#319 – Understanding The Amazon FBA Acquisition Industry With Korion Morris

#319 - Understanding The Amazon FBA Acquisition Industry With Korion Morris Speaker 1: Welcome to episode 319 of the AM PM podcast. In this podcast, I'm speaking with Korion Morris. Korion is one of the main guys over at Uni Brands, one of the big aggregators in the space. They keep a low profile, so you might not be too familiar with them. He's got a lot of great information to share. It's going to be a really fun episode. And I just want to apologize in advance if my voice is a little bit shaky. I'm recovering from having pneumonia, so my voice might be a little bit shaky in some parts of this, but enjoy. Unknown Speaker: Welcome to the AM PM podcast. Welcome to the AM PM podcast. We explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast for money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Let's do this. Here's your host, Kevin King. Speaker 1: Welcome Korion to the AM PM podcast. I'm so excited to have you here. This should be a pleasant one to the ear for everybody because you have the voice built for podcasts. Speaker 2: Kevin, I appreciate it. First off, super excited to be here. And second, I've always kind of said, if all this Amazon stuff doesn't work out, I think I'll either end on the radio or with podcasts. Speaker 1: Exactly. I think you'll have a good future with that. I think we just last saw each other just a few weeks ago at the AMZ Innovate, right? You guys were there sponsoring that? Speaker 2: Yeah, I feel like, you know, we've seen each other on a few occasions now. So, you know, we had a big presence at AMC innovate just a few weeks ago in New York and was a tremendous experience. I've been, you know, incredibly impressed by just the quality of people in the Amazon community. And, you know, I kind of selfishly am the only one that tends to experience these experiences, but it was great to pull our CEO and several members of our team to come in and experience the innovate event. Speaker 1: Yeah, you know that event was a great experience while I was there for me, but the experience afterwards was horrible. I actually ended up getting pneumonia. I came back. That event was on a Monday. Flew back on Tuesday. Tuesday night, started feeling a little funky. Wednesday, lost my appetite. I'm having some dry heaves, starting to get a fever. By Friday, I was down and out in the bed. I was like, man, I must have got a bad flu. A few other people were posting online like, hey, anybody else get the flu at Innovate? A few other people were saying, yeah, I picked it up. I don't know if it happened at Innovate. It could happen anywhere along the way. But several people that were there were reporting that they got something. And, you know, I did a covid test. I did the whole nine yards and it's like, man, this is just something not right here. And, you know, one of the things about covid is that your your blood oxygen level goes down. So, you know, you use those little pulse meters that measure your pulse. You put them on your finger and also gives you your blood oxidation level. So I grabbed one of those, had my wife bring me one. And the number was like 80. And anything below 88 is like go straight to the hospital. And so I was like, holy cow, that's not good. So I was like, I think I maybe maybe I just need to hydrate here. And maybe this is just the flu. So I started hydrating. I had one of those mobile I.V. surfaces come out, infused me with vitamins and everything. And the next day wasn't getting any better. And so I was like, I called my doctor and he's like, yeah, you need to get to the ER, go into the ER. They run a bunch of scans. So, yep, you got pneumonia. You got water on your lungs, in fact. And so I ended up being hospitalized. For the last four days after that. Speaker 2: Holy cow. Speaker 1: Yeah. And running all kinds of tests and they put me on some supplemental oxygen to get it back up. It was a mess. No fun for anybody. So hopefully. You know, now I know there's a pneumonia shot and I'll be getting that shot. But yeah, that wasn't pleasant. But speak of unpleasant, you know, we were at another event together in Austin, the Collective Mind Society event back at the end of October during the F1 races. And at this event, we decided, you know, we had a you were there. You were one of the 12 that was there. And we decided to have a little contest in our we had a little cabana, you know, inside the track. Nice little experience. And one day we're like, let's run a contest. Who wants to compete? Who thinks they can handle hot spicy stuff? And I think there was like four or five, four or five of you, about six of you actually raised your hand. You ended up backing out after they found out what it was. And then four of you, including yourself, decided, hey, I'll participate in this. You know, we put a little bit of cash on the line and it was the one chip challenge. So what this is, is if those of you listening, it's a single chip, you know, like a single potato chip or a corn chip basically. But it's super spicy. So you eat this single chip. And you see how long you can last without drinking. And if you can go for an hour without drinking, you're considered like a stud. I know there's different levels. If you make it 15 minutes, 30 minutes, an hour, I think hours invincible is what it is. And so four of you did this. You handled it really, really well. Two of the other guys, one of them was Howard Tai. He was like, this is no big deal. Give me, you know, I could eat these all day long as a snack. Two of the other guys were like tearing. Their eyes were tearing. They're watering. They were just like, I don't know, but they stuck it out. All four of you made it the hour without taking a drink. And during that first hour, you were just totally like, I got this. No problem. And then after that, we left to go to a concert. And we're going to see Green Day, which is at the track there. And I think something happened as we left to you. And I'll let you explain it. As we were going to that Green Day concert, I think your life changed a little bit for a while. Speaker 2: That I would say that's the the understatement of the year So, you know, I think I'll preface with I love spicy stuff. I love hot stuff, right? and so there's never been a challenge that I Wouldn't take on and you know, I was an athlete and kind of a prior life and so I'm competitive So I'm like, okay, let's do this thing and to be fair. I hadn't done any research on the one-chip challenge I didn't know what I was in for so to your point The first hour no big deal, you know, it's hot like my mouth is burning, but you know, it's manageable And then I hear you know, two of the other guys start to say like, you know, my stomach doesn't feel so great I'm like, huh? Okay. Well like they did two chips. So maybe that's why generally I feel fine and when we are waiting for The shuttle on the track, I'm sitting there and I'm like starting to feel like something's not quite right. And I'm like, I'll just ignore it. I'll try to like take in the views. We start driving on the track and the turns get, you know, my stomach acid, I think to, to kind of, you know, go inside decide a little bit. I'm like, okay, something doesn't feel right, but I'll, I'll keep pushing on. And then, you know, we get dropped off at the concert and you know, I see one of the guys on his knees and I'm like, That's not good. Okay. But like, I'll, I'll just, I'll keep pushing. No big deal. 30 yards later, I get like the sharpest pain ever in my stomach. And I'm like, Oh my God, I've got to stop. And it's like, it just feels like somebody taking a hot knife and just taking it through your stomach. And so I probably stopped for, you know, a good minute or two. And while I'm bent over, I'm thinking to myself, I'm like, I'm in the middle of circuits of America track. No, like, I have no refuge, you know, and so that's going through my mind. Okay, we'll just push on everybody stops. I make it probably another 50 yards. And again, the page, the pain comes back and it's three times as bad. And I'm like, I just at my knees. I'm like, this is the worst pain that I've ever felt in my life. And, you know, I think that time I take a second break, probably, you know, a good five or six minutes a second go around. Um, and then slowly but surely we make our way over to the, uh, to the, to the concert. And, Those two waves are the worst. I think I had some discomfort, uh, you know, for honestly, for like another 24 hours. Um, but you know, the, the, the worst was behind me, fortunately. Speaker 1: Yeah, it was interesting to see it. You're a big guy. You used to play football. So you're a big guy and to see you hunkered over on the ground taken down by a little tortilla chip was a sight to see. Speaker 2: I'd be lying if I said that my pride wasn't hurt a little bit. One unsuspecting chip and when I think of hot, when I think of these hot challenges, my default is like, oh, How bad is it in your mouth? Like maybe you'll sweat like no big deal I don't assume that you're gonna fill it in your stomach, you know 24 hours later And that's ultimately I think you know, what did me in? Speaker 1: And you're a man and I just I don't want to get too graphic here But I want to paint a picture. You said it actually hurt when you went to the restroom too, right? Speaker 2: Yeah, so like, it's weird because it wasn't any like, you know, issues like number two or anything like that. But like it burned significantly when I got up the next morning to go to the restroom and that was a unique experience and one that I wouldn't wish on anybody. Speaker 1: Oh man, I can only imagine. It feels hard for you. Speaker 2: I would say probably nothing compared to the pneumonia and I'm so glad to hear that you're on the mend and you're doing a little bit better now. I did actually receive A notification on my phone stating that like I was in close proximity with somebody who had COVID and it was from that week. So I was fortunate to escape it. Glad you're on the men. But yeah, I would certainly never wish the one chip challenge on anybody. I think I've will have to raise the purse next go around. I've got to be closer to probably five or 10 K to make it worthwhile. Speaker 1: Now, we first met, I think, at the Billion Dollar Seller Summit. Is that correct? You came out to represent the company that you work for, Unibrands. Tell me, what is Unibrands? Speaker 2: Yeah, absolutely. So, Unibrands is a strategic acquirer of Amazon and direct-to-consumer brands. I think a lot of people will refer to us as an aggregator. We are founded in September of 2020, operated in stealth mode until February of 2021, and have since just seen tremendous growth. And so I kind of wear two hats. I certainly focus on the acquisitions function for uni brands, but also as somebody who was a part of kind of the Amazon ecosystem in a prior life, Understand how much valuable insight and knowledge and relationships there are to be had. And I heard, you know, tremendous things about billion dollar seller summit. And so, um, you know, as soon as I, I, I learned about, you know, billion dollar seller summit, uh, in Austin, I wanted to make sure I came down and connect with some of the community. Speaker 1: So, what is your background? I mean, I know you went to college. You played football in school. What happened after that? What's the progression to get you to uni brands? Were you an e-commerce seller? Can you walk us through that? Speaker 2: Yeah, so, you know, it's a long story, but I was a track and field athlete and football player in college Track and field you kind of have no delusions of grandeur, right? It's like hey college is paid for And then you're gonna have to get a real job at some point And so it's pretty clear to me that I wanted to pivot into the world of entrepreneurship And so right actually out of undergraduate, you know, I discovered a love for automobiles And I started you know, a small kind of auto customization shop Essentially, initially doing, you know, high-end car stereos, but eventually over time pivoting into comprehensive restoration. So, you know, I was working with somebody in the Middle East. I would customize a car, ship it over to the Middle East, and then they would, you know, essentially sell it to a client who, you know, had a lot of money and had an affinity for American muscle cars. Speaker 1: This is like a workshop, like a garage. Speaker 2: Correct. Yes. Speaker 1: It was all yours or you had partners with that? Speaker 2: It was all mine. Um, really, you know, my background, I did a lot of, you know, kind of electrical work and different things like that. Um, but you could essentially think of me like a general contractor. So I had a paint shop that I would work with. Uh, I would do kind of all the design and creative for the bill, the customer management, put everything together. Um, but I worked with, you know, the best upholstery shop called Davis brothers upholstery here in the Pacific Northwest. I'd work with, you know, really great motor builder, um, and just bring kind of the best people, uh, under one umbrella to, to deliver really kind of beautiful cars. And so I did that for several years, um, thoroughly enjoyed it. And at that time I was actually a track and field coach in colleges in high school as well. Um, just as, you know, fun way to give back to the community. And I would come back after practice. I'd go work at my shop for a few hours. And I noticed that, you know, I was just feeling increasingly tired and lethargic. And, you know, over the course of noticing that for several months, I also started to notice some lumps in my neck. And I went to my mom's house and said, hey, you know, does my neck look kind of weird to you? And she says, yeah, I think so. I think you need to go to the doctor. And so went into the doctor and found out that I had two masses in my next month. My lymph nodes were enlarged and spent the next month trying to diagnose exactly what it was and ultimately discovered that I had cancer. And so at that point went immediately into, you know, got a port installed, had it staged and went into chemotherapy and eventually kind of closed the business because I just didn't have the health or, you know, the ability at that time to continue to run the business. And so spent about a year going through chemotherapy, radiation. And then once that was all done, you know, took another probably six to eight months to try to get kind of recover. You know, essentially chemo is they're poisoning your body. Um, and so, you know, it took a lot, even though I was only, you know, at that time, 27 years old, uh, took a lot to, to get, get my health back. And so at that point, um, you know, it's like, okay, what's next? I have this entrepreneurship bug. I know what I'm really excited and passionate about. Um, you know, eventually I wanted to get, I want to get into business at kind of a larger scale. And so, I joined up with three older gentlemen who were very seasoned entrepreneurs and launched a company in the gift novelty and souvenir space. We built out a very robust IP portfolio and started selling initially into brick-and-mortar retail here in the Pacific Northwest. And then over time started to expand that into retail nationally, internationally, and then also broke into e-commerce. Spent several years doing that, scaling that company. And then in 2019, we were fortunate to sign an exclusive licensing agreement with a private equity firm to leverage our intellectual property. And so we exited that company and kind of the rest is history as it relates to that. Speaker 1: So how did you hook up with uni brands then? Speaker 2: Yeah. So after this exit, um, kind of when we were in the tail end of, of running the company, I knew that I wanted to go back to school. One of the things about being an athlete in college is, you know, your entire life is athletics. And so it's difficult. I actually love to learn. I love being in college. And so I always knew I wanted to go back. And so in kind of our last year as we were preparing to exit, uh, I did my MBA at university of Washington. I learned about this idea of rollups and I thought that was really interesting. Um, But I also had kind of an appetite to transition into the corporate world for whatever kind of odd reason. So directly after the acquisition, I went to Zulily. I spent about two years there doing strategic partnerships, working with some of the biggest brands and pretty quickly fell out of love with the company. I thought the model was pretty archaic. And so I started looking at like, okay, how can I marry this interest in e-commerce with this idea of roll-ups? I was kind of lucky. I was just searching around on uni for different companies that one day came across uni brands. I think at that point in time, there was four people in the company and sent over an email to like, Hey, you guys are looking for somebody, you know, for your acquisition function. Let's have a chat. And they love my background. We immediately hit it off. And so I ultimately joined the company is I want to say like number seven or eight pretty early on. Speaker 1: How many are there now? Speaker 2: So I want to say all in we're over 150 people. So it's been it's been quite the growth story, you know, and that's part of I think what would really got me excited, right? It's it's one thing to take a company and go from you know, nothing to a few million dollars, but To have a hyper growth story right to go from five people to let's say 500 people in a few years. I think is a really interesting process and I think you know it takes certainly skill, but a little bit of luck as well to be in the right place at the right time to be a part of that type of story. And so it's been. It's been tremendous. I'm really proud of what we build. I'm proud of the culture that we've established and you know the brand that we're starting to build in the ecosystem as well. Speaker 1: And what's your exact role there? Are you in the acquisitions? Are you in the business development? Speaker 2: Yeah, absolutely. So I've got it I wear, you know, like any startup I wear a lot of different hats. So my technical role is, you know, I'm the director of growth for the US. So I really focus on identifying world-class assets for our team to acquire. My team will do the initial pre-LOI due diligence and then we'll hand it over to our investment function that will, you know, come up with a valuation for the asset and then really kind of own the diligence process. But, you know, As somebody who was a seller, I feel like part of my role is to be a representative of sellers, right? So whether it's from a transaction structure perspective, whether it's from, you know, how do we actually build this thing so that it's sustainable and that it's around in 10 to 15, 20 years, I really pride myself in sharing kind of any and all insights that I have as somebody who was a seller and then that I have from great conversations with people like yourself. Speaker 1: So are people coming to you directly or through brokers? Are you actually also out there beating the pavement looking for opportunities and approaching them? Speaker 2: Yeah, all of the above, right? So we absolutely partner with Brokers, I'll be the first to tell you if you've never had a liquidity event before, it probably behooves you to work with a broker because there's somebody who deals with us kind of day in and day out and they know how to maximize your exit. But we also have technology that enables us to go out and identify world-class brands. And so we build direct relationships that way. And then I attend phenomenal events like Billion Dollar Seller Summit, Amazon Innovate. Uh, to go out and meet people as well. So I think, you know, we pride ourselves in leaving no stone unturned, uh, and really trying to go out and find great brands. And I think the other thing, uh, that's worth flagging with us is, you know, it's never about pressure, right? Like it's really about supporting people in their journey. Um, when the time is right, if you're looking to exit, like, Hey, let's, let's have a chat. I'm happy to answer questions. Um, and you know, if you work with us, that's a great, if not, that's okay too. Speaker 1: So are you doing, is, is uni brands just doing Amazon businesses or any kind of e-commerce business? Speaker 2: Yeah. So. The answer, I think, changes over time, right? So if you ask me that question a year ago, it's like, hey, strictly Amazon, we want, let's say, 90% of revenue coming from FBA, and then we'll entertain 10% coming from elsewhere. I think today, as we've built an actual platform that can operate the brands, we've demonstrated the ability to grow our brands and scale, I think we're a little bit more flexible. We're still Amazon-centric. Let's say it's a brand that's doing 60% on Amazon and 40% off We're much more willing to entertain that than we were a year ago And you know, we might even look at 50-50 split and I think that that will continue to evolve So let's say six months six months or a year from now You know, we might look to make our first outright d2c acquisition. I think you know our kind of our view on this is Most of our brands will at least have some component of Amazon. Many of them will have, you know, direct to consumer component. And then I think, you know, there will also be a subset of brands that have stayed in power and are well positioned to go into retail as well. Speaker 1: What's the biggest value you guys can add to an existing brand by taking it over or taking it in house? Speaker 2: Yeah, I think that's a great question, right? I think the answer varies on a brand by brand basis, right? So there's brands out there where, you know, cash flow has been really tight and we can provide a tremendous cash flow and we're essentially just adding fuel to the fire or, you know, there's transactions that we've done where the founder has stayed on board with us and we're able to take all the things that they don't They aren't interested in or that they're not the best at and we can you know Put that onto our platform and then free them up to do what they do really well, right? So how do those founders specifically create value for their organization whether it's new product development? You know new partnerships. So I think there's instances of that as well. I think you know a few things about us is I We are transatlantic. So, you know, I'm seated in Seattle, but we have offices in New York, Miami, London, Berlin and Shanghai. And so one of the first things that we evaluate when we acquire a brand is, you know, can we grow this brand internationally? Can we move it into new marketplaces? Beyond that, we really look to understand, I think, at a very granular level, What is the founder done? Well, what are they excited about? What are the growth opportunities that they have? And then we really incorporate that into our growth strategy in our plan. But I think, you know, for us, it's really about, you know, we're not going to overextend ourselves, we're going to buy high quality brands that we know that we have the ability to operate well, and we're going to deliver. So we're going to pay our earnouts where we're going to, you know, ensure that the seller has an experience that they're that they're proud of. Speaker 1: How much money is a uni brands raised to finance all this? Speaker 2: Yeah. So we've raised over $300 million in growth capital to date. So that's a combination of some debt as well as some equity that we've raised. Speaker 1: What's the range typically that you're spending? Is it half a million to 5 million or what type of range or size of businesses or what's the largest one, for example, that you've done? Speaker 2: Yeah, so we're pretty flexible, right? I think we're incredibly well capitalized. And so if there's an exciting opportunity out there, we always want to take a look at it. I think early in our life cycle, we would, you know, looking at kind of, let's say, a million dollar top line minimum assets up to, let's say, $5 million. I think that threshold now is, you know, minimum of kind of $2 million top line. And we're happy entertaining upwards of 20 million plus. I've looked at You know a 50 million plus dollar asset It just wasn't the right fit for us. So we certainly have the capital to deploy to be aggressive acquire large assets Excuse me, but it's really a matter of you know, does it fit into our portfolio? We think a lot about portfolio concentration. So You know, how does that play into everything? And then ultimately like is this a business that's really growing in a category that we feel like is growing as well and. Speaker 1: So for PortfolioFit, do you focus on certain categories? Are you open to anything? Or how does that work? Speaker 2: Yeah, so we definitely are category focused. So there's eight specific categories that we play in. Those are personal care, pet care, home care, baby and juvenile, sports and fitness, garden and outdoor, and home culinary lifestyle and arts. I kind of joke that feels like everything with the exception of maybe apparel and electronics. And kind of our view is, you know, generally we look to acquire, you know, really high quality differentiated brands that are anchor brands in each of these categories, right? And when you, once you've acquired a great, you know, anchor brand, which typically is gonna be a little bit larger, has great infrastructure, then we can start to look at, okay, what are bolt-on opportunities in those specific categories as well? And so, you know, I won't mention the specific brand, but we own, you know, a tremendous brand in the pet care space. We've added a really phenomenal anchor brand into its portfolio. And so there's, you know, some synergies there and we can continue to bolt on, you know, really great brands that support that anchor brand, but also standalone on their own. Speaker 1: So where do you see this whole acquisition industry going? It kind of came from nowhere. I mean, it started with like one-on-one commerce that they crashed and burned. And then Thrasio kind of led the way and got a lot of media attention, brought a lot of other people into the space. By some estimate, 130, 150 aggregators out there. Now multiples went way up. Now they're coming back down. Like you said, a lot of them have pulled back. Finance has been cut off. They're not buying anything anymore. Where do you see this going? Do you think this is still going to be a really robust market or is it going to be more choosy now from both your point of view as an aggregator and the seller's point of view? Speaker 2: Yeah, absolutely. So I think kind of a combination of everything, right? I don't know that this model is going anywhere, because I think that there's a tremendous opportunity. One of the things that our CEO Ulrich talks about You know, he spent over 25 years selling businesses at Goldman Sachs and nobody has really demonstrated an ability to build a platform and sustainably operate and scale kind of micro brands. And I think consumers have really demonstrated an appetite for micro brands where, you know, If I can buy or purchase a product from a brand that resonates with me and my values and more directly addresses my needs, I think that's huge. I think that appetite will continue to grow. And so I think we'll continue to see micro brands established, grow. Some of those micro brands will turn into household brands as well. And I think people will continue to try to acquire and kind of roll those up as well. I think, you know, kind of on the market side from the aggregator side, you know, I wouldn't, I don't have a crystal ball, but I wouldn't be surprised to see, you know, more consolidation where, you know, I think to your point, there is 150 plus aggregators, right? And a lot of people have struggled to raise rounds following the rounds they raised last year. And so I think you will see consolidation. I think you'll see You know people become a little bit more niche oriented so, you know for us we are across eight different categories, right? You've seen this happen a little bit already. Maybe you know more people start to focus on specific categories Maybe they'll focus on baby and juvenile or I've heard of other ones that focus, you know Strictly on supplements for example, right to where you can build very specific expertise, which I think helps from an operational standpoint and But also, I think, you know, as it relates to interacting with sellers, you know, I'm going to be really excited about selling my brand to somebody who only does supplements if I'm a supplements brand, because I know that's what they know. Right. And so I wouldn't be surprised to see more of that as well. I think, you know, for sellers, we're certainly in kind of a buyer's market at the moment. So you've seen multiples decline a lot. That's not to say that There's there's some of us that will still pay a really fair Valuation on your business, right? Like if you have a quality business, especially in this environment I think that's that much more impressive and we really pride ourselves in offering a fair value for your business and so that's not to say that you won't get fair valuations, but You know, I think It'll likely take for the economy to start to recover for brands to start to grow consistently. And then for, you know, a handful of aggregators to feel like, hey, we know that we can operate these brands well, before you start to see multiples really start to climb back up. Speaker 1: Do y'all factor that in that we're headed towards a recession and things are down, you know, a lot of Amazon sellers year over year down 20, 30% right now. Do you factor that in because they're not, they're not having this massive growth. They may be a flat lined a little bit. How does that factor into when someone goes to sell or when you're evaluating a company? Speaker 2: Yeah, absolutely. So, you know, for us, I think one of the first things that we, we like to think about is, you know, We look to buy businesses that are growing. We look to buy businesses that, um, you know, have momentum. I think a year ago we might look at it in a very kind of black and white way of saying like, Hey, in your LTM period, are you seeing margin compression? Are we seeing category compression or things like that? I think now we're looking a little bit more at, you know, what's momentum look like in the recent three to six months. And I think something that's really important for us as people that, that are operators and as people that were sellers at one point as well, Is to we want to hear the founder story, right? Like I think it goes beyond kind of the quantitative part of all this, right? Where it's just numbers in an Excel sheet, but it's about like, tell me the story. Tell me what's happened. And I think there's instances where maybe that can move the needle, but at a minimum, we want to have a really comprehensive understanding of what are the drivers. In your business, what are the challenges that you faced? And then we can make an informed decision on, okay, is this something that we feel comfortable if it's maybe a little bit outside of our typical kind of boundaries? One of the things that, you know, my colleague Mark likes to say is, we have a guardrails, but our guardrails are made of rubber, not steel, right? They're intended to be flexible. They're intended to, you know, be able to listen and pivot when and where needed. Speaker 1: A lot of aggregators that came into this space, they came with a lot of money, a lot of financial backing, a lot of smart people, a lot of Harvard MBAs and really good finance people from Wall Street. They come into this, they buy a bunch of businesses and they say, holy shit. We can't. How do we execute on this? Because the guy, these operators are like little mom and pop shops for the most part. And there's guerrilla marketing. They're nimble as a fly. They're not coming from a corporate world with all this structure. And when these aggregators come in, they try to to execute. A lot of them have had serious, serious problems and hiring good people and even training good people that can take this over. How do you guys deal with that issue? Speaker 2: Yeah. So I think this is where, you know, As somebody who was a seller, I was able to share some insight kind of internally with with our leadership team. And we've, you know, our view and really the thesis coming into building uni brands was, you know, we actually want to acquire the brand, we want to retain the founding team. And enable them to be that much more successful with their brand. And our first handful of acquisitions, we found that, you know, the market didn't really have an appetite for that. I think people were looking to, you know, kind of cash out and move on to whatever's next, which is perfectly fair. But we ultimately did do some transactions that we retained the founders. And so we, we were able to capture that expertise, we were able to capture that knowledge and insight. And then I think ultimately, like, we were able to capture some of the culture that they have and how they operated their brands and let that flow into how uni brands operates. And so that has been a tremendous value add for us. I think we're always thinking about, you know, what else can we learn? And that's why we come to events like Billion Dollar Seller Summit to learn to rub elbows with founders to make sure that we're staying close to that. But I think, you know, to your point, There was a lot of people that came from outside of the industry and Assume, you know, this was strictly kind of a financial play In underestimated the the challenge of operating on Amazon, you know One of the things that that I recall is, you know, Amazon is a is an ever-moving target things are always in flux They're always changing so you can't necessarily just build a model and run with it. You really have to be agile and flexible and able to move kind of at the drop of a dime and. Speaker 1: How do you deal with the risk factor? I mean you could have a hero product on an account that you buy and just suddenly something happens. Somebody attacks the listing. It's just something goes awry and you lose that whole thing. How do you mitigate that risk? What do you get? How do you factor that in? Because stuff can, like you just said, can change overnight on Amazon. You're cruising for three years. Doing well and all of a sudden there's a supply chain issue or your account gets hacked and the pictures get replaced with nasty pictures or whatever. How do you mitigate that risk as an acquirer? Speaker 2: Yeah, I don't know that there is a foolproof way to mitigate that risk, right? I think this is where having those Harvard MBAs and those people that come from that world can really start to become beneficial for us. We do a tremendous amount of work in the pre-LOI and in the post-LOI phase to really dig in deep and understand everything that's at play in the business. One, to just understand like what are we buying and one thing that we do Kind of in our acquisition processes, we'll essentially, you know, once we're in diligence, kind of run the brand alongside the founder to understand, hey, this is happening. How do you act, right? What would you do here? And in instances where we retain the founder, obviously, we have that for quite a bit longer. But let's say the founder wants to go off and do something else. We want to try to capture as much of that knowledge and information as possible so that we can make the best kind of decisions. But I think there's no way Taxi control for that. I think the best. Kind of the best option on our end is to as thoroughly vet the business as possible to understand it as well as possible to understand how the founder would act in certain situations as well as possible and then respond accordingly. Speaker 1: So you guys look for any kind of product or what if it's a commodity? Do you prefer to not deal with commodities and to deal with something that's more truly unique and differentiated or what? How does that work for you guys? Speaker 2: So that's actually a part of our analysis, right? Like one of the sayings that we use internally is we want to avoid catching a falling knife. Right and so part of our analysis is understanding this specific asset that we're looking to acquire under understanding kind of the adjacency So who are the competitors who are the kind of incumbents in the space that are maybe? Slow into e-commerce, but that are gonna be moving there eventually because that's a potential risk What's the likelihood of Amazon coming in and introducing Amazon basics or leveraging one of their other kind of in-house? Brands. And so we were looking at kind of all of that to really have confidence around. Okay. We feel like this is a category that let's say, you know, we'll face competition, but we're not facing Amazon basics or some other major brand coming in. So there's a tremendous amount of work. I think that goes into that for us to feel confident and feel comfortable. We do typically look to avoid commoditized products. I think, you know, we like to say we're looking for a high quality differentiated products. I think differentiation can show up. In a number of ways, in some instances, you know, maybe that's a really strong review mode and others, maybe it's really tremendous branding. It can be a really strong repeat purchase rate. Maybe they're driving traffic from elsewhere onto an Amazon listing that's doing incredibly well. I think there's no kind of single definition for that, but we absolutely look for high quality differentiated products and brands. Speaker 1: And are you taking them into retail as well now or just helping them expand in the U.S. and internationally? Speaker 2: So currently we're focused on the US and international expansion Amazon, you know, we'll do a little bit of You know direct consumer as well I think you know, we've really assembled a world-class team and as they continue to get up to speed We're starting to roll in you know other parts of it. So, you know, do we evaluate? Expansion beyond just the US and Europe, you know, do we start to think about retail at some point? I think for us It's never been a rush. I think it's really about let's build a platform that sustainable that will be here in 20 years in 50 years. And I think in order to do that, we have to be we maybe move a little bit slower, a little bit more methodical, but that ensures that we build a really solid foundation that we can continue to build on. Speaker 1: What's the play for Unibrands? Is it to IPO? Is it to continue running? Is it to sell to a larger company and exit as a roll-up? What's the play there? Speaker 2: Yeah, I would say the play is to build a world-class CPG company. We're not at all focused on liquidity events, whether that's in the IPO or rolling to somebody else. I think it really is about let's build a special platform. Let's acquire the best brands in the world. Let's ensure that founders feel like they're well cared for when they interact with us. And I think the rest will kind of take care of itself. Speaker 1: So if I'm a seller and I'm looking to sell my business and I come to you, what are like three main things I need to make sure I got my ducks in line for before I talk to you? Speaker 2: Yeah, absolutely. I love this question. I think the first one is think about what you want out of an exit early on, right? Like I think think about what are you comfortable with? What are you not comfortable with? And so what I mean by that are, you know, Are you comfortable negotiating because we're not that we're we're gonna take care of you and we want to be fair But we're also professional buyers, right? And so are you comfortable kind of managing all that or would you rather have somebody else? You know such as a broker or a banker come in and kind of represent you I think having your financials in order is incredibly important I think A world-class accountant is worth their weight in gold. You would be amazed at the number of brands that I've seen that, you know, the founders just doesn't have a hold on kind of where money's going. The margin, you know, we have a call on, hey, the margin is XYZ. And then we actually dig into the P&L and it's, you know, a quarter of that, right? And so, and they can't speak to where things are going. And so I think having a really strong Kind of accounting and finance team is tremendous. I think that applies to having a really great lawyer as well. I think that's incredibly important And then I think you know the last thing one of the things for us when we think about the valuation, you know typically you have what are your earnings and then that's multiplied by some type of multiple and the multiple is really where you have an opportunity to create added value and and The multiple, let's say between a three and a four times and a five and a six times often is going to be about, you know, some of the other kind of intangible parts of your business. Have you really kind of outlined the SOPs for the business? Have you built it to where it's turnkey ready for us to take it to hit the ground running and to start scaling it? Have you left some meat on the bones for us to continue to scale the brand? Have you laid out a plan for what we need to be able to do that successfully? I think those are all things that can create added value for us, but will also help to increase your valuation when you're looking to exit. Speaker 1: I hear from a lot of sellers that have sold that they say the due diligence process is kind of a pain in the ass. It takes, you know, 60 to 90 days in some cases. Some people say they can do in 30. But typically it takes a little longer than that. And you guys are just asking for every document under the sun and every support thing. And they're scrambling around trying to find it. It's almost like a full time job to sell your business on top of continuing to run your business. Speaker 2: Yes. Speaker 1: Any advice you have on that aspect of things for a seller? Speaker 2: Yeah, of course. So I think, you know, first and foremost, um, it's never too early to start thinking about selling your business. And this kind of goes to my prior point, right? Of having a great accounting and finance team is let's say you're looking to exit in 2024. Start thinking about that today. Put, put the pieces in place. You know, shoot me an email. Let's have a chat because I can tell you what we need so that you're ahead of the eight ball. And so when you're, you know, actively starting to entertain offers, let's say, you know, in the middle or end of 2023, you're ahead of the eight ball, you've got what you need. And that's, I think, kind of streamlines that process. I think, you know, that's the first, first and most important thing. One thing I can kind of say about our experience is, you know, we actually really try to front load our diligence process. I would say we probably ask for more than most others in the pre-LOI stage, and that's because we really want to understand the business so that when we send you an LOI, that's a valuation that we feel confident in, that we can stand behind with, that without the introduction of kind of new information, that's not going to fluctuate or change. And so I think that's key. I think, again, you can leverage a broker. This is what they do day in and day out, and they can kind of act as that buffer. When you're going through the process to ensure that you're again free to focus on your business and they're kind of dealing with us outside of obviously calls and different things that you have to take like that. Speaker 1: How important is the relationship between you and the seller when you're approaching a business? Is it all just about the numbers on a piece of paper or is there something to it where you like this guy or this gal or something? Is there any personal things that come into play when you're selling your business or is it just strictly black and white numbers? Speaker 2: Yeah, so I'll kind of talk, you know, speak out of both sides of my mouth. I think if we don't have a great relationship, That doesn't mean you're going to get a lower valuation or multiple, right? Like that's not fair. That's not us sticking to kind of the fundamentals, fundamentals of our business where we're going to treat all sellers fair. We're going to pay a fair valuation of your multiple, whether we like you or not. Like that's, I think that's core to kind of who we are. But I think having a good relationship certainly adds value. If nothing else, You just have another advocate that's pushing to get the deal done that understands your business maybe a little bit more closely than it might might have otherwise. And so I absolutely think it's beneficial to have a relationship. And at the end of the day, like. We're buying your business. Typically, there's going to be an earn out component to that. And so I think having a strong relationship just makes it that much easier, you know, as we, cause we're going to be tied together in some capacity. And then, you know, all of the transactions that we've done where we've retained the founding team, I think we have tremendous relationships with those founders. Again, they've contributed to, to uni brands beyond, you know, revenue, but from a culture, from a quality, from a people standpoint as well. Speaker 1: So when you say earn out, let's explain what that is. So when you sell your company, let's say you sell it for $3 million, there's a certain amount of that that's wire transferred in cash on the day of closing and the rest is considered what's an earn out where you have to stay on, advise or manage it for a certain amount of time or the company has to hit certain sales targets and then you get paid the rest of that and maybe even a little bonus if it goes over a certain thing. What is typically the splits? I know every deal is a little bit different, but what's a typical split between cash and pocket percentage and future earnings or earn out percentage? And how long is that earn out usually? Speaker 2: Yeah, absolutely. So I think it's going to vary with kind of every acquire for us. Typically, I think you'll see cash at close between, you know, 70 and kind of 90%. It varies. I think we tend to be a little bit heavier on the cash at close side. And then typically we have to earn out. So we have a binary and a prorata. So binary is based off of, you know, Hey, do you hit this threshold? Let's say hypothetically 20% growth. Then you'll receive that first earn out and then you'll receive the second earn out on a prorata basis between let's say between 20 and 40% growth. And so, you know, we feel like that's a pretty fair structure. Haven't really received pushback on that. But I think again, it's going to vary. I've heard of others where, you know, they're doing 50 or less percent cash at close and then, you know, you see more heavily weighted towards it towards an earn out or, you know, and there's other mechanisms you can use. There's stability payments. There's deferred payments. You know, there's, I think, We have certainly kind of a standard structure we like to use but we're also always open to what does the founder have in mind, right? Like this is a partnership. This is about creating a transaction we both feel really good about. So let's have that conversation. Speaker 1: What's your general feeling on where e-commerce is going? Do you think it's going to continue to grow? You know, there's in the press, there was the COVID bump and then there's all this negativity now. You know, Amazon's laying off people. Everybody's laying off people. And so there's this doom and gloom kind of thing. But I think some of that's just overhyped a little bit. I think e-commerce is still is still where it's at and it's still going to continue to be where it's at. What are your thoughts on where this whole industry is going? Speaker 2: Yeah, I would echo your sentiment. You know, I think things are never as bad as they seem and things are also never as good as they seem, right? I think the covid bump pulled a lot of demand kind of forward for e-comm. I think consumers have demonstrated that there are certain items that they want to purchase that are tangible. They want to touch feel smell, you know, kind of have direct access to as a before making that purchase and I think That's a good thing. You know, I think of my wife and I, uh, we've been looking at buying some new furniture for our living room for the last, like, let's say six months. We've been looking online. We went down to West Elm last weekend and it was just that much more effective to actually like sit on stuff and touch it and feel it and all of that. And so I don't think retail is going anywhere. I certainly don't think e-commerce is going anywhere as well. Um, I'm super, super bullish on, on e-comm. I think, you know, I touched on this a little bit before. I think the emergence of micro brands where people that have maybe historically been underrepresented as it relates to like products that capture who they are or that are for their specific use case or their need. I think the emergence of these brands that actually have stories that align with these consumers is tremendous. And I think that's, We'll only continue to see growth in the number of micro brands. Like I think the barriers to entry to build brands is lower than it's ever been. Obviously, it's competitive as well. But I think you've got more people interested in entrepreneurship, more people interested in starting their own companies. So I think the future is incredibly bright for e-commerce. Speaker 1: And if someone that's listening wants to reach out and talk to an incredibly bright aggregator or someone like yourself, how would they do that? Speaker 2: Yeah, so you're more than welcome to shoot me an email. My email is Korion. It's K-O-R-I-O-N at unibrands. That's u-n-y-b-r-a-n-d-s.com. And I'm happy to send my cell number that way. I'm always happy for a chat like shoot me a text. Give me a call. We can connect on LinkedIn. I'm here to support people through their journey. I'm happy to share insight on my own experience what I wish I'd learned. I wish I knew or you know, just talk or maybe I won't do the one chip challenge with you, but I'll at least talk you through how to manage it. Speaker 1: Cool. Korion, I really appreciate you coming on today and suffering through me trying to speak here as I'm recovering from pneumonia. But this has been great. It's been fun. Speaker 2: Likewise. I really appreciate you having me. Really, really glad to hear that you're on the mend and looking forward to seeing you again in person here soon and wishing you and the family happy holidays. Speaker 1: I appreciate it. Same to you. Speaker 2: Awesome. Thanks, Kevin. Speaker 1: Korion is a really smart guy. So if you got questions about the exit process or you're thinking about exiting or maybe it's now or maybe it's in a few years, feel free to reach out to him at that email address he gave. Also, don't forget Helium 10 now has a new course. Called exit ticket. That's right. There's the freedom ticket, which I do. And now there's exit ticket. And it's a really good comprehensive, like six intensive modules with subsections and each of those modules that breaks down the exact process and everything you need to think about when it comes to exiting your business. It's hosted by Scott Dietz. Along with Bradley and Kerry, Scott is from the Northbound Group. He's one of the smartest guys out there in the space. So be sure to check out exit ticket. You can find that under the tool section on the educational materials under your Helium 10 account. It's free for anybody that has a helium 10 account. It's a really great course. Really, really good information for anybody considering exiting their business until next week. I hope you have a awesome December and awesome fourth quarter. Hope things are going well for you. I just want to leave you with one little thought as I always do at the end. Do you know wealth, freedom and security come from what you own, not what you do? Think about that for a second. Wealth, freedom and security come from what you own, not what you do. We'll see you next time.