Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast I talk to the people who do it. Today I talk to Golan Manor, who runs acquisitions for an e commerce aggregator. For for those who don't know, e commerce aggregators are companies that acquire smaller e commerce businesses. It's a big trend in E commerce right now and there are lots of aggregators out there gobbling up e commerce companies. And TCM Digital, Golan's company, is one of those aggregators. So he gives a ton of information that is valuable to anybody considering buying an e commerce business. For example, at the end of the interview, Golan shares five very specific tactics from TCM's play about how to quickly boost sales of an e commerce product or business that has been acquired. So this is their own checklist from their own checklist and what they do. Having done 28e commerce acquisitions, these are like the top five low hanging fruit things they do to boost sales of a recent acquisition. So these are things that you yourself, if you go out there and acquire an e commerce business, you can implement. And by the way, even with all the competition, even with all these aggregators running around, Golan doesn't think that it's too late for an entrepreneur or individual buyer to find good acquisition opportunities in E commerce. In fact, he thinks there's still plenty of time. So there's that. Enjoy my conversation, my very informative conversation with Golan Minner, you are the CTO and run acquisitions for TCM Digital, which is an acquirer of e commerce products and companies. TCM has acquired 28 E commerce products in a relatively short amount of time. So I want to dive into that. I want to hear how TCM does what it does, how it evolved into what it now is. And then I want to hear, after having done so many acquisitions, you all have learned a lot about how to make an acquisition successful. So for the other acquisition entrepreneurs out there who have either acquired an e commerce company or are thinking about doing that, you have a lot of value to share with them. So we'll get into that in the second half of the interview. But why don't we begin with the story of tcm? How did TCM start and did it start as what it is today, as an e commerce acquirer or was there something else? Tell me about how it started and then the evolution.

Guest: Well, we originally started as an agency helping offline businesses take their offline brands online, but we it was about Six years ago where we were becoming aware of the huge potential around generating private label products, we started building brands from scratch for our customers. That was very successful. And we've got a lot of interest and demand from passive investors that are really looking to acquire or participate in this rapidly growing segment of E commerce. And we understood that growing new brands organically, we would not be able to meet the demand for this kind of growth. So that's when we started acquisitions. And very quickly we understood that we have to have supporting technology to be able to both identify the right assets to acquire as well as to help grow them at a very efficient way. And that's where we are today. With all the acquisitions that we've done, we've perfected both our technology and our know how. And we are now what is called an aggregator.

[4:54] Host: Explain to people what that means. That's a term you hear a lot in the e commerce world these days. Essentially you're acquiring e commerce companies and using economies of scale and synergies to make those more efficient.

Guest: Yeah, I would say a little bit of a twist here, a couple of twists really, that we also develop our own technology that helps us both identify and quantify these potential new acquisitions as well as develop technology to help grow them. And we are not only focused on what is really the hot area of Amazon FBA businesses, we also acquire off Amazon e commerce businesses that have presence in their own website, Shopify, maybe have already their own community and even SaaS businesses.

[6:04] Host: Okay, and so you've developed technology to source deals? Essentially, yes.

Guest: We've developed technology to both be able to source and quickly quantify potential deals. I would say that the funnel for new deal has become quite significant over the last couple of years. We had to make this process of being able to really understand and break down the parameters of an E commerce business very quickly. We've developed tools and technology to be able to really pull up data from all kinds of sources. It's going to be Google, it could be Amazon, it could be information that we get from the sellers themselves, have it automatically uploaded to our, what we call the superbrain, and then be able to generate what we believe is the right price for the asset. Really understanding what is for each niche in that business, understanding what's the competition, what are the trends. If that particular niche is growing or declining, this gives us a more granular visibility into the business and we are therefore much better able to predict how this business will perform over time. And this is how we really find those hidden gems, say rough diamonds that Maybe not everybody else has identified. And so we're not really in there to compete against making the highest bid, but really understand where potential assets have huge growth potential and be able to leverage that.

Host: And are you running this algorithm against complete proprietary deal source? You're going out there and identifying e commerce stores yourself or you're looking at some of the e commerce stores that are already for sale and being brokered on some of the well known e commerce brokerage sites or a combination?

Guest: Both. Obviously it's easier when the business owner already knows that is interested in selling.

Host: Right.

Guest: So we get a lot of direct contacts from sellers. They don't even know what the value of their store is, but they know that they're interested in getting offers. And of course we are in contact with all the major brokers and websites for these kind of deals and acquisitions.

[9:13] Host: Okay, okay. I want to step back quickly just to drill down a little bit on how the strategy evolved into acquisition. So when you said you were initially doing private label products, so you were developing your own products and by private label just having an outside manufacturer and then privately branding them, would you. And you had said that demand, you couldn't keep up with demand in doing those. Can you elaborate on what you mean by that? Like the investor demand for how much capital they wanted to deploy or do you mean consumer demand? Or please elaborate.

Guest: The investor demand. Really what we saw is when you develop your own private label product, it takes roughly a year from ideation to having the product really become profitable. There's obviously a lot of effort involved around it. We were looking for a way to be more streamlined and to be more efficient in, in how new capital is being deployed and also how fast returns can be generated for those investors that were interested in deploying this capital. So this is where we started looking for business. To acquire businesses that are already profitable and therefore can generate returns day one, and then take those businesses and further grow them with an interest at a later stage to also sell them potentially.

Host: Okay, does that mean if I'm considering launching an Amazon product, would you advise the same thing, that the strategy that you've undertaken is pretty much universally relevant, that I should acquire an E commerce company rather than starting something from scratch? I guess it depends on my own time horizon, but if I want to go fast.

Guest: Exactly, exactly. It very much depends on the type of entrepreneur that you are. Some entrepreneurs, they like to start with the blank slate and have their own idea, maybe based on their own passions. We've seen that a lot in the businesses that we've acquired those businesses came about around a certain passion that the seller had. But if you're really, I would say, a kind of serial entrepreneur that's really agnostic as to what is the actual type of business, but already you have the business acumen and experience of how to take businesses to the next level, then obviously I would suggest that you find the right business for you to acquire and then take that business to the next level. Have a business that's already profitable.

[12:39] Host: If I wanted to go out there and acquire, then can you tell me broadly what deal terms I should be offering to people? Or more specifically, can you give us a sense of the deal terms that TCM typically offers?

Guest: Well, that has drastically changed over the last three years. When we started original acquisitions, we were talking about multiples that were in the range of maybe 1 and a half, 1.8 of the yearly profit. Now the multiples, the average multiples are more in the range of three, three times the yearly profit. And that in itself is an average. So there are businesses that we've acquired recently that are below that multiple and also businesses that are above that multiple. Very much depends on parameters like the market size, market share, growth trajectory, the breadth of products in the portfolio, things like that affect the multiple.

Host: When you say multiples have gone up, let's dive into that a little bit. That would be one trend that's occurring in the E commerce market. Things are getting more expensive probably because the rise of the aggregators, as I heard somebody characterize it, there's a lot of companies or more and more companies like TCM out there looking for opportunities to acquire that drives up the price. That is the multiple of what E commerce companies are selling for. Are there any other trends to be aware of?

Guest: I think it's really an issue of supply and demand. The. The supply of E commerce businesses available that are, I would say, well enough on their growth path to be acquired is limited. And these multiples are still very low compared to public companies. So there's a lot of growth there of acquiring, aggregating those businesses into a larger structure and then taking that structure public with much higher multiples. Therefore, there's a lot of money flowing in to these kind of acquisitions. And like real estate, when the money comes in, prices go up.

[15:30] Host: Right. Like every market, I think.

Guest: And the growth of E commerce in itself, obviously is an important factor because really, if you look at, compared to other businesses, penetration of online E commerce into the general commerce, general retail is still very low. We're talking about the low double digits

Host: Even after Covid, because I'm hearing, Golan, that everybody in E commerce now, obviously many of them had the best year ever last year because everyone was at home shopping. And now the question is, and you keep hearing that that pulled forward E commerce demand by four or five years. But now there's a big question, how much of that demand, that E commerce, that aggregate E commerce demand and user behavior is going to stick and how much is going to recede as life hopefully returns to normal? Make a prediction, if you would. What do you think about that?

Guest: Well, we are already seeing that Covid has a permanent effect in our businesses and in businesses that we've acquired over the last six months. We see that obviously there was a huge spike back when Covid hit around March, April, probably all the way to August. The spikes in some cases were 10 times the revenue, the normal monthly revenue for a certain business. And that has definitely went down. But still, when you look at year over year for months that are beyond that effect, like we're here right now, entering the second half of 2021, you still see that this growth really, as the analysts say, expedited the exposure to E commerce. People having no other way to acquire stuff, went online, understood how easy it is, how comfortable it is, and now you can't go back.

[18:15] Host: Right. And yet we're still, in the early days, double digit, as you said, double digit penetration, teens penetration, meaning the percentage of overall consumer spending that E commerce accounts for is only between 10 and 20%.

Guest: Yes. Right now, probably for 2021, predictions are plus, minus the 20s. But it's still, again, if you compare it to other types of businesses in terms of penetration level, you see that there's still huge room for growth. If you look at real estate, obviously penetration levels are much higher. Growth overall in real estate is really only attributed to the growth in population. And if you look at mobile phones, for example, 10 years from now, 10 years ago there was a huge growth. Now everybody has a mobile phone, everybody has a smartphone. So the growth is only again, the a general growth in population. So this segment, E commerce is still relatively unique in the fact that it is quite large, but still in terms of penetration levels, still relatively low.

Host: Okay, well, if I'm again an acquisition entrepreneur, I'm thinking about making an acquisition of an e commerce company and multiples are going up, sophisticated players and public companies or companies that are expecting to go public that will trade at a higher multiple. So just so people understand, if in the public markets, companies typically trade for a multiple of their profit Multiple of earnings. And those multiples are a lot higher than in the private market. So let's say what would throw out an average multiple earning 20?

Guest: Yeah, yeah. Some companies can be even 100.

Host: If I'm a company that trades at 20 times the multiples of my earnings and I can acquire a private company for three times its multiple earnings, I have what's called multiple arbitrage. I'm basically acquiring these companies for much cheaper than the then the public market will value my own company. So this is a very powerful dynamic if you are a larger company or a public company whose earnings multiple is valued highly. So the question for you, Golan, is if I'm just an individual, I'm not ever going to have that multiple arbitrage opportunity? Probably. At what point do the multiples get uncomfortable or become unwise for me? Is it 5x6x or is it we already getting to the point where as an individual entrepreneur, the multiple is probably unwise? If you were going to go out there alone today on your own, where would you feel comfortable buying at what multiple? What would that ceiling be?

[21:41] Guest: I think that, I mean, still, if you look at the multiples that we are seeing today, around 3, 4 on average, these are still very comfortable multiples when you compare to other types of businesses. If you look at real estate, you're talking about longer periods for getting your full return on investment. And so it's still very. Even for the solo entrepreneur, it's still very attractive. It will remain so probably for quite some time. It very much depends on, I would say, the amount of money that you want to deploy because we definitely see that the smaller assets have smaller multiples than the larger assets. The aggregators or the public companies are obviously more targeting the larger businesses. When you have $100 million of acquisition money to deploy, obviously you will look for the larger businesses. It's easier to make five acquisitions for $20 million each and not 100 acquisitions for $1 million each. So this still leaves a lot of room for, I would say the smaller serial entrepreneurs to take a half a million dollar business or a $1 million business, grow it for several years, take it to the next level, and then sell it to a larger group or an aggregator.

Host: Excellent. Well, that's a very enticing possibility. Let's do an example. I don't think you all have sold Hammock sky, right?

Guest: It's still ours. Yes.

Host: So this is Hammock sky is actually a story that I had heard about already. So it was one of your acquisitions. Can you tell us the story of that acquisition at a high level.

[24:10] Guest: Yes, we did it back in 2019. And it really quickly was very apparent to us that again, it was a very strong business. But we understood that there's still a lot of room to grow. As I explained, when we look at businesses, it's not only what they're generating right now, we look also to where we can take those businesses. Sure.

Host: Tell us what the product was. Golan.

Guest: Yeah, the Hammock Sky. As the name suggests, it's an online brand for hammocks, for outdoor hammocks, you know, in the backyard kind of hammocks. Not those that you take for a trip.

Host: Not portable. They're mounted.

Guest: Not portable. Yeah, they're permanently installed in. In your backyard. Hammock sky focuses on large hammocks, double and even larger than double hammocks.

Host: And it was founded by a solopreneur type individual?

Guest: Yeah, it was founded by solo entrepreneur expat, as they say, that lived in Thailand and he had connections with manufacturers through a previous business of his. And he started Hammock Star and in most situations it became quite big for him to continue to operate and he decided that he wants to do something that more aligns with his original passions and so decided to sell. We saw the opportunity in the business and we took it and grew it. And we also had the great, unfortunate, I would say, but still great happening of COVID which in this situation, people stuck at home had a huge spike in demand for our products. So this business grew very, very nicely since then.

Host: Can you give us a sense of the numbers or the size? Just a sense of the size of the business and a sense of what you acquired it for.

[27:05] Guest: I cannot give really specifics, but I can say that we've acquired it in around 2 1/2 multiple, 2 1/2 times its earnings. On the earnings and it's seen since then, over 50% growth.

Host: 50% growth. Was this a six figure business, a seven figure business?

Guest: Can you say it was a seven figure business in terms of revenue?

Host: Okay, excellent. In terms of the growth, I mean, you had the, again, unfortunate tailwind of COVID But let's talk about in 2019 when you acquired it. You did not foresee Covid, of course, but you still saw potential in this business. Potential to improve it, potential to grow it. What did you see in Hammock sky that was the low hanging fruit that if TCM acquires this, here are the things that we're going to do.

Guest: Well, the first thing that we saw is that the business was solely focused on Amazon.com, and we were already with multiple assets that were spread in the US beyond Amazon.com, on Walmart and also with their own websites. So the first opportunity was obviously to grow the business beyond just Amazon.com in the US as well as take it beyond the US

Host: okay, so essentially increasing the distribution channels.

Guest: Yeah, Being less dependent on just what happens in Amazon.com and also being. One of the nice things about Hammock sky is being very much, I would say, a seasonal product centered around the summer months, spring and summer months. By taking it also to example for Australia, we're able also to generate revenue in those slower months, which are the summer months in Australia, which are the winter months in the US the dual hemisphere strategy. Yes.

Host: Cool. Well, this is a perfect segue into tips. You have been writing online about a playbook that E Commerce acquisition entrepreneurs can follow to improve an E Commerce product or an E Commerce acquisition. And one of those tips is in fact diversifying off a single platform. Usually that single platform is going to be Amazon. If somebody is selling something, sometimes it might be shopify. So that's one of the tips. Why don't you tell us what the other four tips for growth of an E Commerce acquisition are?

[30:28] Guest: Okay, so one method that we used obviously for Hammock sky was to look at the product portfolio and what our customers are really looking for. What are the challenges that they're facing in using these kind of products and then expand the product portfolio around those challenges. As an example, we saw that the ability or the challenge to attach these hammocks to trees or to other elements in their backyard is very important. And so we added all kinds of accessories to make that process much easier. And another thing that we saw is kind of obvious, but still not a lot of people pay attention to. It is issues of size and color. We expanded the portfolio of different colors and patterns for the hammocks and we expanded also the sizes, taking us all the way to extra, extra large.

Host: So, okay, expanding the product portfolio and expanding the, the variety for the SKU for the individual SKU that you acquired as well. And obviously this is a no brainer because you already have customers that you can upsell to, essentially.

Guest: Yes, exactly. It's looking for customers that or, sorry, looking for products that are in the same niche or if not in the same niche, but still really relevant to the same buyer Persona. So it can be complementary products, it can be accessories, or it can be all kinds of variations in the same product. Great.

Host: Great. Okay, what would another one of your tips be?

Guest: So we've talked about taking the products off Amazon, we've talked about adding products. A lot of effort should be also taken into really optimizing the customer experience when they come to your product base. So we spend a lot of effort on photography, on copywriting, making sure that since it's an online experience, to give as much detail to the buyer as to what kind of experience he's going to have with the product, what are the unique selling points, even how he's going to feel after he bought the product. And also optimizing the content in terms of searchability, making sure that when people use certain search terms to locate the product, this is how you usually find products on Amazon, that we have those relevant search terms in our product listing in the relevant places to make that discovery process much better and also to improve conversion.

[34:31] Host: Sure. So improving the by searchability, that's almost like SEO, but SEO specifically on Amazon or elsewhere. And then the product listing itself, from really, from a marketing perspective, market the product better, more detail, more just as much kind of communicating the value and communicating the experience of the product as possible. And you find that a lot of your acquisition targets have under explained the product or under marketed the product.

Guest: Yes, yes. In many situations. Again, these were solo entrepreneurs. Many of them, success really hit them by surprise, I would say. And they were growing very fast. And so they didn't have any really incentive or time to invest in really perfecting and improving the product pages. We have, of course, a big team of copywriters, graphic designers, photographers. So this is kind of part of the usual process that we do for every product that we have.

Host: Great. Okay, and then the other two tips,

Guest: the other is a lot of effort also should be put to optimizing your paid advertising. This is something that can either lose you a lot of money or make you a lot of money. Here again, in many of the situations that we came across, these entrepreneurs were doing their own paid advertising, managing their own campaigns. And when we brought in our professional team and our tools, we were able to do that much better. And that not only affects your paid advertising, your return on ad spend, but it also affects your organic exposure. Because both Amazon and Google, if they see that your ads are performing very well for a particular keyword, they will also organically expose buyers to those keywords and so generate organic traffic as well.

[37:03] Host: Oh, I didn't realize that.

Guest: Yeah.

Host: So there's a positive spillover. If your PPC performs well, your organic is pulled up a little Bit as well, benefits as well.

Guest: And it goes both ways. I mean, if you're not optimized, if you're spending too much money and your ads are not converting, then you will see less and less organic exposure for those non converting keywords.

Host: Right, right. As you said, either an opportunity to make a lot of money or lose a lot of money.

Guest: Exactly.

Host: Great.

Guest: Last but not least is create the community around your product outside of Amazon. That's one of the reasons why we have acquired another company, a SaaS company called Ninja. Ninja Outreach, sure.

Host: Ninja Outreach, yeah.

Guest: Which is an influencer marketing platform. We use Ninja Outreach to generate communities around all our brands through influencers. Influencers of course get exposed to our products, they post all kinds of stuff around our products and that generates a very, very strong community. An example is a brand that we have called Lens Ball. Lens Ball.

Host: And what is that?

Guest: Lensball is, as the name suggests, it's really kind of crystal ball, but used for photography and it's generating very nice photography effects. And so there's really a photography enthusiastic community around Landsberg and this resulted really in a large following. We also published an online course on how to make this kind of very unique photography. And that generated a lot of sales by itself and of course increase the overall sales of our Shopify store.

[39:29] Host: Excellent. And what about things like Facebook groups? Do you ever set up a Facebook group around a product or would that not be the right tactic?

Guest: I would say that Facebook groups are not as effective now as they were in the past. So there is usually also a Facebook page, but we don't, I would say, spend too much effort on growing the community, really. I would say organically growth.

Host: And when you do outreach to influencers and an influencer likes the product and wants to promote the product, is it not a risk that even if they develop, if they help cultivate the following of this product, their. They own their own channel, of course. So that community that they've helped foster, you don't really have direct access to, you only have indirect access to it.

Guest: Yeah, but the same thing goes for when you advertise on Google and Facebook. This is, I would say, another very important channel. And obviously influencers, we're looking into Instagram, TikTok, YouTube, they generate content all the time. They are looking for great stuff to write about and there's a great synergy because we don't need to generate the content, they are generating the content. Content is, I would say, much more from the user perspective, natural. More natural. Exactly. And so the response is in most situations is much better than where you yourself as a brand are posting an ad.

Host: And how does it work exactly, Golan? Do you incentivize them? Is it an affiliate relationship or do you just send them, do you send them free samples and if they like it, they'll talk about it anyway? Or does it vary? Like I don't know much about influencer marketing?

Guest: All of the above really depends on their footprint, on what they're interested in doing. Sometimes it's an ongoing relationship, sometimes it's just a one off relationship.

[42:08] Host: Very much depends is ninja outreach. You all acquired this SaaS company because you were a customer of it, using it for your own influencer marketing. Is it something that is still available to the public?

Guest: Yes, yes, very much so. For us it was kind of a two punch combination. We have a tool that's very synergistic with what we're doing and it's already a profitable online business, so we keep it as such.

Host: Is there anywhere that people can reach you online if they maybe want to talk to you about acquiring their e commerce company? Or maybe they want to acquire an e commerce company from your portfolio or they just want your advice? Where can people find you?

Guest: Yeah, well, our website is www.tcm digital tcm digital.com.

Host: very good.

Guest: Great.

Host: Well, thank you for your time, Golan. This was, this was awesome. And maybe we'll circle back around and have you on again.

Guest: It was a pleasure.