards, no one wants to deal with that. And competitors it’s mostly. Oh, okay. Now, remember this one time I going to say, if you are in a niche that was massively effected by the huge Chinese shutdown recently then and your sales have gone up because all your competitors have dropped off because I’m closing down.
You’re kind of in a good position to sell to, to grow as much as you can in that space a little bit, but after a few months, I would consider selling it that at that peak if you’re in any of those categories that happened to have been affected heavily by that shutdown. So tronics, yeah, you don’t want to be in that fashion, so, or apparel, basically most apparel with the exception of say like a postpartum or lumbar thing.
Those are okay. But anything that has too many skew variation, does that mean it’s too much color, too many different sizes dealing with that is, is, is a pain. So you don’t want to do that. Also the barrier to entry is it’s, it’s not much so don’t do fashion. And then. So if you have a really great secondary part for a DJI drone, that’s a unique and D filter you total entity filter, you know, that might make you money, but it’s not a great business to sell because it’s a, it’s not end product.
It depends on someone else, someone else’s product. And so if they come with a new variation, it’s like cases, phone cases, terrible, maybe moneymaker, terrible for business to sell. And then. Yeah, it doesn’t, you don’t have your own brand, essentially. Not that I believe that most Amazon brand are truly brands, but you’re even less of a brand because you’re dependent on something else.
Yeah. Those are some really,
Jared Bauman: again, things I never would’ve thought of that makes so much sense. Electronics, always updating, always changing, always new models coming out. Yep. Apparel you’re right, man. I think I was buying some sort of a bathing suit or something. I was looking on Amazon and I mean, there were, I think 20 different color options, you know, five different size options.
And then you have draw string versus tie and the, I mean, there’s just gotta be so many variations. It makes sense. While you’re saying that’s a nightmare for someone to be interested in managing and thus not as enticing to buy. And then the parts concept does make sense because you need to have the part or the product before you can have a need for the part.
And so it limits your markets, your market size, in essence, even unpopular things like phones
Jason Lee: phone cases, sorry, it’s something like less, less. Interesting, but still kind of dependent was I’ve seen cases for like instant pot fabricates, instant pot or parts for instant pot as a dependent product cases for the mixer or the cricket cutter.
There’s like some sort of sewing equipment. And okay. I guess this is kind of jumping topics here, but if you’re starting out and you don’t know what you have multiple ideas, multiple categories, you want to launch it, you aren’t sure. From a selling your business perspective, it is terrible to have both gardening equipment with kitchen equipment with I don’t know, automotive, and, but for you, when you start out, you’re just trying to get stuff and throw stuff at the wall, see what sticks.
So I understand that mentality, but keep it under a different brand in the same account, and then eventually break it off into its own account. So you can sell it because it’s terrible when you get a mismatch of how they profitable good products in their categories, but they just. Coalesced together and it’s better to break them apart.
There is like the term in Chinese for a general shop and those are, those are kind of like, great. I see you make money, but like they can’t carry, I can’t make a story around it. You can’t build a story that make someone want to buy it.
Jared Bauman: Great tips. Sorry. I’m still kind of taking notes myself here. Let’s talk about the MNA market as you see it.
And just from a broad, you know, from a broad stroke, you know, what are you seeing the MNA market and what are you seeing? That’s kind of unique from your vantage? The
Jason Lee: point. So when the FBA market exit MNA market 2018 or pre 2018 was pretty much just individuals who had the money. It was, there were some people out there there’s like a one-on-one commerce back then, but, and there was a.
TCM TC and digital has kind of come out. But really it was when I thrashed CEO came on board, that real money came into the space and it was a kind of a kind of interesting thing being from Boston. And then seeing that this company from near where I grew up, I’d be like, oh wow, there’s real money coming in.
And in fact, we were actually unsure whether or not this company was legit because they were just, they had capital just captured it go. And I’ve met up with them and they’re great people they’re really smart for sure. But they started it and evaluations back then were much slower. And they were kind of the only name in the game up until pandemic or maybe 20 19, 20 19.
There were some others. I tried to shut up on the space. And then 2020 hit. And that’s when I think a lot of money that would normally go towards. Offline businesses. So we’ll, that would be like Uber or delivery services or task rabbit, all that money got shifted towards, okay. How can we make money online?
And that pumped up and also stimulus money to help that’s what’s not deny that well, interest rates help. Cause a lot of these alligators are not equity raising, but debt raising. And so that’s just a better sustainable way for, especially with all the inventory. So 2020 was a transformative year in terms of the MNA market.
If you, if you had your business between March, 2020, and then sold it March, 2021, you had the biggest COVID bump of all and the best valuation. And in fact there’s a great, interesting story from, from perch about, in other words, acquisition. And he’s like, yeah, we did, you know, that, that, that time period.
And then they sold it, they bought it and they closed on it in may and it went down like 60% or something like that. And it was like the guys face, the buyers is like, yeah, yeah, it’s just the dynamics of the market. And you have to be able to willing to ride that. So pre pandemic when I was in China.
And this goes back to the story, you mentioned the very beginning of the podcast, which has, I didn’t necessarily feel like I had gotten what I hoped for it by just being there. End of 2020, I had a friend reach out to me from my time and Jen, Jen saying, Hey, Jason, I know that you’re in this market of selling businesses.
And I had met him two years ago when he started his business. And that kind of like, I didn’t really know what’s going on. I caught up with him here and there, but then I got to actually pull the other, his P and L and I’m like, wow. Didn’t know he was doing that. Well, I don’t think he knew he was doing that well either.
And so that’s when that’s when I kind of got back into this space because in between I was selling on Amazon. And back then when I was in China, when I used to say, Hey, I hope you sell people, sell their Amazon business and Chinese sell on Amazon. So they know that it’s like a thing, but they didn’t know that the ability to sell you could sell or exit, right.
Then and when I say, okay, what does sell your business include, oh, it includes your account and include your trademark. It includes your inventory, et cetera. And like, oh, you sell Amazon accounts. Can you help me do brushing? Can you help me do fake reviews? And I’m like, no, that’s not at all what I do.
And, but now the conversation is I help people solve Amazon business. And they’re like, oh, I’ve heard of this thrash SEO company, which is heavily invested in China. Like they just, they, they get it a bit more, there’s still a disconnect in what, what they have, how they have their business set up and how buyers do it.
And also how Western buyers typically look at Western buyers have typically only looked at the Western seller market. So what they come into, what their mindset is, is generally just one account. And generally less significantly less black hat. A lot more of, I want to say it did well. And it did some, there’s some of this, some of that, and it’s okay.
But when, when you, the Chinese they’re like, Ooh, I am so clever. And you’re like, I don’t really want to hear that. Cause like there’s probably some dodgy stuff I haven’t heard of. So when 2020 happened and 2021 happened, basically all the stimulus money just showed up on the screen. Now you can just Google huge list of all these buyers.
And I’m sure there’s buyers that are in stealth mode that you can’t find. The Western seller market is quite saturated most if you’re an Amazon seller and you can just do moderately. Okay. Your inbox probably flooded with alligators, asking or acquire asking to buy your business at this point. To the point that I have heard sellers complain, it’s kind of like being the hot girl on Tinder.
You you’re just, you’re just like, Ugh, just, just go away. And so what these buyers have to go to now is they’re going for. Diminishing returns. Like there’s still good returns. And by diminishing returns, I mean, they’re going after Chinese sellers. And the reason why it’s diminishing returns is because that market has less in less businesses that are fit for the buyers.
So there are a lot more, again, in the categories that people don’t like tonics fashion parts. They do a lot of techniques that buyers wouldn’t like multiple accounts. And those will be different reasons. It’s not always just fair review strategy, multiple accounts, but also for inventory limitations, there’s some clever ways to get around it.
And so you just have to, if you’re entering, I would notice in the overall Metta trend of the industry, Western seller market and I Gators heavily saturated, I am less sure of the value add of a broker in that space. Punishment, Frank, even though I, but there is still some, like, I still talk to. My colleagues.
And I do think the multiples are getting, if you go with a broker is higher than if you go direct. Even if you go direct and try to spread out, there’s a lot of things you don’t know, you don’t know if you haven’t been through the experience of selling multiples and multiples and multiples of businesses, how to structure deals, because you might get like, you know, a few touch points.
But when you, when you have hundreds of touch points, then you can get really creative about deal structuring in a way that maybe you hadn’t thought about. So there’s still value to a broker on that, in that sense in the Western side. Whereas on the Chinese FDA market, like I had to deal with different internet issues because you know, Chinese don’t really use email.
It’s like asking a Western to use fax. Everything’s do we chat language? I do. I work a lot in Chinese. And then also getting money into the country into out of the country is actually an issue. So if someone sells their business for a million dollars, the limit is only 50,000 USD into China. Per person per year.
So there are ways to get around it, but it’s like, that’s why I’m, that’s why I exist because it’s, if, if someone just thinks, oh, let me just translate it to Chinese and I’ll be good. Nah, there’s like a whole, there’s a, there’s all these unique dynamics to the, to the market. If you haven’t lived in China, you don’t get it.
And some of these aggregators, they like, okay, I’ll just hire a Chinese person, used to work for Amazon and will solve the issue. But then the problem becomes what is acceptable there and what they’re used to all these techniques is not accessible to the buyer. So there’s this disconnect between like the home-based buyer and that representative in China.
So if you, yeah, if you hadn’t lived both sides, I would say we live in a particularly our business is a Venn diagram of Western FBA, how Chinese U FBA and the M and a, and we’re just in that intersection of all three, that very few have, I can count on my hands. People I know who had the overlapping skillset because the market is so new.
That it’s, it’s not a, it’s not a financial thing and it’s not purely a language thing. It’s industry specific knowledge that I talked to Chinese who have immigrated to the U S they don’t even know what I’m talking about. So it’s, that’s, that’s a unique place I play in. So what does the FDA,
Jared Bauman: what does the FDA flipper typically BR how does it, how does your brokerage work and what is different about it compared to maybe a different type of brokerage or a different type of sales process, if you, even if you did it
Jason Lee: on your own?
Yeah. So we have to, we work with with our sellers bilingually, full bilingually. So in Chinese, because most of our sellers, almost all of our sellers are based in China. We’ve had a few that are Chinese immigrated to whether the us or the UK, but those are, we don’t, we just don’t, it’s not worth our time.
The market is better for us in the China side. And so we work with them. In Chinese, sending back files back and forth, like it’s like, we kind of use, we chat like slack, but it’s more set up like WhatsApp. So there’s a lot of organization to it. And then we organize everything internally and for the buyers in Google drive and work with them in zoom and then be able to have to educate the sellers on, okay, this is zoom.
This is how to use zoo, you know, and if zoom is not working for whatever reason, cause zoom pulled out of China recently and there’s a firewall issues, then we’re like, okay, for right now let’s just use Tencent meetings, which is we chat to parent company their copy of zoom. Okay. Let’s just use that for now.
It’s like get over it. And so yeah, there’s the language issue? It’s the. How to position your business for sale correctly. We need to know everything the seller does, which is kind of difficult because the trust in the society there is very low. So they aren’t always forthcoming. And we actually have an office to meet sellers in person.
That’s a unique thing about, I guess, our brokerage, where most don’t need to meet their sellers in person. They can kind of get away with doing online. No, they’re you to drink tea get lunch with them, really do that schmoozing to build their trust, to know that you’ll reject and they ask where’s your office.
They want to see your office. If it’s a, we work there, like you kind of work at a cafe, like, come on, dude. They don’t, they don’t quite see you as a jet. You know, and I won’t deny I can play the face of being both familiar for them, but also different like But at American born Chinese and I can speak Chinese, but they need to hear that you hear my Chinese.
They’re like, oh, it’s clearly grew up in like in the U S and they, they trust they’re more willing in a weird way to give their numbers to a westerner than they are to another Chinese person, because they feel that they’re going to steal their data and copy them. And a lot of normally in a brokerage process, when I was at least with empire flippers, you would get added to their account early on in the process to verify the numbers with them.
We actually have to verify the numbers only with the CSV report that they download. And we have to check them to make sure they have, like, they don’t seem modified. And then once they’ve accepted an offer, then we can get added to their account to verify again that trust bladder or funnel, I would say is a bit more delicate on the, on this market that you don’t get so much on the, on the Western side.
And then. Yeah. There’s the language issues, interpretation. It’s, it’s great. If our sellers can speak some English just to sound like it comes directly from them. But if not, we have, you know, we have the ways of handling that. And then how is that different than selling on your own? Again, you don’t know what you don’t know.
I’m the most experienced in this industry? Among my, among my company. My partner, I actually met him through helping him sell them on business. And his favorite reference was, oh, no, we should definitely get a lot more sellers that also sell in Europe or like, oh, European commission definitely worth calculated.
And I’m just like, no, in my experience, I’ve seen so many hundreds of businesses, usually it’s just a U S that’s a major earner. And Europe, when you had ticket numbers, it’s like five times the effort for one fifth, the profit. Now it doesn’t mean that there aren’t those et cetera. Who have figured it out, but in general, that’s the trend I’ve seen.
Also unique to my market is all Chinese are willing to sell a lot more on Japan than I don’t think any question teller tries to tell him on Japan. Yeah.
Jared Bauman: Well, you’ve certainly done a good job underscoring. All of the complexities that go into the sales process, especially across multi, multi regions, internationally, these sorts of things.
I mean, man, I don’t even know how you got to pull it off if you don’t have a broker like you and your team, because it just sounds so
Jason Lee: complicated. It is. And thankfully we’ve had a couple Chinese sellers who they find out, they find out who the buyer is, which is perfectly, you know, they should know who the buyer is, but then they try to directly outreach to the buyer and the buyer comes back to us.
And this. Like tells the seller. No, no, no, no. Like I understand how to work with me directly and cut up, cut up them, but we would rather work through them because through FDA, the FDA flipper, because we know we’ve done business with them before we know it would be a much smoother process and trying to work with you.
And it’s kind of impressive size what the seller is able to pull off with. Not, not outreach reaching around, but like just starting their business, like I’ve talked to Chinese sellers who are mostly running their business from their phone which, you know, that’s my friend quite capable, but to actually to do purely from your phone, that’s like, that’s pretty difficult.
Or I’ve had buyer-seller seller calls where like, okay, can you screenshot now if you’re going to touch the backend and he’s like, oh, hold on, that’s on my desktop computer. I need to go to my desktop computer. So he like turns his, like he’ll enter zoom on different multiple accounts so that you can use his phone zoom to turn the camera backwards, to look at the screen because.
Desktop one, doesn’t have it. And it’s just like this guys only using desktops and the desktops don’t have Mike. So you can’t use that as a, it’s just like the gymnastics people will go through to be able to sell that kind of kind of hunger is really something that is impressive from that side of the world that I don’t see.
I see it, but like, you know, it’s just different. I would say Chinese businesses. Can you tell us a great, the operations of the businesses are dialed to a T hard to beat them on freight costs, product costs. But there’s something that they’re always they’re terrible at, and that is pictures and content, and really understand the customer.
That is something I think a Western or they’ll always be space for. And if you can do well in that, then that’s all that matters, really focusing on that and staying in stock and you’re good. Stay in stuff don’t work. Don’t worry about trying to squeeze, whatever one more of them and B or a dollar out of the price.
Like just, just go. Go go higher. Yeah.
Jared Bauman: Well, how many, w w I mean, what sort of volume are you guys doing over there at the web? The at the the FBA flipper in terms of how many, you know, people come to you looking to sell, what’s your deal flow? Like, what’s the average duration that it takes from contact to sale?
I, I just, you know, what kind of volume are you guys doing? And what’s the process look?
Jason Lee: So in terms of sales cycle from first contact to either signing, or I want to sell their business, it’s a, it’s a Pandora, it’s a, how’s it I’ve heard of it. It’s just an unknown, it’s a mystery. Even, even previously before the empire flippers, they had, they couldn’t figure it out just by being, you know, been around for 20 to 2012.
They couldn’t figure it out. So I get people, I get hit by people who I contacted earlier this year, who I’m like, who are you? And they, you know, they, they want to sell now. So I can answer that in terms of deal flow, we’ve sold 15 businesses. Totally deal value of around 75 million. And we should be on track to do a hundred million by the end of the year.
We do tend to target larger businesses. So we only take half a million in terms of best price and above. So that mean $15,000 net profit and higher. And it’s, it’s a big market for us. It’s a big market, but you do have to, whereas a Western seller, I would say eight out of 10 times would be a good fit for most of these buyers on the Chinese side.
It’s like one out of 10. So when we are going through about 10 different leads a day you know, one of them is, is all to be the only that good fit kind of. And we, we do like filter and filter and filter and filter, and that’s just like just the name of the game in this space.
Jared Bauman: Let me start to bring us to a close here.
Let me ask you what kind of multiples you’re seeing for FBA businesses right now and what you expect going forward. What types of multiples you expect going forward for these
Jason Lee: types of things? Yeah, multiples were crazy Q1 of this year. And the problem with the multiples or anything of this is sometime it’s inclusive of inventory.
Isn’t exclusive inventory. We always do these exquisite inventory because that’s just the proper way to do it. But it sounds bigger when you add the inventory in there and it’s divided by the number. It sounds better. And some people have to say it. I w I used to believe that on the Chinese side, the multiples are lower because the risk perceived risk of acquiring high as ministers of lower than that of a Western buyer.
I have heard ranges as high as five to eight times annual profit, but when it actually comes in and when it actually comes like to the actual sale, I’m hearing that actually closer to four to five and only three upfront, which if you start an Amazon business, you really got to think about, Hey, I’m valued.
Does this only in the last 12 months. Three years of earnings, like you put on a perspective, cause sometimes you be like, oh, it’s not like I should really get we do a monthly, multiple. So I supposed to get at least 55 X and it’s like, well, you’ve only had the business for an equivalent of, I don’t know, 18 X.
And you’re asking for 55 X going forward, like who knows how the market will change the dynamics. And after April may, there was definitely like a cause the correction a lot of people are now taking evaluations purely on the months since April may and, and doing off that now that’s difficult.
If you have a seasonal business to really, to really get a good, fair comparison. And I would say as much as I try to say, there’s a science to evaluations, it’s ultimately what the buy the market will pay. So you do get higher evaluations. If you’re not seasonal, if you’re a steady, if you’ve been stable since April may, you’re gonna a higher evaluation.
You can ask for that five. Six is kind of pushing it. If you asked you high, they’re going to turn off buyers because you just have unrealistic expectations, but if you ask too low, then you’re leaving money on the table. So there is some range you want to target in there. Maybe that helps.
Jared Bauman: No, that does. I, I think what you’re really underscoring is how, how the, the diet for content site owners.
There are some dynamics that aren’t at play that come into play with FBA. I mean, you keep talking about the supply challenges what happened in April and may of 2020? I started 2021. What happened in 2020 with the, obviously the pandemic hitting the outset. I mean, these, these factors play a massive role in the nature of who’s buying and how much they’re willing to pay.
And it’s, it’s really good. You’re underscoring that for people who are listening because the right time to sell an FBA business is clearly very dependent on a whole multitude of factors, right? It’s not just, Hey, I’m ready to sell. And I’ve had a good run over the last 12 months. Let’s do this. There’s a there’s, there’s ranging from inventory to seasonality, to market fluctuations.
And, and, and, and it, you know, one time events. So I think it’s really good. You’re underscoring those things so people can understand.
Jason Lee: Yeah. There’s you don’t, you don’t know what’ll happen. That’s for sure. Yeah.
Jared Bauman: Is there anything that I didn’t ask you about that you think is really important that we, that we talk about that we did, we go over?
Jason Lee: I think we covered it all. Yeah. If they have any questions, they can reach out to me. Where can people contact
Jared Bauman: you? That was going to be my last question for you is where can people get in touch with you and and maybe ask some more questions or, you know, see if their FBA business might be something worth
Jason Lee: looking into yeah.
Happy to take a look. So they can reach me out, reach out to [email protected] You can go to our website. I’ll admit it’s not the greatest. But we do do a lot of stuff behind, behind the backend. So yeah, any questions even if it’s just a, Hey, what do you take a look at my business?
What do you think is worth? I’m happy to answer it for, I’ll be Frank for most Western sellers, their best resource. Probably still my former employer and Pipers. They’re great. But if they just want a second opinion on, Hey, this is the evaluation I’ve got, do you think I am, do you think this is fair? And this is who I’ve reached out to.
I’m more than, I’ll be more than helpful to help people up.
Jared Bauman: That’s great that you’ve come on to kind of go through all the differences in the Chinese market versus the Western market. And just your knowledge base is, is, is really it’s really deep. So I really appreciate you coming on. I’ve learned a ton today.
And so thanks
Jason Lee: for joining us. Thank you very much for having sure. We’ll talk soon, Jason. Thanks.
[ad_2]
Source link
