#329 – Revolutionizing Amazon Seller Financing: Game-Changing Innovations for Growth With Don Henig

#329 - Revolutionizing Amazon Seller Financing: Game-Changing Innovations for Growth With Don Henig Speaker 1: Welcome to episode 329 of the AM-PM Podcast. In this episode, I'm speaking with Don Henig. Don has revolutionized the way Amazon sellers can get money to grow their business. We talk about that. We talk about a lot of other things around raising money and growing your Amazon business. This is going to be a great episode. Enjoy. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast, where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where 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. Here's your host, Kevin King. Speaker 1: Don Henig, how are you doing, man? It's great to see you and welcome to the AM PM podcast. Speaker 2: You know, Kevin, since I joined this industry, I've wanted to be on the AM PM podcast. So thank you very much for inviting me. I'm really, you know, excited about it and honored to be on it and to do anything with you is pretty cool. So that's, I'm excited. I'm excited. That's all you got to say. Speaker 1: I appreciate that. I don't understand why everybody always says they want to be on the AM PM podcast. We have 17 listeners. And so it just, but everybody wants to be on so that those 17 people can actually hear. No, I'm just kidding. We have a lot more than 17 listeners, a lot of listeners. So welcome, man. I'm glad to have you here. Speaker 2: Thank you, Ken. Speaker 1: You know, we run into each other at different events from time to time. We actually spoke at one point back in like during the pandemic because I was desperately looking for some money and someone told me you have bags of money just sitting around your house. And so I was like, Don's the guy to call, but you haven't always, we'll talk about the money side of things and that's always a problem for people when they're growing their e-commerce businesses is cash flow and money. But you've dealt with money before dealing with e-commerce, you were dealing with a lot of money in what I think the film business, doing producing films and then in real estate. So tell us a little bit about the backstory of Don. Speaker 2: You know my story is kind of crazy because i've done so many different things in different industries you know most people find an industry they do well they stay in that industry for the rest of their life and for me i started out as a financial planner i started my first financial planning company I learned about the mortgage industry and it was just really kicking off. I started a mortgage company. I built that to one of the largest in New York, sold that. I started a mortgage broker franchise, never been done before, a new industry, sold that in 18 months. I didn't know what to do, so I looked around. I love being on the fields with my kids, so this is pre-digital. I started a soccer newspaper, became the official newspaper for New York State soccer, 167,000 copies a month. 32 pages, half of it ads. I did everything. I was the only employee. Sold that. Technology businesses I built and sold and got back into the mortgage business and built one of the largest companies in the nation. I was not the owner of it because it was a publicly held firm, but I built my divisions of it to doing Hundreds of billions of dollars and earning hundreds of millions of dollars in net profit. And the nice thing was I was paid on profit. Which was very good. I got tired. I bought and sold 300 houses in 18 months, every one of them for a profit. And I just stopped doing that. I didn't like it. I started an entertainment company to help somebody out from scratch. And we did eight feature-length films with the biggest name stars like Tom Cruise and Natalie Portman and Mark Ruffalo, on and on and on. We won two awards at Sundance, which was a riot. Also created, we created and produced. The Broadway show Rock of Ages, which ended up as the 30th longest running play of all time. And we did the movie Rock of Ages, which was a lot of fun too. So we've done a lot. When we were out at Sundance, what we did is having Rock of Ages, we flew the band and the actors and everything from Rock of Ages out to Sundance, out to Park City for a big party. So needless to say, we were the key party for Sundance. Those two weeks, it was a riot. Best thing ever. A lot of fun. Speaker 1: What was your role in these movies? Was it producing and raising the money or what was your exact involvement and role? Speaker 2: With the movies, I was more of a producer, but I didn't want my name attached to the movies just because I felt that the people that were in the industry, my partners that were true producers, they should get their names up there. I shouldn't have my name up there. It's meaningless. And I didn't want it to be an ego play. I don't like that. So I chose not to have my name In bright lights, if you will, but I was involved in everything. I own the company. So we would go out and find these scripts and then we would decide, okay, this is a script that we want to make. Then we'd go out and we'd find a house that would say, yeah, you make that movie, we'll buy it. Then we'd go out and raise the money and then at the same time attaching actors and actresses to these movies and then working on the scripts and the whole bit and then finally filming the movies. I was offered to be in every one of them but I wouldn't be in any of them because I didn't think that was smart. I didn't like the whole idea of it. But it was fun meeting people like Tom Cruise, let's say. Very fun. It's just fun stuff. Speaker 1: So were you doing this from the East Coast or did you move out to the West Coast to do this? Or have you always been based on the East Coast? Speaker 2: Yeah, I'm a Brooklyn boy at heart. So our office was in Beverly Hills. That's where my partners were. And so I would fly out there once a month. And naturally, I'd fly out there, I'd stop in Vegas for a night and have a great time, win some money, and then go over to Beverly Hills and work for a few days or a week and then come home. But yeah, I spent a good amount of time out there. Speaker 1: So raising money, I mean, as e-commerce sellers, we'll talk about raising money in just a little bit, but for raising money for films, that's really difficult. There's no helium 10 tool that can say, hey, this film is going to resonate with this. I mean, you do focus groups, you're like, this is the audience we're going after, but it's worse than probably rolling the dice on the craps table. I mean, when you're raising money for a film, so how hard is that? To do or is it more of an ego play or people just you know, because Tom Cruise is attached they want to get involved or how does that work? Speaker 2: Yeah, it's very difficult and It's an ego play. It's also a tax play. So at any given time, I'm not up to speed on it right now, but at any given time Some state, some country, some county is offering ridiculous tax breaks if you do your movie there. So, we would do a movie in Georgia or we did Rock of Ages down in Florida, which was a lot of fun. But raising the money, so we would first look at the script, then we would figure out who we could tie to the script. We would reach out to those actors and their agents. And here's the time frame that we're going to do it. We want to tie Tom Cruise, let's say, to Rock of Ages. Here's the role we want him to do. And I'll just give you this quick story because it's kind of interesting. So with Tom, we hooked him into Rock of Ages and he agreed. And we're like, holy cow, this is unbelievable. This is ridiculous. Now he's going to be the star. Which means he's going to be an older, drunken, falling down, you know, rock and roll star. That's just an obnoxious person. And he's got to sing these tremendous songs. Well, three months, maybe four months go by with, you know, week after week, his agent saying, oh yeah, no, he's in, he's in, he's in, and never signed the contract. And we're like, oh my god, what are we doing here? We're out raising all this money on his name. And then we had Alec Baldwin and one name after another. We tied them all together because they all knew that Tom Cruise was the lead. So the cast was legendary, really. Eventually, we find out that he's signing the contract. He signs the contract and what happened? We were interested. Why did it take so many months? Because here's what this guy's about. He's going to do his first musical, his first singing on film. And so he hired a voice coach and he hired our music director without us knowing. And every day for those months, he would go into a studio and he'd perform all the songs and get his voice to the point where it was impeccable. And then once he felt like he could be a superstar, a real rock and roll star, then he signed the contract. And he sang all those songs. And separately, he did a whole concert that's not in the movie, but where he was doing ACDC songs, a guy who's unbelievable. Amazing. Speaker 1: And you had like Catherine Zeta-Jones in that and I think, what was it? Brian Cranston. Speaker 2: Oh yeah, Brian Cranston. I forgot he was in it. Speaker 1: That's right. Alec Baldwin and Russell Brand. Speaker 2: Alec Baldwin. Yeah. What's the girl's name from DanceWorks? Speaker 1: Julianne. Speaker 2: Julianne Hough. Speaker 1: Yeah, Julianne Hough. Speaker 2: Yeah, she's amazing. Unknown Speaker: Beautiful voice. Speaker 2: It was unbelievable. It was a lot of fun, but the show, the Broadway show was better than the movie. Speaker 1: So do you have a Tom Cruise of a crewmie? Speaker 2: You know, I do all of our own stunts. Speaker 1: No singing karaoke at the Amazon events? Speaker 2: No, that's not me. Trust me, that is not me. I'm the guy in the back making fun of those people. Although Liz Downing tells me she's the best at it. Speaker 1: I've seen her do a little bit of singing on the karaoke. So you went from producing films and doing stuff in real estate and then what did you semi-retire and then got bored and decided to start AccrueMe? Or did you have a friend in the Amazon space that was fascinating to you? How did you get involved in this Amazon e-commerce stuff? Speaker 2: You know, here's the deal. I ended up stopping work and I was making millions of dollars. And I was an employee in a very large mortgage company running nationwide sales. And, you know, I decided it's just not what I want to continue to do. I wanted to do something else. I don't know what. So I quit and I left, you know, millions of dollars on the table. And I walked away and I said, you know, all I want to do really is clean my drawers and clean my, uh, my closet, you know, like whatever, just to organize life. I had no desire, no plan. Well, that lasted five years. Where for five years, I didn't work, I would golf a couple times a week, I play racquetball almost every day, go to the gym every day, all sorts, we travel all over the world at a drop of a hat. Somebody would say they're having a party for somebody's birthday and wherever. We'll be there. It didn't make a difference. My wife and I, we boat, so we had a nice boat. We went everywhere. We had a lot of fun. And then I made the big mistake, Kevin. I'm coming out of the city after having a meeting in the city and I thought of an old friend of mine from the mortgage industry from 20 years earlier. I hadn't talked to him and I just sent him a little note just to, you know, I think of somebody I want to send him a note, wish them well. I sent him a quick note. Hey, man, I hope all is well. You know, that's it. He sent me back. Let's have lunch. We did. Anyway, over time, he tried to get me involved in different businesses. I kept telling him I'm done. I'm not doing it. They told me about Amazon and that there were millions of Amazon sellers. And one thing I've always done in my career is help people grow businesses. I don't need to be paid for it. I just try to help people any way I can. That's my whole career has been made of just helping people. And you know, so I looked at that and mentoring younger people. And I was, I went to bed that night and you might, you might understand this, but most people in this industry won't understand this. When you're younger, You go to bed and you dream these big dreams. You're gonna, you know, have the biggest boat. You're gonna have this huge house. You're gonna do this big business, whatever it might be. Well, you know, I'm 63 right now. So I was like 59, 60 years old at that point. I don't have those dreams anymore. And that night I went to bed and I saw myself in a dream talking to a crowd, you know, on stage, thousands of these Amazon sellers. And I don't know what I was saying, but I was helping them grow their businesses. And I felt so good and I woke up in the morning. I'm like, holy shit, this is under my skin. I really want to help these people. So that's how I opened my eyes to Amazon and started researching it. And since I have a lending background, I started researching lending. I didn't like anything I saw. I can tell you that story as well because it's kind of interesting. And so we created something that's never been done before, which is not an easy thing to do. Lending's been around for 2,000 years. We found the way that it should have been done as opposed to the way it's been done. Speaker 1: So that seems to be a common thing among entrepreneurs. I mean, like you said, you've dabbled and played and exited and had fun in many different businesses. They tend to get to a point where they get a little bit of burnout or they get like, I just want to go play golf and go sell the boat and travel. And then that lasts a few years to five years, maybe in your case, and then they get bored. They like, I got to do something. And because you have all this knowledge and all this experience, it seems to be another common thread where they want to give back, they want to help, they want to start a charity or they want to give back and help other people, make money at the same time, don't get me wrong, but also... Come help people and there's a lot of people in this space that that need help. There's a lot of people that get into Amazon specifically that there's some very very smart people that come into this business and they know the finance and they know everything you know that they need to know and they got a great team but the vast majority are winging it. And they're either entrepreneurs or they want to be entrepreneurs. And they have no clue what they're doing. And you can grow so fast in this business that you can get in and over your head really, really fast. And you can crash it down by just making one wrong mistake. When if you would have just had the right guidance or the right partner or the right information, you could be blowing it up. It's really easy to pivot one way or another. And so that's what you're really doing with AccrueMe. AccrueMe, like you said, innovated the financial side of things on Amazon. I remember when I first started FBA in 2015. I've been selling on Amazon since 2001. But this FBA model, I started it in 2015 and there was no lending. I think at that time there was Amazon loans. And I think it had just begun and it was fairly limited. Now it's grown quite a bit. And I just saw a statistic the other day, I think $2 billion worth of outstanding loans with Amazon lending or something in that neighborhood right now. Speaker 2: Yeah, it's it's they have like 1.3, and they're gonna double it this year. Speaker 1: Yeah, that's that's that's what it was It was 1.3, and they're expecting to get to over 2 billion That's a lot of money, and then there's other companies. There's one called Bonolio that popped up and you know they went out of business because they had too many defaults And then there's quite a few others that have popped up And they're all some version of a traditional loan. You know, they'll couch it different ways. And then you had all the on decks and the blue vines and all these others that popped up. And some of those have gone the way of, you know, the pandemic brought them down because they had too many outstanding things. And then you had cabbage. Yeah, cabbage is an example. Then you had You had yeah, I've gone through all these because in 2015 I grew so fast I started with a couple hundred thousand dollars of my money and a partner's money and then we we grew so fast we had to Get money from wherever we could and I didn't have a rich uncle and the banks at that time were like I don't understand what the heck you're doing I'm not gonna give you any money and so I was using credit cards or I was I actually had to resort to actually using I call a mafia loans and At the time there was there They're MCA loans, Merchant Cash Advances, and it was a huge, they still exist, they're a little bit more regulated now, but in 2015, these guys, you could get the money overnight. You could go to them and say, I need 80 grand, you know, you'd give them access to your bank account or bank statements, they look and see if you have the cash flow, and then they would say, No problem, here's 80, you know, go sign this default judgment. They made you sign and get notarized a default judgment in advance, FedEx that to them. As soon as they got that back, they wired the money to your account and started taking daily withdrawals the next day. You know, if you get an $80,000 loan, it might be, I don't know, you had to pay it back in roughly 70 days or whatever that works out to, 1,500 bucks a day or something coming out of your account Monday through Friday. And if it was a holiday, Then they would double up on that next day. They didn't miss a weekday. And I was able to actually get those and that's how I cash flowed the business. And I did the math, I said, the interest rate on these is ridiculous, but I had good enough margins. I was like, it's the only way I can get this, keep this going. And I ended up stacking six of these on top of each other. And I never missed a payment. It became a problem and it started eating, at one point I was having like seven or $8,000 a day. Come out of my bank account just to pay back those loans. It was bad, but that's the only choice I had at that time to grow and we grew the company. I don't have any, I quit using those. In like 2016, I got out of them all. In early, actually early 2017, I got out of them all and quit using them. But to this day, I still get cold calls, probably two or three calls a day. I'm on some list and someone saying, hey, we got your approval for 150 grand. So it was very, very difficult. And then you had the Amazon lending. I had Amazon lending at the time too. I had everything. I think at one point there were 17 different companies that I had outstanding loans to just to grow the Amazon business because I just didn't have, and we were growing so fast, going into the millions of dollars really, really fast. I had no other choice. And so that was, I don't wish that on anybody. It was not good, but now we have people like yourself AccrueMe where you can actually in essence partner with you rather than you actually have a vested interest rather than just make an interest off of the money, but you have a vested interest in the success of the business. So tell me how is AccrueMe different than like Amazon Lending or something like that? Speaker 2: Well, you know, I want to just take a quick step back because what you said is about, you know, taking thousands of dollars out of your account every day to pay these loans. You can't grow. And that's when I started this, when I did the research, I called three sellers from my accountants. And one was small, one was medium, and one was very large. I didn't pick it that way. It just happened. I didn't even know what FBA meant. You know, this is how early in the game it was. I knew nothing. And I asked them all a bunch of questions. I just wanted to learn. And I just asked them the same question at the end. I said, so what do you need? They all said we need good sources of capital. There's no good source of capital. So that's when I did the research and you'll appreciate this. I saw an ad and this goes right to what you're saying. The ad was, and you might've seen this ad, it's still out there. Borrow 10,000, pay back 11. It's that simple. I'm like, how could I compete with that? That's great. What a deal. Then I researched it. I went and called the company and they're still around and I ran a little spreadsheet and I realized that to make that payment, you'd have to have a 19% ROI per month just to make the payment. Not to put any money in your pocket, not to have any cash flow, just to make the payment. I'm like, this sucks, but how many sellers are going to do that? They're not. So I was like, I don't want anything to do with this. And this is when my partner said to me, well, I literally said to him, I don't want anything to do with this industry because it's a little too scummy for me. I don't like that. So he said, why don't we do something different? So we brainstormed this idea. And the idea is simple. We'll, as you said, you're right on the money. Instead of lending, we'll invest in the seller on a temporary basis, just for as long as they use our money. We don't take any equity, so there's no share of ownership, but we invest in the company. We don't charge any interest. We don't charge any fees. We don't have a term. They use the money as long or as short as they want. They use it as a line of credit, so they pay us down. They take out more. It's just ongoing. They can take out more. If they ask for more and it's available, it's in their account the same day. And all we get, and we don't have any monthly payments, which is pretty unique. And you think about it when you're trying to grow your business, if you don't have to take money out of your business and you can invest it in real good inventory, that's going to turn over fast, you're going to make a hell of a lot of money. But if you're making that decision of sending me money or buying the inventory, And you have to send it to me instead of buying the inventory. That's a terrible decision. So we don't have monthly payments. They pay us when it's right for the business. And what we get is a percentage of profits at a high level. Here's the way it works. Very simple. This is the way the math works. All right. It's not the details, but this is the math. The seller ends up with 100% of the profit on their money and half the profit on our money. That's the bottom line. It works out that way every single time. So they can't lose. And I'll give you one more thing. Because you might relate to this. I've seen so many sellers who have good months and bad months. You know they make a lot of money and then all of a sudden whatever happens, they don't make money. They break even or they lose money or they get suspended for a week, a month, three months, something happens. And what happens? They get suspended or they don't make any money. We don't make any money because there's no profit. They literally, there's nothing accruing to us. They not only don't have to pay us anything but we didn't earn anything. Speaker 1: So let's walk through a hypothetical example, let's say I come to you and I've been running my, I'm sure there's some sort of minimum, what's it, six months or a year? What's your minimum selling on Amazon? Speaker 2: Six months. Speaker 1: Okay. Speaker 2: Six months profitable, you know, so we want to see at least the last few months that you're profitable and you know what you're doing. Speaker 1: All right, so I've been selling, let's say, eight months and I come to you and my last three or four months, I'm short, I'm eking out a small little profit and I say, hey, I need 50 grand. You take a look at my books and my financials, I'm assuming, do a little bit of due diligence and then you say yes or no, correct? Speaker 2: Basically, we only look at one thing. We look at your inventory. So we built a system to analyze your inventory. And so we look at your inventory to see that it's going to turn over on a regular basis and that it's going to be profitable. So you might, let's just say you have 10 ASINs. We might look at it and say, you know, this ASIN, you know, ABC is not profitable. And every seller says the same thing to us. Yeah, I know it's a dog. I haven't been able to make money with that in years. So sell it. We're not going to give you money against the dog. So we'll take that one out. But we'll give you money against everything else. Speaker 1: So it's basically the inventory that I have in stock. So it's basically the inventory that I have, it's almost like in your eyes, it's almost like the collateral that, okay, there's actually something there that can actually generate cash in a worst case scenario, maybe even liquidate. So basically the amount of money that I can get from you is not based on what my projections are. Hey, I want to do, I got this big thing coming up. It's more based on how much do I have tied up in inventory right now and how much of that can I free up? By partnering with you. Speaker 2: Right, pretty much. Can I give you a quick example? Speaker 1: Yeah. Speaker 2: That makes it crystal clear. Small example, very low, $20,000. And we go by capital. And by capital, there's two big things, capital and profit. So what's capital? From our standpoint, capital is your inventory of cost. Plus, you're receivable from Amazon, plus cash in the bank. So add those up and they come to $20,000. Whatever that number is, maybe it's $100,000, maybe it's a million, whatever that number is, we'll match that number. So let's say it comes out to $20,000, we'll give you $20,000 or less if you want less. We don't push money. We just want you to take what you need. So now, let's say you're earning a 10% ROI per month. So on your own, you're going to earn $2,000 on that $20,000 of capital. Okay, now we don't take anything for the first 30 days. After that, we're part of the profit. So, and I'll explain how exactly the details here. So now there's $40,000 working. Month number two, we're assuming you're going to earn, you know, basically the same ROI then and going forward, roughly. Speaker 1: So $4,000. Yeah. Speaker 2: So now you're going to have $4,000. So we're 50%, 5-0% of the capital. Whatever percentage of the capital we are at any time, cut it in half. So in that case, we would get 25% of the profit for that month. You'd get $75,000. So now you've got $4,000 of profit. You earned $3,000. We earned $1,000. So you got the $2,000 you would have earned on your money plus half the $2,000 that you earned on our money. Speaker 1: So the thousand that I'm paying you then, is that an interest payment? I still got to pay back that original $20,000? Or does that go against the $20,000? Or how does that work? Speaker 2: Yeah, so that's our income. So that's like interest, if you will. Except, we don't take it. So that $1,000, if you want us to take it, you can pay us. We're happy to take the payment. But I'm going to say at least six or eight months out of the year, most sellers don't make a payment. So that $1,000 just gets added on. Speaker 1: So now you're at $21,000 and the capital splits change the next month. Speaker 2: Right. And now you are $23,000. We're 21, so you're 52, and we're 48, so we earn a smaller percentage of profits. Our percentage of profits naturally declines month after month after month. So we become a small piece of a much bigger pie, and you get to use all the money and grow, grow, grow. And when you're flush with cash, That's when you should make payments and it knocks our profit percentage down. Speaker 1: So what happens when if someone's going to sell, they sell to an aggregator or something and they owe, so some people writing it out until that point, they're just using the capital to grow, grow, grow and then they will sell for a higher multiple and then when they get that payment from the buyer, they just pay you off? Unknown Speaker: That's it, yeah. Speaker 2: So we have sellers that haven't paid us in over two years. So think about that. It's not like we're calling them saying, hey, when are you going to pay us? No, we know what they're doing. They're growing and growing and growing and they're going to exit. So we want them to do that. And we've had a few that have exited. And when they've exited, exactly what you say is, you know, at the closing table, we get paid whatever the last amount that we were owed, doesn't matter. But typically what happens, what's happened so far, is the seller doesn't want to have anything confusing. So a week or two before the closing, they find out what are we owed, they pay us, and we're done. Speaker 1: So how do you mitigate your risk on that? I mean, like you said, there's good months and bad months. If someone hasn't paid you in two years, you're at risk. You have all that Amazon platform risk. I mean, Amazon could shut their account down for a valid reason or an invalid reason and just totally crush them, like they did with us in 2020 on one of my businesses. They didn't shut us down, but they, in essence, shut us down because of the algorithm. But how do you mitigate against that? Speaker 2: Well, you know, in 2020, when they shut everything down as far as you couldn't send any product in, we had a bunch of sellers that went from profitable to losing money. And, you know, they would call me because we were early in the game and they would say, Don, what are you guys going to do? Like they were very scared. They were very worried. And I said, we're not doing anything. This is part of business. You didn't do anything. You know, we're going to ride this through and work it through. And that's the end of it. And, you know, three months or so later, they were all profitable again, but it took time for them to build their profits back up to where they were. You know, it's just part of the game. Speaker 1: Correct me if I'm wrong, but don't you have some sort of agreement where the payments from Amazon, when you do a deal, the payments from Amazon either go and they get switched to like a mutual account or like a holding account so that you do have, you have your finger on the pulse a little bit there? Speaker 2: Yeah, so there's two things that we do. One is we become a partner in your business, but not an equity partner. We become what we call a profit share partner. So we create a new class of membership. So we own no equity in the business. Once our money is repaid, we have nothing, zero in the business. We don't own anything. The second thing that we do is we open up a new bank account in the company name. So if you're the seller, the bank account is opened up in your company name and we are the signers on that account. So the money from Amazon goes to that. You handle it all. We don't touch it. So we built a system that shows you everything all the time, 100%. And you go in and say, you know, I need $10,000 wired to my account. We're not looking at that. We only have one rule. We don't want to be more than 50% of the total. So we don't want to have more money in the business than you. Let's use an example. Let's say you have $100,000 of capital and we have $100,000 of capital and now you want $10,000 to go on vacation. Fine, whatever you want to do, but that makes us have more money in the business than you. So you need to send us $10,000 as well. Now we're both $90,000, but let's say you had $100,000 and we had $50,000. You can take out $25,000, knock yourself down to $75,000, take out another $25,000, knock yourself down to $50,000. So if you have $100,000, we give you $50,000 and you want to take it all and go on a big vacation, you can do that. Speaker 1: But if Amazon's paying into this account, then I got to take money out to cover my overhead, to cover my inventory. So I got to do like a balancing act there to keep it equitable so that it doesn't go in, you're not higher than me. Speaker 2: Right, but it hasn't been an issue really. There are certain times when sellers are higher than us or we're higher than the seller, but we do everything with them. They all know they got to get a stamp. And we give them some time to do it. Speaker 1: So why is this a better way than just getting a term loan or getting something else? What are the advantages to this? Speaker 2: You know, a term loan is pretty good. So the Amazon deal, when we did all the analysis, it came up to us being the best for growth for the seller and Amazon actually being number two. And that's because their term was a little bit longer. So most of the deals that are out there are As you said, 70 days or 6 months or 4 months or 7 months, 9 months, it creates such a big payment, your cash flow is dead. You're dead in the water. You can't grow because all your money is going to the lender. With us, you get to manage your business. So it's a variable cost. So as opposed to a fixed cost, so when you have a bad time, you're not paying anything and you don't own anything. So as you know, in business, you'd much rather have variable than fixed costs wherever you can. It's so much safer for your business. And then you have the cash flow now to grow, where if you're taking the money out of the business and sending it to a lender, You know, you're not growing. Speaker 1: What am I providing to you every month? Am I providing you just P&Ls and balance sheets and your team and someone on your team is looking over that just or are you guys creating your own version of that with your special software just to keep a pulse on what's happening with your clients or how does that work? Speaker 2: Yeah, we do it all ourselves. So we look at the Amazon account, we see that, that everybody sees. The bank account we can see. We see where your inventory is. If you have a 3PL, we either get technology reports or digital reports or sometimes manually, and we see everything. But we don't ask for reports. We don't need them. We don't ask for other bank statements and all that stuff. We don't look at your credit report. It's all based on the inventory. Speaker 1: Have you had any deals go south in this or has everything worked out? Speaker 2: No, not everything's worked out, but very few have gone south. So the first one, it was a complete scam. And this was before we had our technology. So we had no way of knowing. The guy switched the account. He opened up As it turns out, he opened up nine new Amazon accounts in different countries and he moved the inventory into these other entities without us knowing. Again, we didn't have the technology at the time. Turns out this guy has done this three different times to other companies. And so we're in the process, we have a judgment against him and we're going to get paid eventually. That was a complete scam. He did it on purpose. We have one other that we're working through right now that we made a mistake on it. It was an error on our back end as far as managing where the money is and going and all that stuff. But, you know, hopefully we'll get paid out of that one. And that one's got a lot of inventory with Amazon. So it's difficult when it's with Amazon. When it's with a 3PL, it's easy. But with Amazon, it's difficult. So we'll find out. But in the end, it looks like, you know, we might have one or two bad accounts out of everything else that we've done. Speaker 1: What ratio do you approve? Is it like 10% of the people that come to you actually get approved or what's a standard kind of ratio of the ones you look at that you say yes to, let's partner up? Speaker 2: So I'll give you a number in a second, but our issues are that since we become a partner in the business, we can't have another loan. So we either have to take the other loan out or we can't help. Speaker 1: So if you have an Amazon lending loan and you come to you, that loan has to be resolved some way. Speaker 2: It's got to be paid. Speaker 1: So you have to be first in line. Speaker 2: Yeah, we have to be because we're an owner in the company. Otherwise, we're liable on that loan. So, you know, we can't do that. But we'll give them the money to pay that off. But, you know, sometimes they'll have a really favorable term loan somewhere and it doesn't make sense to pay it off. So, you know, that knocks them out of the park right off the bat. And then it's, you know, the inventory. Is the inventory good? Is it turning? Is it profitable? Things like that. But I would say we approve probably about 40 to 50 percent. And we end up closing out of that probably another 50. So if we approve 50%, we probably close 50% of those. Speaker 1: 25%. Speaker 2: So about a 20, 25% altogether. Speaker 1: And what's the maximum you go up to? What's like the biggest deal that you've done so far? Speaker 2: You know, we say a million, but we've done a million and two, a million and a quarter. We've considered some larger ones. But the problem is, and this is a problem with the larger deals too, is people come to us with, you know, $2 million request. All right, we're all excited. We're looking at it. Everything looks great. And then they show us their loans, and they've got $3 million of loans. And they're with Amazon and whoever else, and they're making monthly payments of, you know, $250,000, $300,000 a month. Their profit is less than that. Speaker 1: So do you give financial advice to your clients as well? Do you guide them? Like you said earlier, you're in this to help them, not besides just giving them money. But that seems to be a big issue. There's a lot of people in this space, including some well-known You know, influencer types or well-known people that are teaching or whatever that they don't have two nickels to rub together on their business. They can show a screenshot of doing, you know, 10 million, 15, 30 million, whatever. But when you dive into it, there's a reason they never sold a business or whatever. I mean, do you see that a lot? And do you give advice? Do you really get hands-on with like your clients and like give them financial advice and strategic planning advice and stuff like that? Speaker 2: All the time. So my partner is a Wharton grad and a lawyer. So he's brilliant, number one, and I've got tremendous experience. So I'll give you an example. Recently, one of our sellers came to me because he had an opportunity. He heard about a very large business that was going to close down. And he thought, is there an opportunity? I said, I don't know, but I know the owner. So let's give him a call. And he goes, yeah, would you do that? Yeah, of course. So we get on a call and we negotiated a deal over a few months for him to buy the business. And, you know, we would have to finance it. And I was actually helping him get money outside of us because initially we couldn't go into it. I don't remember the reason, whatever the reason was. But I was helping him with knowing all of my competitors. Who's going to give you the most amount of money? But within six months, your payments are going to be so freaking high, you got to get out of it. That's when you have to come back to us and we'll save you with that. So anyway, yeah, I help people like that. I help people all the time. On LinkedIn, I'm constantly getting contacts with people that are new in the industry, asking questions. They need help on whatever it is, bookkeeping, accounting. How does this work? How does that work? I'll sit down with anybody anytime and go through and review any deal that they have financially to see if it makes sense or not. And I don't really care about selling the deal. I just want to do the right thing by them. Speaker 1: Is there any kind of like back of the paper math or just a quick little formula that people can use that if they have X amount of profit, let's say it's 20% profit margin, they should not take any kind of financing, whether it's from you guys or from anybody else that's over, you know, a certain percentage to stay. Is there some sort of formula that's just a quick down and dirty formula that you can analyze different deals with when you're looking to raise money as a seller? Speaker 2: There isn't, but I'll give you an example. It wouldn't work anyway because the lenders, they're not out to tell you the truth and give you the whole deal. It's just the way it is. It's the way the whole industry has been forever. There's no lending contract that's in your favor. It just has never happened. So I'll give you an example. And this is a pretty common loan that's out there right now. And when I say it, you'll understand. And it's not one company. Across the board, this is so imagine getting a loan. Hey, we only charge 6%. All right now, I think it's up to 8%, but we only charge 6%. Wow, that's a great deal. So let's say you borrow $100,000, but it's based upon your revenue. So you're going to pay a heavy amount back. And the first time it might be seven months or six months. But after that, they're going to knock it down. The goal from a lending standpoint on those deals is to have you repay it in four months, three to four months. So let's say you pay it back in four months. All right. So $100,000 over four months. What's your average outstanding loan for those four months? It's not $100,000, it's $50,000. So you're really borrowing $50,000 for four months. So now you just increased from 6% was $6,000 on 100 grand. Now you're paying 12%. And now what are you going to have to do in four months? You have to refinance that three times. So just bottom line, before you even blink your eye, you're at 36 to 40%, but you think you're paying 6%. Speaker 1: Yeah, it's the same thing with Amazon lending. The Amazon lending is the same. You see that 13% or whatever the number is there, and it's over four months, six months. No, it's actually double that and add a few for the cause of the compounding and stuff. And it's, yeah, a lot of people don't understand that. Speaker 2: Let me stay with that for a second because it's worse than that. If you think about it, here's, and I've said this to many sellers and they all go, oh my God, you're absolutely right because they've gone through this and you'll appreciate this. You borrow a hundred grand from Amazon. And you know, you may not need a hundred grand, but it's an ego thing. So Amazon offers you a hundred, you take a hundred, maybe you need 50. So now you're leaving 50 in the bank. As a reserve, you feel very good. You've been in business as long as I have. You feel very good when you have a ton of cash in the bank. But now you just doubled your cost because you really only needed 50 to apply it to inventory, let's say, to build your business. You took 100, you're paying 10%, whatever the number is. So you're paying 10,000, not on 100, but you're really paying it on 50. And now you're paying that back anywhere from six to nine months typically. I've seen a couple go out to 10 and 12 months, but I've seen most of them are short term. And then you're refinancing it. Speaker 1: Not a good deal and sometimes though the best time to get money is when you don't need the money And it depends on how you're gonna allocate like Apple computer Apple just recently They got billions of dollars in cash sitting in the bank, but they just took out a four billion dollar loan Yeah, and they got whatever. I don't know what the number is 17 20 billion What are some crazy way more than four billion just sitting in the bank in cash? We're not sitting we know it's deployed, but it's basically it's liquid right and Why would a company like that do that or why should an e-commerce company that's maybe flush right now consider partnering with someone like you or taking a loan rather than dipping into their own cash? It's the same like with movies. They say never finance a movie with your own money. Speaker 2: Sure. Yeah, don't do it. Trust me, don't do it. But you know, Apple or any of the big companies, you know, they're able to hit the bond market and, you know, get money at three and four percent. And, you know, even lower times and probably much lower. So why not take that money? It's so cheap. It's like when I was in college and they came out with student loans. I didn't need a student loan because I was working full time and I made my own money and I paid for college. But I took out a student loan to buy stocks. And the money I put into stocks, I bought my first house with, you know, so it was cheap money. Why would I not take it? Same thing with Apple. So it just makes all the sense in the world for them to, you know, have more cash, not use their own. And now they have dry powder. If they're thinking about acquisitions, they can go after it in an instant. And what was the second part of the question? I'm sorry. Speaker 1: Well, is AccrueMe cheap money? Speaker 2: No, I don't think we're cheap money. I don't think there is cheap money in the industry. But with us, you can manage it. So you were also asking about Why would anybody want to use our money, let's say, if they're flush with cash? In my mind, you shouldn't. You should use your cash as much as you can and what you're comfortable with. But with us, it's a good time to get comfortable. We're a different model than everybody else. Nobody's ever done what we do. We did it as if we're sitting on the side of the seller. What would we want? And you mentioned rich uncle, you know, that's a lot of people call us that you're like a rich uncle, you know, you're giving us all this and you're not taking, you know, you're taking all the risks, but you're not taking a lot of the income and a lot of the, you know, whatever from the company, you know, no equity at all. So it's a good time to start with us at a low level just to get comfortable. You know, don't, you need, you know, eventually in a few months, you're going to need a hundred grand, let's say. You start with us with 10 or 20, get comfortable with the system. If you don't like it, pay it back. If you don't like it and you pay it back in 30 days, it costs you zero. You don't like it and four months from now, you want to pay it back, you pay it back. It's, there's no risk, there's no 30-day notice, there's no penalty, none of that. You call me up this morning and say, Don, I want to pay you off. You already know the number. Just wire the money in. There's nothing. Speaker 1: So what happens when that happens? Does that bank account that you guys set up, does that just dissolve and they switch it back to their other account or whatever? Speaker 2: Yeah, we don't close it immediately. We leave it up to the seller. Whatever you want us to do. So typically they ask us to leave it open. Some sellers have said, can you leave it open for a few months because I'm sure I'm going to want to come back. We say, yeah, but you know, truthfully, what you should do is just leave like a $5,000 balance, something small, so everything stays. And then you come back and you want to, you know, pull out 80 grand that's in your account the same day. You know, it doesn't make sense to close it, but if you want to close it, close it. Speaker 1: So some people say that, you know, they don't really think through the process of, they need to raise money. And some people go out and they give equity away. You know, they get the rich uncle and they give the rich uncle 10% or 20% or whatever and bring them in as like a silent partner. But other, because they say, I don't want loans, loans are bad, interest is bad. But that's not necessarily true. And in your case, it's almost like the best of two worlds. You're getting the money. Yes, there's some interest, but you're not taking any equity. And you're allowing people to have breathing room rather than you've got this payment that's due on the 1st and the 15th or whatever every single month that's, you know, a lot of money. You're like, if you need breathing room this month, fine. You know, we're still here with you, which I think is a major advantage to a lot of sellers. Speaker 2: Oh, absolutely. Yeah, I wouldn't give up equity. And I think most of the sellers that use us and have used us in the past love that we don't take equity. That's probably their biggest thing. They can get money anywhere. And with us, they have the flexibility, they have the cash flow. From a growth standpoint, the whole key for us is growth. You're going to be able to use all the money for growth. My example earlier, the $20,000, And we earned $1,000, you earned $3,000. You're able to use not only the $20,000, but now the additional $1,000. If you add all that up, so that company went from $20,000 of capital to $40,000, we gave them the other $20,000. The next month, they have $44,000. The month after that, it's like $48,000 or $49,000. Then they're up to like $54,000. It's amazing how fast these companies grow. Speaker 1: What's an example of one that started with you, small? Have you had one that started with, say, $20,000, $40,000, $50,000? Now their capital is half a million or a million. And just because of working with you guys, they've just exploded and it's given them that leverage, I guess, to explode? Speaker 2: I can give you a bunch of them, but I'll give you the worst one and the best one at the same time. Same guy, a guy from Israel, really good guy. And he came to us and he took out whatever it was. 50 grand, 250 grand, I don't remember. And four months later, he called me and he goes, Don, I'm sorry, I have to pay you off. I said, why? And he said, because I've made so much money. I have all this cash now. I don't know what to do with it. I have to pay you off. The money that we gave him just like lit a fire in his business. So he paid us off faster than anybody else ever. But it's only because he had so much money. A kid last year, last December, not 22, but in 21, came to us, he made a net profit of $1,500 in December. In January, we gave him 25 grand. We gave him more in February, more in March. By May, his net profit was $44,000. By July, his net profit was $56,000. And I don't know where he is now, but probably, you know, 70 or something, maybe 90 net profit. But to go from, you know, $1,500 in net profit to, you know, close to $100,000 a month in net profit is mind-blowing. Another guy, this guy, it's interesting, we don't just do private label, we do private label, wholesale and retail arbitrage. And so just, this is an interesting one, this guy, retail arbitrage, came to us, He earned $2,500 in profit. Okay, we get started. Just a little over a year, so it was 13 months later, his net profit also grew to $44,000. Then he hung around that number, $39,000, $45,000 per month in net profit. Then he came to us and said, hey, do you know any wholesale distributors? And yeah, we do. And he's a great guy and great business. So we introduced him to a distributor. Investing like $40,000 a month in wholesale, making money there. And now, I haven't talked to him recently, but at the end of last year, he was telling me that at the beginning of this year, he's launching his first private label product. And so he's another one that's going to go from $25,000 a month in profit to, I bet you by this time next year, he'll be $70,000 to $100,000 a month in profit. You know, it's life-changing and there's a bunch of them. Speaker 1: So since a lot of people are taking, they don't pay you off quickly in four months like the fellow from Israel, you have a lot of capital tied up out there. Is this, do you have outside, is this some like big VC firm that's invested capital? Have you had to raise money? Is this your own personal money that dumped in or how do you keep that flywheel going when you're constantly adding new cash to bring on new clients? Speaker 2: It's a great question. So, you know, before I jump into that real quick with the guy from Israel, when he paid me off, I said, well, do me a favor. Would you tell your friends? He literally said, are you kidding me? This is a miracle. I'm telling everybody. So yeah, so what we did initially is, you know, I Went out on Wall Street, you know, really on Broadway, Upper West Side on Broadway in New York with my partner initially and we were going into the first hedge fund and it's controlled by a billionaire and who knew me and had wanted to work with me in other projects. So, Before we go in, I said to my partner, do you know what 242 is? And he said, no. I said 242 is the number of pitches that Howard Schultz from Starbucks made before anybody put money into Starbucks. I said, so we're not going in to get money. We're going to get our asses kicked. These are the smartest freaking people. While we're sitting there, they're going to build a spreadsheet that's going to make ours look like it was done in kindergarten. They're going to know more about our business than anything. They're going to ask us questions that are going to make us uncomfortable. And all we can do is do our best in here and learn as much as we can. And the best we can hope for is to be invited back. And we'll have to come back and answer their concerns. And we got invited back. Long story short, six weeks later, we got a term sheet for $100 million. So that's the way we kicked off, plus an equity investment as well. Then from there, we've had so many other hedge funds and family offices from around the country and around the world. Looking to put money into the business and what we've tried not to do is take too much because if you take too much you have to pay. Fees on that money, and it's a pain in the neck. So it's something that we manage. But interestingly enough, when we started the business, we started it with my money. And our first few accounts, I said to my partner, you know, this is probably all going to be lost. And he said, I know. And I said, you know, kind of nerve wracking, but I think we're going to learn. How to do this properly, and it might cost us some money to do it, but we're going to learn. We didn't lose anything. In fact, our very first account is still with us. That's three and a half, almost four years now, and happy as could be. Yeah, it's great. You know what else, Kev? On Seller Central, we are the number one rated capital provider on Seller Central. All five stars. On Google, we have just about all five stars. We're proud of that. We love that. Speaker 1: That's awesome. So if people wanted to learn more about AccrueMe and about what you guys can do to help them, how would they do that? Speaker 2: So what I would say is just go to accrueme.com. This website's basic. It's simple. A-C-C-R-U-E-M-E. AccrueMe. And basically what it means is, you know, we let our profits, our share of the profits accrue as long as you want them to accrue. You can pay us at any time. You can also reach out to me on LinkedIn. I communicate with everybody. So it's my full name, Donald, as if my mother was calling me for dinner. When she's angry. And my last name is Henig, H-E-N-I-G. And, you know, again, you'll check out my background. You'll see what I've done. You see the type of person I am. And, you know, I help people whether they're in the industry or not. If I can help them in any way, even with encouragement, I do. That's what I do. Speaker 1: Awesome, Don. I really appreciate your time today and for sharing. This has been great. Speaker 2: Kevin, it's really a pleasure, man. Thank you so much. Your questions were great. I love it. Speaker 1: Thanks. I hope you enjoyed this episode with Don. We're talking about money. And don't forget the Billion Dollar Seller Summit, the virtual edition, is coming up next week. It's not too late to get a ticket. There's just a handful left, so be sure to go to BillionDollarSellerSummit.com and get your spot for this incredible summit. There's a lot of great speakers. There's a lot of great content. It's all live, nothing pre-recorded. You can interact with the other attendees. You can interact with The speakers, the average in the room last time was doing about $12 million a year on Amazon, so it's a high-level group. You definitely want to be there if you're serious about your Amazon business. And you definitely want to be back next week for the next episode of the AM-PM Podcast as well. And before we go today, I've just got a little bit of words of wisdom for you. If you don't make time for your wellness, you must make time for your illness. If you don't make time for your wellness, you must make time for your illness. We'll see you again next week and hopefully at the Billion Dollar Seller Summit as well.