They won’t go to crap. They will go to the industry norm. Nobody can win on Amazon with an industry norm unless they want to make 10 points.
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You can demand a higher multiple if your partner agrees to be vertically integrated into the acquisition - your partner benefits on PV of money at a higher multiple upon exit - you can also cleverly word it to where if your partner sells his manufacturing business it nullifies the pricing agreement - plenty of options - I doubt its gonna be a sticking point if you and partner get 7-8x multiple just on pricing alone.
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His margins are asinine and his ad spend is racecar tuned - all he needs is B&M footprint and he’s sitting on a fat golden goose or in this case geese
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Dang, I’d sell my business in a heartbeat at that rate. We’re not manufacturers or hold any IPs, though.
that’d be the golden key - ip and competitive advantage
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Actually, I got in a call from with of those aggregators in 2021 as well. We are / were very well positioned in our industry but they were looking for brand ownership, which became apparent halfway through the call, making it a waste of time.
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That’s because they’re looking to market and build those brands.
For those of you who don’t know, the simplified version of an aggregator is as follows:
They buy a bunch of small brands and then invest a bunch of advertising money to turn them all into big brands. The idea was solid when it was 1 company doing it. When there’s 100 companies all bidding up PPC against each other, they all go bust and Amazon takes all the money in advertising fees.
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A bit more complicated…they thought any operator could run them - they learned the hard way that not just anyone can run amazon stores - so they hired a whole bunch of people who couldn’t do their job well as well as managers who were either SMEs or ended up getting the bulk of the jobs - and now if an aggregator has 30 brands that becomes very difficult to manage.
But additionally, capital was cheap and now its not - so it made sense to pay 6x SDE for a store when your interest rate is 0 + 2.5% - not when it’s 10%
Further, when you’re doing such large cap raises - people at the top are going to do whatever they can do take large pay packages and just bounce - which will have the entire house of cards folding
But as a business model being an operator is still a solid choice - the ROI on $'s on very tight margins like mine is about 100% and the ROII is about 57% - which is an insane return (we’re not talking about margins on GMV/Revenue).
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They thought it was set and forget lololololol.
People were willing to invest in an experiment.
The experiment failed.
On to the next shiny thing.
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How do you tell the difference between an aggregator and a con man looking to defraud consumers using your IP?
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Once its sold - it’s not really your problem - unless you’re resolving climate effects, pollution, poverty, war, and the myriad other problems that exist in the world.
So an LOI is a start
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The con man actually makes money
Is this a joke? What’s the punchline? haha and just kidding.
I can’t tell the difference nor do we ever respond to these types of things. The one time we did, it was a sizeable known “business” that reached out and we just wanted to get some thoughts on what they were thinking in terms of value without sharing a single detail.
Most information, including our sales, are easily obtained so they had a pretty good idea already.
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