Paul Miller of Amazing Exits had a fascinating interview with Richard Turnbull, an Amazon brand owner who made a seven-figure exit. During this interview, Richard said something key that we wanted to take a deep dive into in this article.
That is: “It’s more important to sell when they are dying to buy you than when you are dying to sell.”
In other words, timing your sale is not about having the perfect year or even wanting to make an immediate exit. It is about determining when your business is most valuable to the marketplace.
Timing is Everything
When we hear “timing is everything,” we often think that means that we must build a business with the intent to sell it at the perfect time for us. Not so in Richard’s case. Here’s a little bit of background:
Richard had built his Amazon brand over the course of eight years. Eventually, he intended to sell his successful brand, but not necessarily to an aggregator. Additionally, the year before his eventual exit was not his most successful year. It was immediately after Brexit, which meant a third of his sales in the EU had disappeared overnight. It also meant his transport and logistics costs increased.
He thought it was a terrible twelve months – a year that he could easily top.
At the same time, aggregators were banging down his door to buy his brand. At first, he ignored their inquiries. But, eventually, he spoke with his M&A advisor as well as some friends in the business. They suggested he take the calls and hear what the aggregators had to offer.
So, he took the calls and, after speaking with sixteen different aggregators, he found the one that would be the best fit for his brand.
Later, he asked the aggregator what would have happened if he had waited an additional twelve months to have a perfect year and get an even greater valuation. The answer surprised him. They told him that they likely would not have bought his company because they are saturated by brands like his at this point.
He took from that conversation that it wasn’t his perfect picture of “the right time to sell,” but it was the right time because that is when the ideal buyer was interested in purchasing his brand.
We take many lessons from selling our products through eCommerce, but sometimes the most straightforward lessons are ones we do not scale up to the sale of our own brand. That is: find a niche for your business, connect with the buyers in that niche, and then sell at the highest profit possible.
A Lesson in Selling a UK Brand
Speaking of profits, Richard and Paul discussed one rarely talked about point in their interview. The standard brand acquisition method that most aggregators want to offer is called an asset purchase agreement. This means they buy the assets of a business but not the shares. This protects the aggregator from liability issues.
However, this kind of agreement makes for a very unfavorable tax situation for the seller in the UK. In Richard’s case, the difference between an asset purchase agreement and a share deal was $500,000 in taxes. That is half a million lost in profits.
He managed to cushion this enormous blow through negotiation. He negotiated a tiered payout, where an asset purchase agreement (the simplest option for the aggregator) was priced higher than a share deal. To avoid complexity, the aggregator paid the larger amount to help defer the difference in the ultimate profit.
Any seller can discuss this type of issue during a negotiation – as long as they know about it. In negotiating with aggregators, Richard found that it pays to simplify the buy-out.
Do you have aggregators knocking on your door? Are you wondering if it’s time to make an exit? Let’s talk. Schedule your complimentary exit strategy consultation today.