How To Sell Your Amazon Brand For 10x w/ Jim Mann From Thrasio – #15

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The Brand Builder Show
How To Sell Your Amazon Brand For 10x w/ Jim Mann From Thrasio – #15
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Welcome to this very special episode of the Brand Builder Show where we welcome Jim Mann from Thrasio. As one of the biggest buyers of Amazon businesses, Thrasio have a very clear picture of the type of brands they are looking to acquire. In this episode I quizzed head of UK&EU acquisitions Jim Mann on exactly what that criteria is, so you can go out and build on that blueprint.

Key Topics:

Why over-diversifying may actually harm your valuation
How aggregators will begin to look to the future for valuations and could pay up to 10x in the near future
What route you should take to expansion for maximum impact

Connect with Jim and Thrasio:

Thrasio.com
Jim’s LinkedIn

Connect with Us:

Useful Resources:

If you got this far, there’s a chance you enjoyed the episode… if so, please consider leaving a review – we really appreciate it!

Ben Donovan  0:00  
What’s up podcast crew and welcome to another episode of the Brand Builder Show where today’s episode is a special episode. I’m so pumped for you to hear it.  It’s an interview with Jim Mann from Thrasio. Now in case you have been living under an Amazon sized rock for the last couple of years, Thrasio are one of the fastest growing Amazon aggregators in the space. They have raised billions of dollars worth of funding, are buying up hundreds of Amazon FBA brands. And I reached out to them to have a chat inside our recent FBA Freedom Challenge. 

The FBA Freedom Challenge was a five day challenge that I partnered with John Elder to put on. It was a live training event and part of it was we wanted to interview both successful sellers and also guests in the event to be able to unpack what it looks like to build a seven figure brand in three years or less. That’s the goal, that we’re trying to help people the journey that we’re trying to help people on inside the Brand Builder University and have those discussions too, on the Brand Builder Show. And so it was honestly such an insightful conversation with Jim. We talked about things like how to increase the multiple of a future exit. He talked about what Thrasio specifically are looking for, which may surprise you things like they do not care one bit about SKU diversification. They love brands that have a high concentration of revenue through a small amount of SKUs. And there’s a whole bunch of other criteria in there that it does get into. He talks about how they will look towards the future of potentially seeing 10x multiples. In fact, we talked about an actual deal that has happened for a 21x multiple in the last year. So you know some crazy numbers in there. Super insightful stuff. And I just loved Jim, like he’s so down to earth. He has a crazy story of Amazon FBA himself, so many gold nuggets in there. So sit back, grab a brew, grab a drink, and enjoy this episode with Jim Mann from Thrasio. 

All right, welcome. Welcome, everyone that’s watching. Welcome to this amazing session we’re going to have with Thrasio. It’s going to be an awesome session. Welcome to everybody that’s watching on replay, which will be everyone right now. Because I don’t expect anyone to get on live this quickly. But welcome. If you’re watching on the replay, put a little hashtag replay in the comments. So you know you’re catching up. Great to have you with us no matter when you’re watching this around the world. But we are honored and privileged to have Jim from Thrasio with us, Jim. Welcome along.

Jim Mann  2:35  
Hi Ben, thanks for having me. Good to see you!

Ben Donovan  2:37  
Yeah I know, it’s good to see you, too. I’m particularly excited. But I know our whole community is pumped about this session. It’s kind of like the thing that everyone’s been talking about all week, you know, looking forward to these industry giants coming in and telling us what to do. And so we’re really looking forward to. So what are you going to share? We’ll definitely open up as well, for questions and comments. I know that people in the group are going to be leaving their questions as we chat through. So I’ll try and feedback to, to use some of those comments and some of that feedback and questions as we go along. And try and make it nice and interactive. But we’re super interested to learn from you today. But before we do that, just why don’t you tell us a bit about yourself and what you do at Thrasio.

Jim Mann  3:20  
Yeah, Ben, hi, thanks. Well, I am director of acquisitions at Thrasio. So I lead up on the front end of the deals we do, mainly in UK and Europe, we work in the US as well. Before joining Thrasio, I was actually an FBA seller myself in 2013, full time. So as many of my friends were amused, this sort of scene is going over to the dark side and I’ve gone from the seller to acquirer. But you know, it’s good, it gives me a pretty unique perspective. I saw I bootstrapped a business 2013. Built it up to multi seven figures. And now that’s really helping me at having a proper conversation with sellers as you know, seller to seller. I think also it just helps, you know, from Thrasio’s perspective to have someone that comes from that world as well. So it’s nice for me still in the ecosystem. So different jobs, same world, same people. So that’s, that’s what I’m up to now.

Ben Donovan  4:13  
Do you kind of assess when deals come on the table? You assess whether they’re good for Thrasio or not? Is that kind of the gist of it?

Jim Mann  4:19  
Yeah, we, you know, some some stuff comes to us. You know, we’re fortunate position. You know, if people are thinking about selling an FBA business, they’ve probably heard of Thrasio. So, you know, a lot of people come and knock on the door. But we still invest a lot in marketing. And increasingly, we’re trying to put content out to help people build their businesses rather than just be seen as these vultures that hang arond, shading of the ecosystem, which no one really liked. So yeah, we’re trying to be a bit more kind of altruistic in our marketing, which is, if most people I think start an FBA business with a view potentially either, first of all sort of independence and when once that box is ticked, they go, hang on, there’s an exit opportunity here and so, you know, I see our job not just to buy those businesses when they get there, our job is to help people accelerate the speed in which they can get to an exit. Yeah. So that’s we’re investing a lot of time in that and content. Helping sellers over time now.

Ben Donovan  5:09  
Yeah. And I think that really shows and I think that’s why, particularly why I was interested to chat with you and get you on. Because, you know, it made total sense for me as I thought about it more. And as we discussed things more, it makes total sense for me, because the more brand builders you can help get to, you know, build real, healthy, equitable brands, the more opportunities there are for you guys to buy brands, you know, you might not have the time, resources to be able to build a load of stuff from scratch, but you can acquire these brands that everyone listening is got all of the time and energy to put into building. You know, for me, it’s like, it makes a perfect partnership, right?

Jim Mann  5:43  
Yeah, absolutely. I mean, we’re really good at taking brands when they’ve proven themselves, and then throwing complexity and resources and money and trying to scale them to the next level. You know, the hard bit really hard bit is launching a brand and getting it $2 million. And we’re not that good. You know, we’ve never really done that we do line extensions, we invest into accelerating when they’ve done that proven themselves as a brand. But you know, that startup, that bootstrap bet that sort of hustle. That’s, you know, that’s not our expertise. 

Ben Donovan  6:12  
Yeah, no, definitely. So it’d be good to help as many people as we can get there so you can buy their brands, we were joking the other day that, you know, we just launched a new brand less than twelve months ago and hit six figures with it. And I kind of talked through my plan, you know, 100,000, this year, 300, next year, then a million the year after, you know, hopefully relatively conservative goals. And I said, you know, hopefully at that point, maybe it will sell to you guys. I don’t know, but you’ll probably be doing 10 million plus deals and only exclusively maybe I don’t know,

Jim Mann  6:39  
I don’t know. Who knows? It is a long time in this world. Yeah. Three years is a, yeah, an eternity. Yeah, so no, we were looking to work with sellers who’ve reached that point where, you know, some people sell either appointment, or they’ve reached a number, they think there’s enough for them to get out. Yeah, they’re stressed out, and they don’t want to do it anymore. And I can relate to that, because I got to that point in my business. And as you know, my business got taken out against my will. But I was also at a point where I wasn’t enjoying operating anymore. Yeah.

Now talk to us about that. Because you haven’t always been with Thrasio, you had this brand, you stepped into a new role. You know, as much as you feel emotionally prepared. Can you tell tell us the journey of what happened with that brand?

Yeah, I mean, I, so I started in 2013. In a prior life, I worked in consulting, and I was working with eBay senior management team in Europe. And they were going through a shift in leadership strategy. And we were working with them around a leadership story and an engaging organization to execute new strategy as quickly as possible. And, you know, I was always seeing really interesting depth, quite big companies in the work I was doing. And often the stuff sort of shakes around in the back of your head, and it’s completely irrelevant. But a few months after seeing this deck, e-bay, a friend of mine said, oh, there’s this thing called FBA Amazon and, and I was like, right, you’ve got my attention. I’ve just seen the strategy deck around the move away from direct to consumer and into marketplaces. And so we bought the course the Amazing Selling Machine course is ASM one at the time, and, you know, color by numbers, you just follow the steps, little video here, do this, buy some stuff, this criteria, threw it up on Amazon about six months later, because, you know, takes a while it’s go through, and I was still working. And it’s sold. And I was like, this is real. 

So, you know, I built the business up from that, you know, to right up until 2020. I could have probably exited before. I personally wanted to sell the business when I didn’t need to necessarily have to work. I had enough money that I could kind of get through life. And I hadn’t hit that point yet. And also multiples were lower then as well. And unfortunately, it was a travel brand. So fast forward to 2020, I had a multi seven figure business doing well while COVID came along. Europe fell off a cliff, 90% drop in sales in about three weeks. And four weeks later, COVID hit the US and the US tanked. So I had about three months of panic. I fired my team, I pulled everything out of when I realized COVID wasn’t just a kind of blip. This was around for a while. Yeah, I pulled all my stock out of FBA, ’cause obviously that was gonna get expensive long term storage fees. We saw coming into Q4 and I was not faced with what to do next. And because I’ve been around Amazon for ages, people going, “Can you manage my brand and you wanna do this?” And I realized I didn’t like the fight anymore. I was in my business because I had a goal of exiting. I didn’t like waking up and getting … essentially and we’ll be doing for a long time. And that’s when I knocked on Steph, who’s the CEO at Thrasio, her door and I said, “Look”, and she said, “we’re in a mastermind together”. 

And I was like, “Steph, I’m kind of you guys are rocketship at the moment. I don’t have an MMA background. I used to work in consulting. I know FBA as well as everyone else does”. And they were great. They’re like, you know, “come, come and work with us. Come work with Ken and acquisitions.” And, you know, I’m okay with numbers. I have very good commercial common sense. But I work some super smart analysts and they really, really hold me up on where I’m not great, which is with numbers. So I’m, I’m happy chicken because I’m still in this kind of entrepreneurial-ecommerce-Amazon world. But I’m doing something very different. Yeah, I’m learning all the time. And I love learning. For me, one of the biggest things it gets me fired up is just learning. So I’m on a whole new learning curve. And yes, that’s where I am. So I hit a bit of, you know, I had a sketchy 2020. That’s really keep it together for a few months.

Ben Donovan  10:39  
Yeah, yeah, it must have been tough to stomach. How did you? How did you get through it?

Jim Mann  10:42  
And Joe, what would you have not an option, you just have to work it out. I’ve got four kids. And, you know, I didn’t my money was in the business. All my money was in the business, you know, a successful and growing Amazon business sucks up a lot of cash flow. So, you know, I had a lot of borrowed money in there, like one, you know, best part of $1.3 million in inventory and warehouses around the world and, you know, cash tied up. So, you know, I did what I could to send the bleeding. And “is that right? What am I gonna do next, I’m gonna start generating cash flow again.” So I didn’t really, you know,  from COVID, hitting to starting with faster was probably about six months, I started up PPC agency, I was looking at PPE and trying to get masks in from China. As most as so many people were, I was on hustle. I was just I was working probably harder than ever, but not generating much cash flow at the time. But you know, that’s, that’s life. You just when you get hit, you have to get up again.

Ben Donovan  11:41  
Yeah, no, absolutely. I think reason I’m keen to sort of hear from you on this is because I think a lot of our listeners would be, you know, with struggle taking action for the fear of “what if”, and yours is obviously like a real extreme example of what can go wrong. And I don’t chuckling obviously is not funny at all, as it says now, it’s tragic. Yeah, I mean, obviously glad that you can be light hearted about it. But it’s, it’s a real challenging season you went through, and a lot of people will think, Well, they won’t start a business, they won’t step out. Because what if it goes wrong? What if I fail? You know, I’m always have the mentality that even if you do fail, the learning that you get, the steel that you build in you from that experiences is worth the experience, but like it has it changed? How do you feel about when you’re talking to new sellers, to people that are ready to take a step out in business, as it changes your mindset at all, in that sense?

Jim Mann  12:32  
I was really lucky because I was working consulting right at the beginning. We specialize in mindset. And so we used to before, we had the license for Tony Robbins and Stephen Covey’s Seven Habits of Highly Effective People. And we teach people about mind mapping. So I came out of uni and my mind ducks. My first week at this company, was sent off to a Tony Robbins event. So I had like a firehose of mindset training in my early 20s. That I think probably helped me out through these things. And, you know, partly, I think that was a really good baseline, and you know, and encourage anyone to just really focus on personal development mindset. That’s the biggest driver right for everything. Yeah. Also, like I said, you know, I mean, you’ve got four kids and like, the, the money is all invested in the business, and the cash flow gets turned off, you have to hustle, you’ve got no, there’s no option. You can’t just throw the towel in South, I’m done. So as part driven by need and part I think, hopefully, maybe some of the stuff that I absorbed in the 20s helped a bit as well.

Ben Donovan  13:29  
Yeah, absolutely. What would you say to new sellers to try and avoid the situation you find yourself in as a, you know, how do they protect themselves from something you went through? Like a disclaimer, I get, you know, you can’t predict something like COVID worldwide pandemic, etc. But, you know, just in terms of building a short foundation, is there anything that you would have done differently if you were to look back and have that time?

Jim Mann  13:52  
I mean, like that, I mean, COVID was a lightning bolt. And you know, for a lot of people, there’s a lightning bolt lit up their business in a good way. And for the odd unlucky person in travel, it just destroyed their business, most categories took off, most of my mates saw kind of 234x and on the back of COVID increases. You know, Brandon Young, he probably know how to chat with a while ago, he, I knew he was in travel, but he also had some brands and other categories. So he is kind of has worked out because travel tanked for him. But his other categories grew by two or 3x. And the business, you know, aggregate grew really nicely. But what I suggest to people to launch brands and different categories, probably not because the complexity and the stress, they’re trying to get your head into three categories and audiences and the risk that puts on success versus the covering, you know, hedging against like another lightning strike. Lightning doesn’t strike twice that often. Right? COVID was extreme, and I was just, you know, there’s that musical chairs that the, you know, the music stopped and there’s 100 chairs in the room. It’s just my one that went, yeah. So I think you know, generally said to people, I wouldn’t worry about tomorrow, because if you worry too much about tomorrow, it’s gonna paralyze you. You just have to, you have to back yourself, you know, do your research, make sensible decisions and then go all out. And if you if some if something comes, it’s completely unexpected and unpredictable, that’s life! But doesn’t happen to many people very often. And when it does, you know, you’ll just get up and go again.

Ben Donovan  15:23  
Yeah, definitely. Yeah, I heard someone say recently that the, the fastest route to success rather than having, you know, eggs in lots of different baskets is, is actually put all your eggs in one basket, but then just really look after that, that that basket, you know, to do that.

Jim Mann  15:38  
It was the second time and to me, because I got killed by 2008 crisis as well. I saw I was mortgage free on a house in London. And I moved to Spain, and I sold the house at 2007. and bought a big plot of land, which was going to be double its value in nine months turnkey retail unit, and then see 2008 hit Spain, and you know, apart from maybe Greece and Ireland, there probably wasn’t anywhere worse to have your money. So I absolutely. I got run over capacity 1000 H…actually, as well, I think, you know, these things happen. And if you if you talk around to people who’ve had their own businesses, most people are very, very few people will tell you it’s been easy all the way through. Most people have been knocked over at least once in their journey.

Ben Donovan  16:17  
Yeah, I mean, I can somewhat sympathize. We bought our first property in 2007. So I know the timing well,

Jim Mann  16:22  
Yeah. Yeah. Yeah. So I you know, that. Yeah, I would I like to say just don’t just back yourself. And don’t worry too much about what could go wrong? Because that’s a very paralyzing sort of self thought.

Ben Donovan  16:36  
Yeah, for sure. Do you find, last question on this, because I want to move on to other stuff. But I think it’s just really interesting how, you know, so much of being an entrepreneur is resilience, right? You know, and keep going on, keep being persistent. But it must have been hard in terms of you mentioned, like your friends, you know, exiting selling their businesses? Did you ever have to deal with bitterness that you that you struggle with?

Jim Mann  16:56  
No, I tell people that all the time, because I’ve got mates that that started after me and couple have made like, massive exits last year. I mean, I’ve got friends that have made, you know, 15 to $50 million exits in the last year, year and a half. Now, I don’t because I just don’t now, you know, would I like to have 20 million in the bank? Absolutely. Do I feel upset or resentful? I’ve got it. No. I think actually, it kind of it shows possibility. In a way it’s kind of motivating. I know that. Unfortunately, the bus hit me this time. But, you know, I’m assuming it won’t happen again. And next time it could be made. I don’t know. I don’t see any point in thinking like that at all.

Ben Donovan  17:41  
Well, I hope it never happens to me, I hope I can react in the same way. Hats off. Very impressive. Let’s move on away from your, you know, the past and move into the present. And let’s talk about Thrasio M&A. Talk to us a bit about the state of play because there’s lots of talk in the space, but you are working in it every single day. What is being in the Amazon aggregator industry, like right now?

Jim Mann  18:07  
It’s very exciting, fast moving, there’s lots of cash flowing around all the stuff we’re here about. I think 2022 is gonna be a different year. You know, we talked about this the other day, I mean, traffic on amazon.com drops when it’s 30% since August, so there’s been there’s now a post-COVID behavioral shift in consumer behavior on Amazon and off Amazon as well. And so aggregates about 20-30%, less traffic on dot com. And some categories will have dropped to 50-70%, others are still growing. So, you know, the result of that is, I think, what I know that people are gonna be much more picky about what they buy. The aggregator model is very simple. You go to someone say, Can you lend me some money to go all right, have some money? What’s the what’s the conditions of the cash flow? You got to make that you got to make some money with that money, right? So basically, an aggregator has to buy a brand, that they can come back and report back to their, you know, their teachers or whatever and say, Look, I’ve done my homework, and we’re outperforming you know, the average performance in the category and the categories is growing. So can we have some more money and the whole cycle continues. So that’s quite a simple idea. But it’s not simple to execute, when it’s quite, you know, we all know what’s going on at the moment. So some categories, you know, there’s the category movement. And then, you know, day to day is quite tough, PPC is more expensive than it’s ever been. Raw materials in China are pretty tough at the moment. Shipping is not really getting back to where it was previously. And then Amazon in the bubble of amazon.com, or in Europe, there’s still price compression, which is bizarre. 

So it’s almost like a sort of denial going on about the external forces, putting a compressing margin, and it seems that people are scared to put the process in so much competition. So you know, aggregators have to deliver profitable growth. Normally with a minimal, you know, average EBITDA. They go back to the investor and say, “Can I please ask for more money?” And I think everyone’s talking about some aggregators who came in gung ho in 2021, and lots of cash deployed, it was all about deploying cash. I, you know, I can’t speak to specific aggregators, I was involved in some deals, and I saw what was being offered and they weren’t adjusting for COVID bump. So an extreme example, like sort of booty bands and sort of home exercise stuff that blew up in COVID. They were offering, they weren’t adjusting the EBITDA for the COVID bump. So they will have paid massively for that 12 month trading history. And then in May, last year, revenue dropped off by 50% on that category. And suddenly, they’ve left a business that’s in decline, they’re paying 10 to 20% interest on the debt they’ve borrowed. There’s no organic profit to reinvest in the brand, or go to market. So can we borrow some more money, the mark is like, show me how you’re done that? Well, we’re losing money. And you know, there’s sort of deaths, it’s like death by 1000 cuts that ain’t gonna blow up spectacularly. But if you’ve done 10, 20, 30, acquisitions, and 20 are kind of struggling, you know, a bit of a zombie, because you can’t borrow money, you have an organic cash flow to reinvest. And the fairy tale comes around pretty quickly. 

So I think this year, there’s gonna be a lot more focus on certain categories, I think there’s going to be a spread of offers. So some brands will get 10x, some getting 3x was historically is gone. Everyone’s got 2x 3x 4x 5x. And then the multiples gone up kind of flat across all categories. I think valuation is gonna be more future-focused on how the categories looking well than historical performance. And I think, yeah, I think some people get offered, a lot of people will get declined, that people say, Look, we’re not good. We’re not good acquirer for you. Yeah, I think. And then there’ll be a range of offers based on how the future outlets perceive to be by the acquirer. So, yeah, it’s still a massive opportunity for people to exit. And I still believe that Amazon is probably the fastest way to get yourself to earning a million pound or tournament at 50 million pound exit. But I think it’s going to be less rushed, is gonna be more considered, and strategic than it’s ever been from all the aggregators.

Ben Donovan  22:11  
Yeah, right. Okay. That’s interesting. The just quickly before we do go into, like, if anybody’s listening, and it’s the first time they’ve heard this term, Amazon aggregator. Can you give us like a, in a few sentences like exactly what that actually is?

Jim Mann  22:25  
Yeah, so I don’t know, the guy called Richard can never say his surname, but he came up with idea with …, and creative 101 commerce. And his thesis was simple as I’ll buy $101 million profitable Amazon brands. And I’ve got one of the largest e-com and most profitable, global e-com companies operation, and they got about I think, 10, maybe a bit less acquisitions. And then the complexity of stacking all these accounts and PPC campaigns and purchase orders and bank accounts, and they kind of threw the towel in. Thrasio started in July 2018. Similar idea. And the idea is that, you know, as as you aggregate more brands, you have more data on the algorithm or data on PPC, you have more depth and breadth of the bench and supply chain SEO, creative marketing. And the bigger the team, and the more data you have, hopefully, the more effective decisions you make the de-risked the decisions and you can start doing more aggressive growth tactics, then you would either because of cash or because of data and knowledge, and then a sort of typical, you know, a small, small team of entrepreneurs can do operating at once 10 million themselves. Yeah, so the word aggregates is horrible. I mean, I don’t know. And I think some aggregators, and Thrasio’s one, we’ve kind of moved to hopefully beyond that, and I say, I think Thrasio is now the largest e-com growth engine globally, because we’re not just aggregating numbers and brands, you know, we’ve got, we can talk about this in a minute, you know, direct to consumer, retail, wholesale, workplaces in different channels. So you know, got industrial design teams for line extension. So it was really integrated right up from product sourcing and design through to, you know, logistics, the infrastructure in UK in Europe, and then of course, the on platform DTC marketing teams. And so it’s more than just an aggregate of brands. It says specialist ecommerce growth engine.

Ben Donovan  24:25  
Yeah. That’s good. And from like an economic point of view, the attraction, obviously, as well, it would be if you are a billion dollar company, the moment you add a brand to your portfolio that increases in value almost overnight, right? The business that you’ve just brought in?


Jim Mann  24:47  
It’s a really good question. I’m not quite sure how to answer it. So there’s speculative valuations and multiples on Thrasio who know we’re aggregators. And that’s generally pegged against there’s the equity given to the money coming in. So, you know, Silverlake just paid Thrasio a billion dollars just for Christmas. And that sort of estimated Thrasio’s valuation to be between five and 10 billion. No one’s done an IPO yet. So no one knows what his businesses are really worth. So the guys like guys are putting the money on the table or speculating what this aggregate engine could be worth the brands within it. But and the expectation, the hope is that because of it’s more than just a bunch of operators together, there’s a huge amount of technology, I mean, Thrasio’s tech team, and data teams over 400 people now. You know, that’s, that’s, that’s bigger, I think, I think that’s bigger than the biggest aggregator team in, you know, I think I don’t want to name names. But, you know, most aggregates, we have 100 people in defense defending listings, which is bigger than most aggregates. 

So that does add value as soon as a brand comes into that, because its chances of success and growth are much greater because of what’s going on inside Thrasio. So yeah, there is an instant acceleration of multiple. But it’s not just because you throw this is the thing that frustrates a lot of people go. And the people people have come into this with the idea of throwing 10 brands together and flipping them and selling them onto an aggregator and no one’s managed to do it. Because there’s no, there’s no value add and having 10 brands operating with 10 little mini CEOs, and nothing tying them together. No platform. Yeah. And that’s that’s the thing that I think people miss is that you have to have a platform of data technology and capability. And then yes, you can justify as soon as it comes into there and increase multiple. But it takes a long time to get to get that leverage. You don’t get that just by throwing 10 bands to get to do 10 deals, you get that by building a value added capability.

Ben Donovan  26:57  
When it can’t, I think it’s brings us into multiples like, because the in terms of I’d love to hear your thinking on it, you share some interesting thoughts about future predictions and where that might go. You mentioned a juicy number of 10x, which is just like, oh, let’s talk about that. But from my understanding, the higher the rate top line revenue, potentially the higher the multiple, right? So you’re saying a group of brands might not be worth more just because they’re a group but is that top line revenue aspect that doesn’t apply in that situation?

Jim Mann  27:29  
I think what people like now, there are lots of things driving valuation. So category, pets is one everyone talks about, you know, 30% of people went out bought pet during lockdown. So now you’ve got a guaranteed, depending how long your pets gonna live, between eight and 15 years, depends on how people are treating their pets and investing in their food and accessories and stuff. So that category is gonna it’s got a premium on it, because it’s, it’s going to keep strong. 

The other thing driving valuations is the level of profitability. So, and the revenue concentrations, the operational complexity is something that most acquirers want to avoid. So yeah, a million dollars of revenue across 100 SKUs, is actually quite a lot of you know, each SKU is a new PPC campaign, you throw that into seven languages, and you’ve got all this complexity in supply chain and trying to keep an eye on relatively slow moving SKUs. And it’s easy to sort of, you know, have a delay, especially now you have a delay on the water, and then you’re out of stock, and you’re creating ranking issues. So revenue concentration has a real premium on it at the moment. So $1 million SKU is very attractive and so that might drive a premium. So million dollar SKU in the right category that’s trending positively for the last two years, has the key characteristics to maybe go direct consumer or it’s already proven some direct consumer metrics around average order value and cost of acquisition and repeat purchase patterns, that kind of stuff. 

Those are the guys that get premium, they can get 10x plus. There’s very few brands that tick all those boxes. So you know, you have to try and manage people’s expectations. And I think, you know, a fair expectation in 2022,  multiples were are at somewhere between four and six upfront, trailing 12 months. And, you know, we talk about it a lot internally at the moment, because we’re trying to work out where the markets headed, and we think it’s going to it’s going to drop off a little bit. And within the average, we’re about five, but some will still get 10 and some I get for three, and they’ll be driven by largely those things I’ve just said now.

Ben Donovan  29:34  
Is that  a Thrasio-specific thing? Or do you think that’s across the board?

Jim Mann  29:37  
I think you’re gonna see all across the board. Because you know, it’s a very sinister, like I said earlier, it’s just a really simple business model. You have to acquire brands and demonstrate that you can grow them profitably. And you know, you said to do that you have to have a very strong integration team. You have to have a really strong brand ops team. And it doesn’t matter if you’ve got the best ops team. If the M & A team  throw them a brand and a category in decline, is the hospital past depends. So that’s that’s what, you know, it’s there. There’s gonna, I think, focus on certain categories. Focus on, you know, trending growth for the last year not in decline. The other thing is we’ll look at our PPC, what’s the average cost per click, like in the category? What’s the pricing trends in the category? So, look, I think the I think we’re gonna say is less rushed to go, “We’ll close in 30 days”, you know, which is what faster was actually saying, like, a couple of years ago, we’re actually probably gonna say, we won’t close in 30 days, because we’re gonna do some more diligence than we’ve ever done. And it means you’ll get a better deal. And there weren’t any surprises for anyone in diligence. So yeah, I think I think people will slow down, they’ll be more considered valuations will range, depending on the outlook for that category in that brand in the future. So there’s, they’ll still be really bullish, like exits. I think they’ll also be some slightly more conservative offers to, you know, less differentiated, desirable brands.

Ben Donovan  31:01  
Yeah. Thrasio made a 10x acquisition yet? 

Jim Mann  31:06  
Yeah. 

Ben Donovan  31:06  
You have. 

Jim Mann  31:07  
Yeah. 

Ben Donovan  31:07  
You want to talk about it?

Jim Mann  31:10  
No. Sorry, I can’t. No. And also, this is partly we just we just don’t  publicize that stuff. And there’s also the discretion of the seller, a lot of sellers, you know, it’s a bit like winning the lottery, you know, like, people start treating you differently. So people know they’ve sold your business, but especially for friends that are not in the Amazon world. They might think you’ve just made a couple 100 grand, they might not realize it’s 10 million in the bank. And so a lot of sellers actually want to be quite discreet about it. Yeah, we we asked all the time, like by the press, can we sell our or, you know, can we have a seller and you’d be surprised how few sellers want to kind of get on and do that stuff. They just work the guts out for years, we’ve got some money in the bank, they normally either taken some time out to spend with their family and do what they want to do or travel or, you know, normally get a bit of an itch after about six months, and they’re busy trying to create a brand.

Ben Donovan  32:05  
Yeah. That’s good. That’s good. But we can obviously safely assume they pretty much would have been similar to what you described in terms of what you’re looking for those in those valuable.

Jim Mann  32:15  
Yeah, yeah. Yeah, but … is not common. Yeah. You know, I know, Brian, that got 21x. Last year. Yeah.

Ben Donovan  32:26  
What were the circumstances around that?

Jim Mann  32:30  
It was a real, it was a strange one. It’s in a pet category. There’s one really aggressive fund in the US that was rolling up at the time, a lot of pet brands, and was paying crazies to local strategic valuations. And is a friend of mine is just, you know, very good timing. Right place, right time.

Ben Donovan  32:52  
Yeah. Okay. I want to ask more about that, but I’m gonna move on because I’m not as good. I it’s just so interesting for me, you know, like, I think everybody that’s listening will find this stuff, kind of super interesting, but also super motivating. Because you know, that if you put the work in to build something of value, then there’s going to be, you know, value at the end of it for you, right, because that’s where most brand builders gonna get most of their money in the exit.

Jim Mann  33:17  
Yeah, yeah. I mean, you know, in terms of sort of where to focus to get the best valuation on the business, you know, the key things, the filters are, you know, trending growth, trying to deliver on 20% EBITDA, 15%, minimum, you know, healthy tax costs, you know, somewhere between seven and 15%. And I know, some categories can go lower, and some you have to burn a bit more, seven to 15%. So, good sanity, sanity check. Having your COGS set up at 25, 30%. If you’re getting up to 40% on your cogs, you potentially structurally going to start having some pressures, PPC goes up. And then try, you know, there’s another myth, well it’s not a myth, actually, when you own a business, it makes sense to de-risk by having different channels and having lots of SKUs at once … falls over, you know, a night and if Amazon suspends you or you get attacked and you lose your account, then while I still got 20% on each sale, 50% on whatever. 

Actually, acquirers don’t like, they don’t like revenue spread out. They like it really concentrated and actually license operational simplicity. So really high revenue SKUs is a difficult one, because as you come to prepare your business for sale, definitely streamline it, it’ll make you much more attractive. But as you’re growing, you also probably want to see if you can have another hero SKU or two that can fire up. So it’s just it’s really having a view where you are and you’re kind of progression to executing and just deciding when’s the time to launch and test versus when is the time to really trim your sale and optimize your revenue and profit. Because you’ll get, you know, you’ll get valued largely on the future prospects of the category, but also on your trailing 12 months profit. And if you’re scaling, and launching products and testing tactics all the time, that tends to hamper your profitability.

Ben Donovan  35:12  
It’s really interesting because there’s a big debate about it, I think in the space between, you know, a lot of people about “what does add value”, and there are some, you know, staunch kind of believers in the camp of “No, you need to diversify”, and people that are going to buy your brands, don’t want to buy something that doesn’t have a social media account, doesn’t have a website presence. And then you come along, and you’re like, none of that matters, just give us revenue …

Jim Mann  35:37  
Well it can matter. So you know, what’s a brand find a brand, right, that’s another whole story. But you know, on Amazon, I’m bit like a broken record on this, I think there’s two kinds of product or brand, there’s the commoditize me to SEO, price-sensitive products. That’s a hard fight to keep winning, and increasingly dominated by the kind of low-cost Chinese writers. And then you’ve got the brands that are differentiated, either by design, like physically design, which is quite hard to do and expensive, but, or just an aesthetic thing that just gives it a premium look and feel. And then if you can add to that an audience that dropped, you know, an off-Amazon kind of engagement with an audience, which is easier in some categories than other right, you can’t you’re not going to create a huge following on sort of coat hanger brand. But if it’s pets or, you know, supplements or you know, something to do with well-being you can leverage audiences offline quite off Amazon quite a bit that that does have a value on that.

Ben Donovan  36:39  
Okay. Yeah, that’s good. Good to know. Emily in the chat, and the group is asking, is it better for brands to focus on expanding to different marketplaces first? Or rather than rushing to launch multiple SKUs? 

Jim Mann  36:52  
I’ll give you my personal responses if I was selling as much low risk to drop. There’s some caveats there’s but generally much lower risk to drop. Same product, new marketplace, especially now the reviews porting. Yep, than it is to launch new SKUs from scratch with no reviews. And I’ve done I’m sure most people listening have done it, you know, you launch a product, you think this is gonna be the one I know so much more than I used to launch it, and it just bombs. And that happens all the time. So that, you know, I personally, I would always say go check compliance and check demand and brand analytics and bloodline in local marketplaces, but provided the demands there, your reviews are going to pull over and your reviews look comparable, and therefore gonna give you a similar kind of firepower. I’ll get some SKU in the new market first. Yeah, I’m glad you said so much quicker as well. Supply chain. Another 10,000 units out there. Yes, it’s a much quicker process designing products specking, sourcing. It’s, yeah, it’s that you lose six months, depending on what you’re doing. But it’s easily six months per product to get it ready to go.

Ben Donovan  37:55  
Yeah, I’m super glad you say that, because that’s what I teach. And I’m gonna be talking about that today. All I had to change my slides. I talked about James Clear and Atomic Habits, he talked about the growth of agriculture, and it talked about the law of least effort, you know, and agriculture expanded really quickly across an East-West plane because of climate. And it was much easier to do. And that’s how humans are wired. And, and I just figured it’s the same with building a business, right? You go wherever is the least amount of effort to grow and least amount of resistance that’s going to help you help you build it up. 

Jim Mann  38:29  
Let’s just on that, I mean, some people say you should, when you sell your business, there should be some low hanging fruit, because that’ll make you attractive. I mean, that’s true. But, you’ll get more money if you’ve delivered that profit before you go to market, rather than a little bit of a premium. Because you’re like if there’s no hanging fruit there. So personally, trim your business for profit, go into other marketplaces, get it in a really good place with a nice 12 months trajectory, and then go.

Ben Donovan  38:56  
Good. Okay. So to summarize the ideal business for someone at Thrasio is a strong revenue concentration. Low, I want to say low SKU count, but I suppose it doesn’t necessarily have to be low SKU count.

Jim Mann  39:09  
No, not typically what we see and we like and says it’s 80/20 right here, so I’m told that by … 20, but you know, a lot of the time sort of two or three SKUs drive 80% of the revenue, if you’ve got 10 SKUs and as you amplify that, it’s similar. So people do that a lot of time by accident, just because some SKUs just don’t deliver what was expected.

Ben Donovan  39:28  
Yeah, good. Okay. No good. And simple, logistical side of it the operational simplicity is key for you, as well. 


Jim Mann  39:37  
Yeah, you know, on-Amazon is great, off-Amazon is fantastic. But if you’re doing, you know, say you’re doing a million dollars, and you’re doing like 100 grand on your direct consumer. That’s like, it’s not a lot of revenue for a lot of effort to manage that Shopify store. 

Ben Donovan  39:56  
Yeah, that’s good. That makes sense. Makes sense. Which would be essentially be different if it was like a private equity or like a private buyer, maybe. But that’s maybe another question for another day.

Jim Mann  40:06  
Yeah. You know, there are different types of buyers and strategics: private equity, family, we got the guys in the States with SBA loans, and the aggregators. There are different options out there as well for who …

Ben Donovan  40:18  
It’s okay, a couple more questions. And then we’ll see if there’s any last ones in the group and let you go, I know you’re busy. In terms of deal structure, you mentioned about 4 to 6x up front and 30-day closing time, what would be like a typical deal structure for someone right now?

Jim Mann  40:35  
In the UK, typically, we’ll do this two ways of selling a business normally: in the UK is that a share purchase agreement; in the US and other parts of what is called an asset purchase agreement, share purchase agreement, you’re selling the limited company assets inside it, get more complex, because a lot of liabilities come across with that. So diligence takes longer, so rather than sort of 30, 45 days, it’s more like 70 to 90 days. And then the asset purchase agreement is like you know, you’re saying that, the trademarks, the domain, the seller central account, you itemize all the assets, that’s the main difference. And then, once that’s happened, you then go to a tier earn out period, where and I think most aggregate’s the same, they’ll offer you 50% of the uplift in profit. For the two years after they bought your business. They throw in their team, their money to accelerate and scale the business profitably. And they give you 50% of that uplift for two years. So you sell to the right aggregator and your category is got genuine growth potential. And you’ve got a team behind it that know what they’re doing, you know that earnout can really be a meaningful amount of money.

Ben Donovan  41:39  
Do you require sellers to stay on in any capacity to see that?

Jim Mann  41:43  
Not about eight times out of 10, no. Bigger deals, Yes. If it’s a 20, 30, 40 million dollar business, they typically got a team, a warehouse, and it’s not a clinical transition. So sometimes we’ll have like a transitioning service agreement for a year, 18 months while that stuff, their job is to sort of hand over making sales redundant over a period of time.



Ben Donovan  42:05  
Yeah, okay. So let’s take an example, say 500,000 a year profit, and you can sell for like 2 million upfront. And then if they were to grow that profit by is only on the uplift, right? So if they grew that profit in the next two years, from 500,000, year to a million a year, they get another 250.

Jim Mann  42:25  
Correct. And then the second is an interesting one, because it’s paid against the EBITDA up close provided you’re growing every year, and it goes 500 to a million, then the second year, you get the difference. And it’s 500 cases be 250 and 500, in that scenario.

Ben Donovan  42:39  
Yeah. So almost another 50%, then?.

Jim Mann  42:42  
Correct. This is why earnouts can be really cool. But you got to go in there with your eyes wide open around what’s a realistic expectation for your brand in that category? What’s happening on the macro side of things? And also, do your due diligence on who’s buying you. How good are they as operators? Because the … turnouts only as good as the team behind the brand.

Ben Donovan  43:03  
Yeah, no, that’s so such key thought, yeah. No, that’s good. In terms of like a minimum for maybe Thrasio might be different other acquirers now, but what would be like a minimum profit level that you would entertain?

Jim Mann  43:18  
You know, we’ve been picky at the moment. So we’re looking for a minimum of a million dollars EBITDA, which is quite high. You know, a couple of years ago, we were looking at brands doing a couple 100 EBITDA. So I think, don’t be put off by that, there are people that will acquire FBA brands doing 100k. I think what we’re seeing is, you know, we’re looking for bigger deals, and we’re getting much more picky. Because all the stuff we’ve talked about, yeah, I think a lot of the other bigger aggregators are the same. But there’s still there’s 100 aggregators out there, you know, everyone’s got a different strategy and a different budget. So don’t be put off by the numbers I’m saying. You can exit probably from 100k a bit or upwards. 

Ben Donovan  43:59  
Sounds good. Sounds good. And I don’t know if again, you’ll be able to share much on this, but I just thought of asking you if you have any examples, maybe details reducted, or whatever, just any inspiration you can give to the people listening in terms of brands you’ve acquired and maybe their journey, like case studies, examples, you know, that you would have maybe that would just inspire our listeners about if they’re just starting out now. You know, two, three years time. What’s the what’s the opportunity out there?

Jim Mann  44:26  
Yeah. A friend of mine. I hope he doesn’t kill me. He says. His bold unique is shampoo brand. And what the founder did is he’s made a brand. He’s developed hair masks for a specific audience. It’s in that value premium category. So it’s differentiated. It’s expensive, but it’s cheaper than premium brands. Very passionate and loyal customer base. Not that many SKUs, so about 15 SKUs, which, for us, for DTC is a good number because we can start once people buy that product, you can then start upselling and cross selling and start creating a lifetime value. So it’s got a really good deep secret platform. Formulation takes about six months, … . So, you know, they formulate the shampoo and have to leave it on the windowsill for like six months to see what happens, measures will congeal, or just separate and stuff. So, you know, he’s done the hard yards. He’s built, really nice design, really nice packaging. He’s built a brand rather than just an Amazon product. He’s built passionate following off Amazon. People now is posting all the time on Instagram unpaid for. That’s a brand that we think we can take from being really strong Amazon category leader to potential being a global category leader on and off Amazon. 

So you know, businesses like that, you know, are great and they get premium. Yeah. And there’s actually a business there’s a tail in there to be wary of as well, actually, because it is really good sell exit right now. But there’s a lot of lofty promises made to get people to sign LOIs and this is a good example. This guy came to market got closed over the weekend on a crazy multiple, and he was too good to say no to. And then sort of, I think, eight weeks in to diligence. The aggregator is quite a well known one realize it was too complex for them and walked away. Having kept him up all our diligence is quite grueling. You don’t want to have to do it twice. You know, and he ended up taking a lower off from us, because he then realized the importance of having an acquirer who knows what they’re doing. And a lot of people get hot under the collar about very sexy, LOIs, you really need to do your diligence on who’s buying you because there’s a lot of a lot of LOIs get signed, and don’t make it through diligence. And sellers get kind of chewed up and spat in the process. And, you know, they just move on to the next deal. So, you know, check that that … is a really nice thing to look at as a success story. But also, you know, if you are selling your business, just go in there with your eyes wide open and make sure you’re doing your due diligence on your acquirer as well. 

Ben Donovan  47:23  
Definitely. Great thoughts. Great thoughts. Just to finish up then. And then I think there’s a couple of questions, I might just quick fire quickly at you. What kind of advice would you give to anyone who’s looking to launch a brand right now? And it’s got a vision of an exit? What’s the key focus you would say in this first year, focus on this, and this is going to set you a really good foundation?

Jim Mann  47:43  
I think really, I know your audience. I know, in the past, it was all about Amazon hacks. Now I think you’ve got to look at Amazon as a channel with a big customer base, you’ve got to think about why would I buy your product because there aren’t too many categories now that don’t have a big review base. You’ve got to come in with a differentiated story or products. If you can build an audience off and drive traffic in, that’s very powerful as well. But don’t fall down the trap of going this much demand, search traffic, and you know, the old kind of, you know, they’re selling that much like the scent of that and then puts in if you go in with that kind of attitude, it’s gonna it’s going to be tough. Yeah, Amazon’s amazing. But the people selling and doing well, on Amazon now have to be really good business people. It’s not just a sort of hack platform anymore. So just you got to do the basics really well right from start as a business person.

Ben Donovan  48:38  
Yeah. Yeah. Great thoughts. Couldn’t agree more really solid thoughts. Appreciate that. Just checking the group for questions as we finish up, then Clayton says along the 80/20 SKU count, would you advise dropping loser revenue SKUs before going to market?

Jim Mann  48:55  
It’s up to you. If there are a lot of what will happen with your acquirer is they’ll probably do that post acquisition because everyone’s trying to just make sure that they get the best return on every hour and every dollar spent. Yeah, and most entrepreneurs put a lot of life and a lot of sweat into launching a product. And if it’s not losing money, they kind of just maintain it I used to do and that’s it. You know, it’s not losing money. Wow, you know, I’ll leave it there. But when you kind of, when you get a bit more disciplined as an acquirer, you start killing off a lot of stuff that’s just like using time and not making money. Yeah. So short answer to question is, yeah, it would be helpful probably to your course. It gives it gives a nice perspective on the business.

Ben Donovan  49:33  
Yeah, it would be helpful to keep them in?

Jim Mann  49:37  
No, if it’s literally turning over, and it’s like, you know, 3% of your revenue and not generating any profit. It’s not that it’s not adding value to your business, and it’s taking time for you to work out how much inventory to … . You know, it’s not optimizing your time or your cash flow, and that’s what we should always be thinking about.

Ben Donovan  49:51  
Yeah. Do you on that similar note, if there’s, say Seller Central, you know, you’ve got lots of random stuff going on there. How important to you guys is a tidy, sort of central, tidy finances all that kind of stuff?

Jim Mann  50:05  
So essential lots important finances, you need to have your P&L, accrual based P&L for the last, you know, one to three years prepared when you come to market. Yeah, that’s one thing is an absolute baseline. If you come to market without a monthly basic, a monthly accrual based P&L, you know, my aggregates will build it for you. But you’re putting your trust, your numbers in their hands, but also it just looks like you’re not really serious about selling if you’re not able to put your P&L together properly. Yeah. And if someone hasn’t done it, that’s fine, gets one set for you. But it just looks like someone hasn’t is running a business doing a million plus, and haven’t got proper numbers in place. It’s an instant with these guys can’t be on top of their business if they haven’t got this foundation sorted. Yeah.

Ben Donovan  50:53  
Someone says P&L question mark. Profit and loss.


Jim Mann  50:56  
Profit and loss account. Sorry, yeah,

Ben Donovan  50:57  
That’s fine. That’s good. It’s good. We love helping people learn this stuff is there’s so much to learn, right, when you’re when you’re launching and scaling a business, but I think you’ve detailed for us over this last 45 minutes together the opportunity, you know, this the scalability of these businesses and the life changing possibility. So I you know, I think as an industry, we’re growing to be more and more thankful for people like Thrasio, I think, early on, we were worried, how’s this going to go? And I think, you know, from my perspective, now, I just look at it and think, man, this is so great for our industry. So we we appreciate your input massively.

Jim Mann  51:34  
Yeah, I mean, selling a business in 2015 was not even thinkable. Earn money from a bank for an Amazon business was not even thinkable. You know, you had Amazon lending. And that was about it. So yeah, the world’s moved on. People do worry about aggregators, I don’t think people need to, as a percentage of total revenue on Amazon, globally, we’re nothing. Some people blame the advertising costs on aggregators. It’s a crazy idea, you know, the cost of advertisers going up everywhere, TikTok, Instagram, Facebook, Google, it doesn’t matter. It’s just the problem is since COVID shut everything down and everything’s moving online and of course, all the advertising monies come online. That’s affected every platform and every channel.

Ben Donovan  52:14  
Final question. So I know I keep keeping you on it. But crystal ball, you said about price compression, increased costs, it can’t carry on forever, right?

Jim Mann  52:24  
I think China is not going to get cheaper over time. So I think sourcing out of China is something probably to look at, and Apple, on the back of COVID panics, have restructured their entire supply chain. So if you want to look for what might be in the future, Apple is not a bad place to start. Then you  patch that with consumers liking a more sustainable supply chain, and more local supply chain be more comparable to Asia, because the cost in Asia, it could be time to look so locally. And also, you know, if you’re sourcing locally, you might save yourself a whole load of money on you’ve got a container on the water. That’s cash tied up, right, so the shortening supply chain, you have a lot more cash flow running the business so you can actually grow the business quicker with less cash by having a shorter cashflow cycle and supply chain. So China’s still amazing, but you know, I think it’s worth if you have time to start looking elsewhere. Yeah, I think in the category and what you’re making.

Ben Donovan  53:30  
Yeah, no, it’s good. It’s such an under discussed topic, the speed at which you can turn over your money.

Jim Mann  53:37  
Cash flow is what makes or kills most businesses. And what we do in FBA, if you’re sourcing in Asia, especially with supply chain problems now with containers have doubled the time they take to get in and then it might take two weeks to check in. Once you think it’s made that final … . You know that it can two weeks out of inventory that has a knock on effect on your ranking and you got to then invest in PPC to get back up. So yeah, having a reliable supply chain with shorter cashflow cycles and reliable timescales is massive.

Ben Donovan  54:09  
Yeah, definitely. Absolutely. Gosh, it’s been so good. Clayton says, “Thanks”. Matthew says “This was great. So thankful!” Paul says, “Super valuable information. Would love another hour of discussion.” … . But this man is a busy man. 

Jim Mann  54:22  
Honestly, I feel like we could talk about so many things. I have to tell another chat another time.

Ben Donovan  54:26  
Definitely. But I think we’ve got you lined up for some more stuff in the future. So hopefully more stuff coming. And yeah, that’s really good. We really appreciate the time, Jim. We appreciate taking time out and like all of the comments, saying it’s been super, super valuable. Where can people find out more about Thrasio, if they’re interested?

Jim Mann  54:46  
I’m on LinkedIn, Jim Mann with two Ns, or jim dot mann at thrasio dot io. ([email protected]) Or on the website thrashio dot com … there’ll be a form they can fill in.

Ben Donovan  54:59  
Good stuff. Well what an episode that was, I honestly loved this conversation with Jim so much. And I’m glad you guys got to experience it as well. Like I said it was recorded live inside of our challenge, a bit of live interaction there, which hopefully, you know came across well in the audio. But regardless, there would have been so much value in there for you. So if you did enjoy it, please do like the video, leave a review for the podcast. We’d love all that kind of stuff. And doing that subscribing to the podcast and leaving a review for the podcast really does help us to continue to get high caliber guests like this on and as discussed in the show there. We did announce inside of the FBA Freedom Challenge that we are launching the Brand Builder Summit, the inaugural Brand Builder Summit is this year in April, April 6th or 7th. Jim is going to be speaking so do make sure that you sign up for Early Bird information. We’re going to run that event as a free event but we will have like a VIP package. You can get some more access to the speakers as well. So definitely check that out on the link will be in the description below for the early access stuff to that and we will look forward to seeing you in the next episode real soon.