Trever is the Founder and one of the Managing Directors of Objective, Investment Banking & Valuation, and is focused solely on the Investment Banking Group, which offers sell-side advisory. Trever has 20+ years of investment banking, acquisition, and strategy experience advising middle market companies on transaction execution and strategy.

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> Here’s a glimpse of what you would learn….

In this episode of the Ecomm Breakthrough Podcast, host Josh Hadley interviews Trever Acers, founder and managing director at Objective Middle Market Investment Bank. Trever, with over 20 years of experience in investment banking, shares strategies for e-commerce entrepreneurs to maximize their business valuation. Key insights include understanding target and “sell now” numbers, diversifying sales channels, leveraging customer data, and maintaining a resilient supply chain. Trever also emphasizes the importance of selecting the right advisor and preparing for unsolicited offers. This episode is a must-listen for business owners aiming to scale their companies and achieve a successful exit.

Here are the 3 action items that Josh identified from this episode:

1. Diversify Sales Channels and Products: To attract private equity buyers, ensure your business is not overly reliant on a single sales channel like Amazon. Expanding into wholesale, retail, and direct-to-consumer channels, as well as offering a variety of products, reduces risk and enhances your company’s appeal.

2. Prepare Financials and Strategy Well in Advance: Begin preparing for a potential sale at least three years ahead. Clean up financial records, set clear valuation goals, and have a methodology in place to manage unsolicited acquisition offers. This proactive approach ensures you are ready to engage with serious buyers when the time is right.

3. Engage Multiple Buyers and Highlight Synergies: When considering a sale, engage with multiple potential buyers to increase competition and leverage in negotiations. Discuss potential synergies early in the process to demonstrate how your business can add value to the buyer’s portfolio, which can justify a higher sale price.

Special Mention(s):

Related Episode(s):

Sponsor for this episode…

This episode is brought to you by eComm Breakthrough Consulting where I help seven-figure e-commerce owners grow to eight figures.

I started Hadley Designs in 2015 and grew it to an eight-figure brand in seven years.

I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.

If you’ve hit a plateau and want to know the next steps to take your business to the next level, then go to www.EcommBreakthrough.com (that’s Ecomm with two M’s) to learn more.

Josh Hadley 00:00:00  Welcome to the Ecomm Breakthrough podcast. I’m your host, Josh Hadley, where I interview the top business leaders in e-commerce. Past guests include Kevin King, Michael E Gerber, author of The E-myth, and Matt Clark from ASM. Today I am speaking with Trevor Akers. Trevor is the founder and one of the managing directors at Objective Middle Market Investment Bank, and we are going to be talking a lot about how to maximize your business for a premium valuation that will not only help if and when you decide to sell, but to help you stay in business for decades to come. This episode is brought to you by Ecomm Breakthrough, where I specialize in investing in and scaling seven figure e-commerce companies to eight figures and beyond. If you’re an ambitious e-commerce entrepreneur looking for a partner who can help take your business to the next level, my team and I bring that hands on experience, strategic insights, and the resources needed to fuel your growth. So if you or someone you know is ready to scale or looking for an investment partner, reach out to me directly at Josh at Ecomm Breakthrough dot com.

Josh Hadley 00:00:48  That’s e-comm with two M’s and let’s turn your dreams into reality. But today I am excited to introduce you all to Trevor Acres. Trevor is the founder and one of the Managing Directors of Objective Investment Banking and Valuation, and is focused solely on the investment Banking group, which offers sell side advisory. Trevor has 20 plus years of investment banking acquisition and strategy experience, advising middle market companies on transaction execution and strategy. So with that introduction, welcome to the show, Trevor.

Trever Acers 00:01:13  That’s a lot. Thanks, Josh. Excited to be here.

Josh Hadley 00:01:15  Trevor. Super excited to have you here to kind of give us a lay of the land of what’s going on in the specifically in the e-commerce space with acquisitions right now and buying and selling. What do multiples look like? But I love that you also are not just solely focused on e-commerce. You also are advising other middle market businesses and seeing multiples in very different segments as well. And you’re seeing some up, some down. So I’m interested to kind of get your take on the market right now as we record this fall of 2024 here.

Josh Hadley 00:01:42  Where are we at specific to e-commerce and then maybe the broader market as a whole?

Trever Acers 00:01:46  Yeah. it’s been interesting. So I’ve led I let our consumer practice for a good number of years, and one of our areas of expertise, we spent a lot of time as e-com, both in B2B and direct to consumer And, you know, we’re seeing some really interesting shifts. you know, we have talked a little bit about this aggregator model that has been, that had been very popular in the especially in the DTC space. But we saw it in B2B as well. We’ve seen, as I would tell you, we’ve seen a I wouldn’t call it necessarily a decline because there’s still a lot of them out there. but they’re, they’re really not consistently as a whole, really the often the most attractive acquirer. I think some of the challenges that they’ve had is in a if we back if we go back seven years ago a little bit further, what we saw is that a lot of these e-comm skills were very, very limited in terms of how many people had them.

Trever Acers 00:02:35  Right. And so as that has changed as E-com, that skill set has continued to have expanded the number of people that have it really that magic, that ability to say, hey, I can take your business and help you scale because I know what I’m doing. Everybody else doesn’t. That value proposition has been diminished. There are people yourselves who are exceptionally good at helping people grow their business, their e-comm businesses, and those are services that you can hire. and so that that value proposition has been diminished. In addition to the fact that the, the value prop of, hey, I’m going to buy you and, and I’m going to give you all these massive amounts of synergies is really, really hard. you know, GE talks about the fact that that when they make an acquisition they expect to have negative value. and I think that’s real I think it’s when someone buys you and says, hey, we’re going to rip out all your systems, put our systems because we know what you’re doing. That’s a tough model.

Trever Acers 00:03:23  I think there’s a lot as, as, private equity acquires of, become more and more interested and comfortable with E-com, especially Amazon centric e-com businesses. we’re just seeing the range of acquirers expand dramatically, and as such, they’re willing to pay a lot more, than aggregators were. And so I think right now it’s a really robust market. for e-comm businesses, we’ve never seen private equity more comfortable, in looking to, to these companies. But there’s, there’s some specific equations that they’re looking for, a set of characteristics in an e-com company that makes it exciting.

Josh Hadley 00:03:55  Awesome. Well I think that that part’s fascinating. And I think that maybe the aggregators maybe led the way, to, to help, maybe bring a little bit more appetite, from the private equity standpoint. So we know the issue with the, you know, the aggregators overall, it seems like multiples are down, but yet you’re telling me, Trevor, that like, hey, there’s actually some private equity willing to throw some decent multiples at things right now.

Josh Hadley 00:04:16  So maybe tell me, what are the what are the brands or the types of e-commerce companies that these private equity companies are looking for and willing to pay a premium for on the multiples?

Trever Acers 00:04:26  Yeah. So let’s let’s focus first on DTC. Right. the consumer segment there, if we compare 2019 to 2020 through 21 to today, it’s reasonable to say that the level of activity and quote unquote multiples are down, in the DTC space, it’s really a function of the fact that we saw this like euphoric time for a time, like an amazing. Right? 2019, 20, 2021, we had Covid and we had this huge maturation within E-com shifts in customer spending, customer behavior. That was spectacular. we’re now seeing a normalization of a lot of that where the technology is much more ubiquitous. the capabilities are now it’s it’s a, and we’re getting a maturation in the way that we can reach out to customers. Right, right. More and more channels, greater, greater diversification and a real institutionalization of that.

Trever Acers 00:05:15  If you look at, for example, TikTok, and how e-comm companies have been using TikTok 3 or 4 years ago compared to today. It’s amazing maturation. So what we found is that buyers are cautious, right? They’re cautious and they’re thoughtful about where is the macro economy going and what’s what’s going to go on in consumer spending. We know their shifts. If you think about that economic pyramid for a second. we know that, you know, more than a year ago we saw massive shifts in the, the the lower third of the consumer spending. We’re seeing it continue to walk its way up. where we’re seeing now luxury brands reporting changes in revenue. So acquirers are certainly watching that. And our concern at the macro. However, these e-comm E-com businesses have gone from a situation where private equity looked at it and say, boy, that looks really risky. Single channel to boy. I can now see that these are great businesses, these are great businesses and that I can scale it. And now I can buy, call it an Amazon centric ecom, DTC comp business and I can build it up.

Trever Acers 00:06:10  And by the way, I can I can look at more of a DTC where I’m selling through my website. I might be looking at other channels to diversify. I might be even looking as far as, as retail creating more of a hybrid model, but they can see that growth path. There’s been many successes. So I would tell you it’s in general it is a good it is a fine it’s a good market in more, maybe more refined. There are certain segments, mostly because of the macro economy that are challenged. Right. Have nothing to do with the acquirers. But if you look at apparel right now, for example, E-com apparel is having a hard time. we’re seeing shifts in consumer spending. We’re seeing a consistent dependence on discounting. we’re seeing margin margin decrease there. It’s hard. this might be the time for many apparel brands to kind of keep your head down, keep growing keep working on, you know, genuine organic customer interactions that’s going to pay off here, in the near future.

Trever Acers 00:06:59  other consumer products, you know, especially health related, if you look at health and beauty doing very well, we expect to see some big IPOs this year in the health and beauty space. I think that’s going to be a continued signal of the fact that a lot of customers have shifted their acquisition trend, their customer, trends towards a lot of self health. and that they made they’re going to spend their incremental dollar that they have on health and well-being in comparison to some of these other products, that they may have been more popular. Nice to have product in a 2019 timeframe. So it’s exciting. I mean, it’s exciting space in the the direct or the sorry, the B2B segment I think is very different. I think in the B2B segment, you’re certainly impacted by the macro economy, and we’re seeing if your customers in their industry are having growth challenges. That can be problem. But you look at healthcare E-com businesses focus in the healthcare segment, killing it right now, they are they are doing a really nice job, especially as healthcare organizations post post-Covid redo how they think about their their procurement.

Trever Acers 00:07:56  There is a lot of opportunity for e-comm businesses focusing in that B2B segment. Strong customer service, really quick delivery, strong response. You know, beautiful for if you think about that Amazon platform, right. It plays right into that equation. So we’re seeing really good multiples in that space.

Josh Hadley 00:08:13  Interesting. That’s fascinating. And you know I agree with you I think we have seen that on the beauty side. health right. And even supplements still fairly strong. So I guess this would be my question then. Trevor, as you work with, you know, other brands and help provide them strategy to exit to increase their valuation, how are like, give me a roadmap that you’re giving to a lot of these brands that might come to you that says, hey, I’m, I want to exit in the next, you know, 2 to 3 years. What do you do to help them become more attractive, especially to private equity?

Trever Acers 00:08:43  Yeah. And so it’s very common. We’ll work with companies up to about three years prior to sale.

Trever Acers 00:08:47  we find that we can start conversations around five years, but three years, you start to it starts to be real in terms of, okay, I’m there’s some things I can actually do that aren’t sort of high level guidance, right. When someone tells you to keep your accounting clean. Okay, I appreciate it. I’m an entrepreneur. I’m trying to grow my business. In that three year window, we’re seeing really more actionable things about how I should be thinking about structuring my business. There’s also some guidance there, and not only in terms of characteristics that acquirers are looking for, i.e. things that we can do to make ourselves more attractive. But I think the other thing that we’re teaching them that I would say is even equally, if not more valuable, is how to respond to all the unsolicited, interest from acquirers. And that’s if we talk about, you know, we’re talking about the start here, about, you know, these really trying to focus on specific actions. Right. What can I take away if I’m listening to this podcast, what can I take away? So if there’s like two things you can hear I want to highlight those.

Trever Acers 00:09:35  So here’s one of them. When we’re talking to to business owners in this e-comm space, the comment we say is, look, M&A has become a normalized business activity. 20 years ago M&A was a strange, weird thing. Call you got you didn’t talk to anybody about it. You were scared. No one knew what they were doing. We’re in a new world. M&A is now a very, very common growth strategy for acquirers. We’ve got private equity. Who is there’s more than 2500 active private equity firms. The United States. They’re calling everybody I get calls, Trevor. We want to buy your business. I have to remind them. You do realize we’re an investment bank, right? So there’s a lot of junk email, but there are also really, really valuable calls. People calling you unsolicited. I want to buy your business and how to respond to those. So this is the thing you can do here. The greatest risk in those calls is wasted time. And it sounds very stupid, but let me quantify it for you.

Trever Acers 00:10:26  So I’m an e-comm company on an eight 9 million. As I reached that $10 million revenue mark, there tends to be an increase in buyer activity you get on their radar. Now they’re interested in buying you. The reason being at 20% margins or somewhere thereof, that puts 2 million of EBITDA and ten of revenue and at 2 million of EBITDA is a is a stair step for private equity interest. So that’s where we’re getting more and more calls. The challenging ones are from a strategic. You’ve known someone in the space. You respect them. Wow. So-and-so’s calling us boy I really like that brand. And now in this this can happen in private equity as well. Boy this private equity firm just called and they told me they want to buy my business and really excited. What happens is as entrepreneurs we get that call. We’re stoked. We are so excited. We’re flattered. We feel good about ourselves. And so our desire and it makes us excited. Boy, I wasn’t even thinking about selling yet, but they’re they’re they’re talking to me about or creating this image in my head that I can have a lot of money is going to be a wonderful thing.

Trever Acers 00:11:21  I should spend time on this. And so what the entrepreneur then does is they spend they they talk with the buyer, they send them there, they send an NDA, they send them their financials. They have more and more calls. We’re now like, let’s call it three, four months into a conversation, and maybe then we get an offer and we look at the offer. I’m like, wow, that’s not even close to what I would need. And what we really what we figured out is you could likely have identified that buyer was going to disappoint you, not because they’re bad people, but because their needs and your expectations are not aligned today. you could have identified that within a couple of weeks. Instead, we just spent four months. And so you can say, well, no big deal. I didn’t sell what? We kept going. That’s okay. I’m not concerned so much about the confidential information we just sent them. I don’t believe that that high level financials really include tons of confidential information.

Trever Acers 00:12:08  In fact, I would advise. Well, companies should always talk to their attorneys and get their own advice. I’d say, look, sharing revenue and earnings information even before you sign an NDA is a good idea. And the reason is if it’s not a fit for them, I want to get them off the hook, right? I want to get them to leave. And this is why, if I went through that four months of of brain damage and talking with this company, I’m so excited we’re going through it. They keep asking me and what’s happening is instead of focusing on the company, instead of focusing on growth, a larger and larger percentage of mindshare of possibly the most valuable person in the company, right? The CEO owner has been focused on something that we, if we were doing it right, would have known that that was a poor waste of time. What that’s going to do is cost us. So if we were thinking we were going to be call it $2 million of EBITDA and, instead we ended up at one five, you know, because we were just so focused on what was going on.

Trever Acers 00:12:59  So that half $1 million of EBITDA at 7 to 10 times. So that’s 5 million at ten times, that’s $5 million of enterprise value that we just destroyed. We just threw it away because we didn’t have a methodology to aggressively disqualify that buyer interest, to shake them off the hook. Right. This isn’t the fish I’m looking for. I want them to go away. I might want to keep a relationship. I might want to, like, be nice to them. Right. So that we can talk with each other later on. There’s some strategies there, but I want them to go allow me to focus back on growing the business. And that’s the methodology we often talk to entrepreneurs, entrepreneurs about as they go through this. Boy, we’re three years out and the key criteria are knowing what you want. That’s the first thing we need to understand what success looks like. And that might be something to the effect of, boy, if I’m going to sell my company, I’d want at least X dollars in after tax cash at closing.

Trever Acers 00:13:42  That’s the key metric. And what I mean by that is not the top line. Top line is a great number, but that doesn’t count. I need after tax, and then the top line number often includes a dollars today and a potential dollars to more. We don’t make decisions on potential dollars to make decisions on dollars today. So after tax cash at closing, what does that need to be? So if my number is $10 million of active tax cash, whatever state I’m working in, you can do that. And you can figure out what the top line dollar is, assuming that it’s call it 70% cash, 20% earnout or rollover or whatever the other other may be. You can start with the math, basically saying as you’re talking to this acquirer, hey, by the way, I’m so flattered you called me really excited. You guys do amazing things. by the way, here’s my revenue and here’s my earnings and I don’t we get a lot of inbound interest. I don’t think we’d probably be interested to sell for anything less than X.

Trever Acers 00:14:28  And what I’m doing is I’m trying to shake them off the hook because that X dollar, that valuation that I tell them is probably a function of where I’m going to be in three years. I’m executing a three year growth plan. I’ll tell them I’m executing a three year growth plan. We probably wouldn’t usurp that, but we would probably wouldn’t preempt that plan for anything less than X dollars. And what you’re doing is you’re recognizing that that might be a tomorrow price, right? But what we’re doing is giving them as a good partner, we’re giving them a buy now opportunity. Yes, it may be a premium, but I told you why it’s rational because that makes you a three year plan. But that’s my buy now price. And if it’s ridiculous to them and they look at it and say, boy, you know we just can’t pay that great, it’s wonderful. If they’re a great partner, let’s keep a relationship. Let’s keep in touch. Maybe is our partnership opportunity here. That’s wonderful. We’re going to keep executing.

Trever Acers 00:15:06  And then we go back to focusing on our business. And if they say yes, wonderful. What we’ve done by telling them that numbers, we’ve created a floor and not a ceiling because we told them we get lots of interest. So boy, that 28 would have to be $20 million or more. Okay, now what we’ve done is said if you’re interested, that buy now price is $20 million or more. The key positioning there is, if I tell you that I’m going to sell you this apple for a dollar and you’re going to try to buy it for lower, you’re never going to pay any more than a dollar. But by telling them that I have a lot of interest, which is true, and letting them know that’s my minimum decision point wouldn’t do anything less than I’m creating that floor to ceiling, and I’m allowing ourselves to basically disqualify any interest that comes in below that. I want them to very nicely go away, which is in complete conflict with what our bodies tell us. Right? Our human body says, oh my golly, so excited.

Trever Acers 00:15:52  I want to keep spending time on this. Instead, we want to tell them the exact opposite. Let’s find out if there’s a real option for them to to achieve success here together. Let’s focus on it. But most likely they’re not going to achieve it. So let’s try to shake them off the hook.

Josh Hadley 00:16:06  Yeah I love that. So you recommend people understand what is their number that they want to meet. That’s kind of like this would be my dream you know, kind of exit set that down and then kind of almost have like a pre templated response that you can copy and paste whenever you get an email or outreach that’s like, hey, we’re getting a lot of interest. You know, we’re executing a three year strategy right now. We’ve got X number of products in our product launch pipeline. We know we’re going to be at X revenue in three years. So we’re you know, we’re not entertaining anything less than $20 million.

Trever Acers 00:16:33  Yeah I’m a little hesitant to put that in an email. But but I think in a communication, a verbal communication, I think that’s a really effective approach.

Trever Acers 00:16:40  The other thing we do is we often when we’re starting to talk with the company, and when I say working with the company, we mostly advisors do not get technically engaged until they start the sale process. We’re very similar. So we’ll work with the company 3 or 4 years before we technically get engaged. And often what the company will do is just refer us that that inbound interest. And it’s basically, hey Trevor, will you have a conversation with X? They talk to us. I want to keep the CEO focused on growth. I’ll talk about the company. I’m going to try to disqualify them. knowing what my client’s objectives are and if there’s merit there, then I’ll set up that call. But my commitment is to try to make sure that I only take that CEO’s time if there’s a high probability of achieving their objectives. And we’ll talk about those valuation objectives. I really want to clarify here. There’s we talk about valuation. There’s two numbers that are critical. The one is what are we targeting.

Trever Acers 00:17:27  Right. What are we. What’s the number that we’re shooting for. That’s really important because when people talk about valuation that’s often what they want to hear and want to talk about. boy, I want to sell for a 2 million of EBITDA. I want to sell for ten. I want something 20 million. That’s what I’m targeting. Okay. But the next question that is for internal decision making purposes is critical is what I’m what’s my what’s my, sell now number. What is that number that I’m actually willing to sell at today. Or I’m going to to hold it for a dollar less. And if you’re selling your house must be able to advise you. Don’t tell your realtor that because they’ll sell it for you’ll sell your house for like, a dollar more than what you’re willing to accept because they’re looking for a transaction. A really good investment banker is job is to not only deeply know your industry, but to maximize the outcome. That’s what you’re looking for is someone who’s not looking to run a standard process, but someone who really has some methodologies to maximize your value.

Trever Acers 00:18:13  And that’s the key is tell them what that number is, that that decision number so that they can say to you, boy, you know what? I just don’t think at this point in time, running a full market process makes sense because there’s a high probability that most of the offers don’t meet your, your, your objectives. Yeah. And they know that the cost of taking you through a market process and failing. Yeah, it cost them a couple of months of time cost millions of dollars. Yeah. So really being thoughtful about using those metrics and being thoughtful about that is, is one of those key intelligence things that business owners need to have.

Josh Hadley 00:18:43  I love that, I think that is great, solid advice so they don’t get, you know, caught up in the thick of thin things for sure and focusing on the growth of the business. So Trevor, my question would be all right. So let’s say, you know, let’s say our goal is to get to a $20 million exit. What are the things you’re encouraging, you know, entrepreneurs to do now? You know, what are some of the best practices.

Josh Hadley 00:19:01  What is private equity specifically looking for that we could start cleaning up in our businesses today.

Trever Acers 00:19:06  Yeah I mean the there’s a there’s certainly an overlap, right, in terms of what private equity is looking for and what strategic are looking for. But I think private equity is a little bit, easier and maybe a better lens to look through. And the reason is, is any strategic acquirer has all sorts of very idiosyncratic rationale. What are we doing in our business today? Where are we going as a brand? What makes sense for us, which are really hard to solve for some of it you can see from the outside, some you can’t. So instead, if you look at private equity, which is just a much more stable view of the world, I’m looking for companies that look like this. I think that’s a better lens. And so I would tell you that one one aspect is what we call single channel dependence. So if I’m only selling through Amazon today, is that a good thing or a bad thing? Ten years ago private equity was very, very uncomfortable.

Trever Acers 00:19:48  Even seven years ago, very uncomfortable with a single with just a dependence on Amazon. I think that’s changing. I think private equity really recognizes the maturity of the Amazon channel and sees that these are very the history says that you can build a very sustainable business. The fears were I don’t own the customer, right. I don’t I don’t think that’s true today. Right. I think you can own the customer and own that relationship and that experience and yet still use Amazon’s that is that channel. So I think that’s going away. That being said, companies that have multiple channels I’ve got an exceptionally good at Amazon. So now that I’m focusing on Amazon is that I’ve found other channels. Maybe it’s wholesale, maybe it’s distribution, maybe it’s retail, maybe it’s through my own website there. That creates a diversification of sales channel, which is certainly an attractive, attractive characteristic for businesses. And this is one of those things. It’s a great example of a the characteristic that it shows us that there’s a difference between a great business as an entrepreneur and a salable business, right? A great business creates consistent cash flow to our to our to us as business owners, right.

Trever Acers 00:20:50  What we’re looking for in terms of an acquired, highly saleable company can be different. And this is a great example of where, you know, sales channel diversification is probably makes you much more attractive to acquirers as you grow, but may not necessarily create large amounts of incremental EBITDA as opposed to just focusing on Amazon. some of the other things we see is a single product dependence. We have a we see companies sometimes and they name themselves after the single product. And it’s really hard as you think about that defining, defining characteristic. So we see as somebody who sells a specific type of beauty or a specific, supplement. And so what we’re looking to do is we want to see companies who have shown evidence of the ability to expand the product offering, take that contextual relationship they have with the customer and expand it beyond that. One thing that they sold them first and great brands consistently do this. So that’s a real opportunity. We want to think about that product diversification. The reason is the acquirer looks at it and says great you got it to call it 10 million.

Trever Acers 00:21:43  Where do I take it from here. How do I grow this. Right. And so that allows us to have a growth story on my ability to expand that, that product line. I can sell more stuff to my existing customers. Lowest cost of customer acquisition out there. and I can also, if I have a hopefully a reoccurring product, I can show loyalty. we’d love to see a lack of dependence on discounting. I feel like that’s, like, the silliest thing for me to say right now, because it is so hard for our E-comm clients not to use discounting it, something we’d all love to get away from. It’s very I mean, it’s just not realistic right now, but but it certainly is a characteristic we’d love to get away from. that that one that we that no one talks about is supply chain. So private equity, these professional buyers, they’re looking at everything. Right. strategic buyers, they already have a supply chain. They’re comfortable with their supply chain. Right or wrong, it is what it is.

Trever Acers 00:22:33  Private equity says if you have a 100% dependence, for example, on sourcing your goods at China, what happens when we have a, you know, a weather event? What happens when we have, you know, probably not expecting a Covid event, but some other kind of logistics related event. What happens when we have a tariff, you know, this or that. So having some kind of at very least a plan, even better, some kind of diversification in your supply chain makes that private equity acquire a lot more comfortable. More comfortable they are, the more they’ll pay. Right. Risk brings down, price, lack of risk increases. So those are the so very actionable characteristics today that often when we spend time with companies, we’re working with them on these strategies. We love to see scenarios in which they’re selling via their own website. it used to be like always the goal. It’s not as 100%. Now on the go. There are a lot of companies that don’t really use their website as educational and then drive them to Amazon or other other platforms or purchased.

Trever Acers 00:23:27  but the there is still a lingering perception in private equity that if you the more you sell through your website The more you control, the customer, have that connection. So we’re a belief of we want to use the website, at the very least to really demonstrate, independent of platform that they’re actually buying on, really demonstrate customer interaction, be it through customer service, through product insights, however they’re going to get through that. There needs to be something there in private equity pays a premium for that.

Josh Hadley 00:23:54  Awesome. I love that those are some excellent, I think, goals. And I think that not only is this good business practice if you want to increase your valuation, but I think this is good business practices just in general. you talk about having, you know, not being too dependent on one specific supplier for your products because what if there’s so many different issues, there’s so many what ifs that could come up? What if their warehouse or their, you know, manufacturing plant catches on fire? Or what if there’s a tariff war or what if, you know, there’s, you know, shipping failures like in the Suez Canal, like, we’ve seen numerous issues that can clog things up.

Josh Hadley 00:24:28  And so being able to pivot quickly, I think, will not only help you stay in business, but be able to continue to capitalize on that, being able to.

Trever Acers 00:24:34  We’re seeing, for example, we’re seeing companies diversify the supply chain out of China and Cambodia into Guatemala. We’re seeing fine goods come out of Colombia. You see a lot moving into Mexico. And it’s not that they’re moving 100%. They’re often product, you know, they’re starting to move some product lines. But it does. It creates a ton of of value that may not be seen today. But boy when that logistics issue comes up it’s a huge issue. And there’s some you know, there’s some certainly some value in the agility, especially when you talk about product management. And we we see an issue where when I have a shorter supply chain, I can respond to consumer to, to consumer, preferences much, much faster. I can order smaller lots, I can do a lot of things that allow me to look at how a certain line of dresses is selling and maybe think about, boy, I’m seeing sizing, strange sizing issues, or I’m seeing color changes that I didn’t expect.

Trever Acers 00:25:24  I can change that mix because I’m manufacturing in Mexico, and it’s not going to sit on the water for X number of months. Yeah.

Josh Hadley 00:25:30  Makes a lot of sense. Trevor I’m curious that when people come to you looking to sell their brand, as you start digging in, what mistakes do you see business owners making? They’re like, oh man, I wish you wouldn’t have done X, Y, or Z. What are some common things that you’re seeing? They’re like, guys, if you could button this stuff up, like make sure make your life ten times easier.

Trever Acers 00:25:46  Yeah. So the the first one is the most boring one, which is, poor data and data comes in the form of certainly accounting is the place to start, which is like the most boring thing we can talk about. but if you don’t have good accounting, which often is the last thing as entrepreneurs we think about, right? Hey, money, when it came in, right, I sold something that came in. Why are you concerned about accounting? The reason is I’m talking about a third party who’s looking at us, and the only things they can know for sure.

Trever Acers 00:26:12  But the greatest level of confidence is these external things, like accounting. Something I can show them. Right. So I’m going to be valuable to us because we intimately understand live our businesses is very valuable to this third party. The next piece, though in the data is really customer data is we find that there is a ton of value in being able to to cut up that customer data So there’s a number of things we do sort of uniquely as a firm to maximize client. Client. Client sale price. One of the things we do is deep data models love doing, cohort analysis on on customers. But we look at this customer what’s the behavior. so we’re looking at, you know, cost of customer acquisition. And we’re looking at the full basket cost. We’re looking at the lifetime value. We’re trying to cut this in a thousand ways so we can show these diamonds. So for example we have an expert on our team. This is his job is to literally go through massive amounts of customer data and find those diamonds.

Trever Acers 00:26:57  And that diamond may be something like, boy might be to be customers. once they are ordered from me three times three, they’re with me for another five years. Three years or what have you. Look at the average spend after I do x. So typically you would say that, well for marketing purposes we want this data. Well I’ll say it for sale purposes. I want this data. I want to say by the way, did you notice that our customers once they bought two things buy exceptionally a lot more. And by the way, that’s why I’m spending so much time on our websites putting informational videos there. That’s why I’m doing this. So we’ll look by product line, by customer type by time. We want to see what that retention looks like, what that spend span characteristic looks like data if you don’t capture it, if you don’t have the systems to capture that data makes it really difficult. Luckily, a lot of the platforms today, out there are exceptional. They have that kind of data and we love it.

Trever Acers 00:27:42  so that’s that’s call it the more boring answer. but that’s a lot of it. The piece, though, that I see that’s most disappointing, honestly, is I think we talked about those two things. Here’s the second thing that I would I think it’s really if you hear anything, this is the second thing I think that they should take away is, the biggest mistake is when by when, companies are talking to a potential acquirer and they talk about their financials solely. What I mean by that is so you get called by a buyer and they say to you, hey, can you talk? And they they start falling in love with each other and they say, send me your financials. Great. You sign this NDA, you send me your financials, and then the next process they’re going to do is they’re going to ask you a bunch of follow up questions, and they’re going to make you an offer. And then you’re going to sign negotiate that offer or sign an Loi and do the deal. That’s the standard process.

Trever Acers 00:28:26  And if you don’t know better. You’re going to follow that process. And unfortunately, this is what most advisors will bring you through as well. They’ll bring you through the standard process. they they’re not doing the things to or the business owners not doing the things to maximize the value. So the number one mistake they’re making is this sole focus on the financials. We have to give our financials up. We have to do that to you. They need to see it. But stopping there is a crime. But we want to do is say great attention to those financials. That’s great. What I’d like to do Mr.. And Mrs. Acquire is start talking about Monday morning. Monday morning. What do you mean? I want to talk about the synergies. Right. I want to talk about the synergies of how not only you’re going to get our business and what it looks like, but where how much money are you going to make in the next 3 to 5 years. That, in fact, is the only question that matters in the conversation.

Trever Acers 00:29:11  But what they’ve been trained to do is instead have this conversation that’s only focused on your financials, which means it’s just a criticism. So whenever you started an evaluation, it’s just a degradation from there. And by the way, they’re professional buyers. So they’re better suited at pointing out all your flaws than you are And it’s like, that cannot be the sole context, because that’s never going to set us up for a premium. What we want to do, basically, is do three things. We want to characterize what the synergies are. We want to quantify them, and we want to validate them. So that means that, boy, if you own what I want to do is start this conversation where we’re shifting away from Trevor. Tell me more about your margin here. Great. I tell you all that and then I shift to I really want to talk about that synergy. Boy, if you owned us, you could sell your products to all our customers. Let’s talk about that. And then, by the way, you you can sell my products to all your customers.

Trever Acers 00:29:55  Let’s talk about that. So those are two examples of those types of synergies. And often what happens is we ask the client is the buyer understand your synergies. Oh yeah yeah yeah they understand it okay. And what what we find out is they do the buyer gets it at the PowerPoint level. They get it at the high conceptual idea. There’s an opportunity here for us. What they don’t do is the next piece is start to is to quantify them okay. If you owned if you owned us we think that you could sell our products to x percent of your clients in the first year. We think the average sale is going to be Y. We think that incremental gross profit is going to be this incremental profit contribution is going to be that. And they say, Trevor, that’s that seems a bit aggressive. You can’t sell your products to 20% of our customers in year one, maybe 15%. Okay. But what happens is that’s an our number. We agree they have confidence in that. And now we want to do the next thing which is validate.

Trever Acers 00:30:42  We want to allow them to get the insights into can you validate together that that 15% estimation is right, that incremental profit contribution is right. And if I can do that what I’m saying is you get my organic earnings, you get the value of synergy A, synergy B and synergy C. And by the way, we’ve taken the time to look at this together so that their level of confidence and their belief is much higher. So what that means instead of getting my $2 million of organic earnings, I’m now saying with a high degree of confidence, I think you’re going to get $5 million of earnings within 24 months. Very, very different picture. So if they’re trading at ten times earnings and saying basically you’re going to get $50 million of shareholder value, $5 million times ten times $50 million of shareholder value, with a very high degree of confidence within 24 months. What are you willing to pay for that So I just framed it instead of I’ve got $2 million of EBITDA. Tell me a little. Try to find the price.

Trever Acers 00:31:29  That is as little as I’ll accept to. I’m framing this up to showing your shareholders how much money they’re going to make. And now I can logically justify you paying a premium. Wait, Trevor, I think that seven times earnings is the high end of market, but I’m willing to pay eight for this or even nine, because I realized that paying, $18 million for this company, it’s a ton of sense. I’ll pay ten because I’m making $50 million a shareholder. I’m only paying you ten. Yeah. For 20. That’s a no brainer, right? $20 million to $50 million. So that methodology that oddly enough, that happens usually post a lot usually in this diligence. And so the logical question is why would you hold back the most compelling information post and do it after the price is set? How would you do that? Yeah. And the reason is because it’s not the standard process. It’s not efficient. The buyer is doing this math in their head anyways. They’re doing it behind the curtains.

Trever Acers 00:32:18  I’m just helping them get more and more certain about it so they can logically justify paying the premium Trevor.

Josh Hadley 00:32:24  This is, I think, a huge mindset shift. And I guess my question is this is that kind of the the primary reason to come, you know, if I’m a brand owner, is that the primary reason I work with somebody like yourself, to say, hey, help me, guide me through this so I can truly maximize the value when I’m ready to exit, so that you can help guide these conversations t them up to where, yeah, you don’t get your standard multiple. You get you get a premium. And it’s because you’ve had these conversations.

Trever Acers 00:32:50  Yeah. I think it’s characteristic, these are the type of methodologies that that a good advisor can bring. the question so what used to be said is that the advisor makes the market that’s their job is to make the market as was. They always talk about the value proposition of knowing the buyer is completely diminished. the reason being is you and I have Google and LinkedIn and his business owners, we know who’s a we can do a Google search and figure out who’s acquiring companies.

Trever Acers 00:33:14  And guess what? I can message them by LinkedIn. They’ll take my message just as much as they’ll take anybody else’s. So knowing the buyers, that value proposition is gone. Despite what the advisers will say. Because one wants to hear, oh, I know you’re I know your buyers, I know your buyers. But they’re really saying is, I know your industry and I know how to position companies like yours. That’s an important characteristic. But what you really want is a advisor who’s going to maximize price, maximize probability. Those are the two factors. The third one is minimized risk. But no one we’re entrepreneurs. We don’t think about this. So the it’s really about maximized price. And the question you have to ask your advisor, you want to ask them is you’re going through the process. Tell me all about the deals like mine you’ve done, which is great, but that’s really not valuable. Once you understand that they’re an industry expert, you really. The best question you could ask this advisor is tell me what you are uniquely going to do to maximize my value and maximize my probability.

Trever Acers 00:33:58  That’s what I want to know. Those are the keys. So it’s things like what we just talked about we call post-acquisition economics focusing, shifting that conversation away from a criticism of my financials and talking about how much money are you going to make in the next 3 to 5 years. It’s thoughtfully running a process with really engaged advisors that may be starting with a global set of potential buyers and aggressively disqualifying it. It may be starting with one. I’m amazed what often happens right now in 50% of transactions are going on is you get a call from somebody and your decision is, do I just talk to them? Do I talk to a few? Or do I run a process and half those situations they’re talking with one buyer. So Mr. Advisor, why should I hire you with one buyer I can I’m a CEO. I can get a deal done. Why should I hire you if I’m talking to one buyer? Price and probability. That’s it. Boy, what can you do? Well, I can help you maximize the hell out of that price.

Trever Acers 00:34:42  Make a really thoughtful choice. I can use things like deep data models. I can use things like post-acquisition economics. There’s a number of other tools that we can use to maximize that. And that’s someone that’s that’s from an advisor who’s been in the space for 20 years, 15 years. Right. An advisor that’s been in there in the space for five years. And they know the industry, but they’re really not doing the most valuable things, just maximizing price and probability. The other thing they can do is this probability piece is really navigating the weird strangeness around selling a business. How do I talk to employees? How do I manage the fact that my buyer is getting weird on me on this issue? How do I have the strength to really ask for what I care about? Maybe it’s exiting the business early. Maybe it’s about I don’t want their burnout. I just want equity. In fact, I want to minimize. How do I deal with these things? The advisor has done this. Hundreds of good advisor has done this hundreds and hundreds of times.

Trever Acers 00:35:26  That’s the kind of stuff I’m willing to pay for. in the my expectation is if you hire an advisor, your expectation should be I want to get 5 to 10 x the value comparatively to the fees on paying. I’ll pay you a good number. I don’t mind paying you a fair, reasonable market. You know, payment for an advisor, but 5 to 10 x measurable value is what I’m looking for. Increase in purchase price and increase in probability, which is a expected value calculation. Those are the two ways to do that. If your advisor can’t convince you that they can uniquely do things, they’re only going to run the standard process. You need to go talk to the next advisor.

Josh Hadley 00:35:57  That’s brilliant. And I think on that note, you know, in our previous podcast, we had Bill on and he talked about whether it’s finding an Amazon agency to help with your business or whether it’s finding a key employee to join your team whenever you’re creating that partnership, which would definitely be the case if you’re looking for an advisor to take your business to market, date lots of people, right? And date lots of advisors, you need to set up a lot of different calls, and you need to have all of these tough questions that Trevor just laid out say, how are you going to help me increase my value? How are you going to help me increase my probability? How are you going to identify the synergies and go through those hard questions first, rather than just like, well, I heard this guy on one podcast, so I just signed up and I think he’s a good dude, like go through because there are there are going to be, you know, the right advisor and find the one that you know, obviously fits the one that feels right to you.

Josh Hadley 00:36:42  So I think that’s also like good insight and words of wisdom is just like sometimes it’s good. Go talk to a lot of people, then come back because this advisor can truly add millions into your pocket if done correctly. And on the flip side, you could lose millions if you settle for somebody that’s that’s less than ideal, so to speak.

Trever Acers 00:37:00  I’m a member of EO Entrepreneurs Organization, and I had a CEO recently say some to me that I thought was brilliant. I think it’s so it changed the way I started to think about this, he said. When selecting when you’re trying to select a service provider or an advisor, ask the number one thing you can do to differentiate between the really, really good advisers and those that aren’t great is to ask them, what? How do you think I should select an adviser or a service rep for this particular thing? What should I be looking for? Advisers that service providers and advisers that really know their stuff will tell you exactly the most important factors. They’re often different than the factors that you might think.

Trever Acers 00:37:36  On the surface in our industry, as I mentioned, it’s like, boy, telling you all about the tombstones you’ve done in the industry. Okay, just tell me your industry expert can prove it to me real quick. Check that box. Tell me about your process. Good advisors really talk about their process and can answer the question of what can you uniquely do, right? That’s how. And I started using that with other service providers. It’s trying to select people. It’s like, hey, tell me about how I should think about selecting someone that does what you do. That’s exceptional. And it’s amazing to watch people glow who are really good and those that aren’t great kind of new to it, kind of okay at what they do. Their answers are all over the place, kind of. They just you can tell that they don’t have it.

Josh Hadley 00:38:13  Yeah, I love that that that is another great recommendation. Now Trevor, as we wrap things up, I love to leave the audience with three actionable takeaways.

Josh Hadley 00:38:20  So here’s the action items that I’ve noted. Trevor. Let me know if you think I’m missing something here. Action item number one. Going back to your first comment, which is have a kind of a script or a plan for when people are reaching out to you, right? If you make the Inc. 5000 list, you’ll get hit up a bunch, right? You crossed that $10 million mark. You’re going to get unsolicited people reaching out saying, hey, we want to buy your business. And so jumping on a quick call and explaining to them, look, I have a three year plan in place. I’ve got products X, Y, and Z that I’m going to be coming out with. Look, this is this is my buy now price, right? And so having that already that that then sets the floor. And guess what. Maybe they’re just anxious and hungry for your brand. Maybe they’re willing to pay that buy now price, which is a win for you because you didn’t have to wait for those three years for that to come to fruition.

Josh Hadley 00:39:02  Action item number two is going back to, you know, before you even sign that Loi, can you possibly have that conversation to discuss the synergies, about, hey, when if when you acquire my brand, I know that you have X, Y and Z brands in your portfolio. I think that you could sell our products to 20% of these guys in year one. Adding that adds to the value stack so that the focus is no longer hey, how do I trim down these guys as EBITDA number? It’s more you talked about maximizing the shareholder value. They’re saying this can bring 50 million. Now. We’re just now we’re just talking about pennies. At the end of the day, if we’re talking about $100,000 adjustment to their EBITDA, right? Yeah. Yeah.

Trever Acers 00:39:39  Maximum. I just shocked at how much value that methodology have done. Well can increase purchase price.

Josh Hadley 00:39:46  Yeah, I love that. And then last but not least, I think the third action item is selecting the right advisor with you. They are definitely worth their weight in gold.

Josh Hadley 00:39:53  And I think we’ll end with that last comment you made, which was you should ask them the question, how would you recommend or how would you make the decision of what advisor you would work with? And what should I be looking for as I interview all these different advisors? Don’t just interview one and jump in bed with them like go go through the gamut. Even though it’s going to be a lot of upfront work, I promise it’s worth it.

Trever Acers 00:40:12  At the end and try that trick with any advisor or any service provider you’re hiring. It’s, It’s a really fun trick. It seems almost like a Jedi mind trick, if you will. But it’s amazing to see how quickly you can assess good service providers from others. Yeah.

Josh Hadley 00:40:25  So how do you think I should select the right PPC agency? Yeah. How do you think I should select the right, you know, supply chain management, you know, software or whatever it is.

Trever Acers 00:40:33  So that’s exactly right.

Josh Hadley 00:40:34  Awesome. Trevor, my favorite part of the podcast where I asked the following three questions to each guest.

Josh Hadley 00:40:38  So number one, what’s been the most influential book that you’ve read and why?

Trever Acers 00:40:41  So, we run iOS in our company Entrepreneur Operating System. there is the first book in that call. It processes a book called traction, by Gina Wickman. iOS is life changing for business owners. I mean, it’s one thing to like, you know, we get incrementally better in our business, what have you. iOS is life changing. And it’s it is such because it’s the creates organization within the, within the company. And yes, does it make us it makes us much more effective, much more focused as a company, our roles are clear. We’re better what we do. But the life changing piece helps us as entrepreneurs focus on our highest, best use and that anxiety starts to come down. Now we get to focus on the part that we love, that we create the most value. And we’re not getting up at three in the morning freaking out about all the things we should be thinking about.

Josh Hadley 00:41:26  It’s great.

Josh Hadley 00:41:27  I echo, I echo that book as well. Great recommendation. Question. Question number two is what is your favorite AI tool?

Trever Acers 00:41:34  Yeah. I’ve got a really boring answer for this, but, I find it to be very impactful. I don’t use Google too much anymore. for search engines, I use, I use ChatGPT for for all my searches, and I find the results to be tremendously different. And the reason is because I can add so much more context in the search. it is a differentiating tool. So we’ve taught we are very aggressive in our firm about using AI in the ways that we think adds the most value. you can’t depend on it. It’s not a crutch. It has to be an enabling tool. So that’s the method I use. And, as boring as it is, I’ve seen a lot of other neat tools out there. It is still my go to.

Josh Hadley 00:42:15  Yeah, I love that as a unique way to, you know, start your searches on ChatGPT rather than on Google.

Josh Hadley 00:42:19  I like that approach. All right. Third and final question. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why?

Trever Acers 00:42:26  Yeah. so in consumer, ecom there, there’s one by the name of Deanne Ackerson. She was the CEO at Kindred Bravely and then transitioned as she sold the business, which helped them sell it to TCP. Great transaction. Really neat mix of cultures to see the acquirer just like love what the seller business and helping amplify that. But if you watch her videos she’s talking about she’s talking about women’s apparel, but you can see the care she takes. You can see the connection she creates with her customers. Look at her customer service policies. This is an example of a company that creates massive amounts of value, far beyond just the earnings that they create by selling their product. This is a brand that has a lot of organic connection to their customers. That means that not only from an M&A perspective, people pay a lot more, but the reason they pay a lot more is because they can see how long the brand is going to last, because it’s a it’s not a hey, I bought it because it’s the cheapest.

Trever Acers 00:43:20  I bought it because it was convenient. It’s I bought this product because I have developed a lot of trust with this company. And then guess what? Anything else they have to sell me. I mean, so take a look at kindred bravely. Dan’s videos are they’re they’re on YouTube. she’s like incredible. She’s our CEO. She’s like a Michael Jordan in E-com. She’s amazing.

Josh Hadley 00:43:38  Love that, love that recommendation. And, always trying. You know, the value definitely comes if you can charge a premium for your product. So great recommendation there, Trevor. If people want to follow you, they want to reach out. Where’s the best place to do so.

Trever Acers 00:43:50  Yeah. Go to our website with a lot of resources there. objective IBV. Com tons of stuff both on we have six industry practices. So we have I work in our consumer practice and in our tech practice. We’ve a lot on on ecom there. So there’s industry reports. There’s other pieces, their thought pieces out there. they can certainly reach out to their LinkedIn.

Trever Acers 00:44:08  We do a lot on LinkedIn. Our marketing team is very active there. The idea is give, give expecting nothing there of which is this idea that, look, help people, help people without knowing that they’re going to ever hire you and life will be really, will be really positive. And so there’s a ton of resources on LinkedIn and our website.

Josh Hadley 00:44:25  Wonderful. Well, Trevor, thanks so much for taking your time to join the podcast today.

Trever Acers 00:44:29  Yeah, yeah, there’s one of the other pieces of advice I could give to, on business owners. Don’t be scared to call investment bankers. Some of them are going to be jerks and say, hey, are you ready to sell today? No, thanks so much. Most of them, they’re going to take that call. The other thing you can do is talk to M&A experience attorneys. These are not attorneys that have done it once. These are attorneys that are doing M&A all day. They will take an hour of their time and really help.

Trever Acers 00:44:48  And you may not be ready to sell today. And that’s okay. But they are great resources. They want to help you give advisors like myself a call or great M&A attorneys a call. They want to be resources for you.

Josh Hadley 00:44:57  That’s that’s awesome. And I would recommend that as well. Just jumping on the phone with somebody like Trevor can definitely unlock one little mindset shift that can change the trajectory of your business. So Trevor, you dropped a lot of knowledge bombs on us today. Thanks again. I love.

Trever Acers 00:45:09  This stuff. Thanks so much, Josh.