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Targeting a Buyers’ Culture With Ben Leonard of Ecom Brokers

Ben Leonard

Ben Leonard is an ecommerce consultant and the Co-founder of Ecom Brokers, a UK-based ecommerce brokerage that helps companies sell their businesses for an optimal price. Ben has been an entrepreneur since 2016 when he founded Beast Gear, a fitness equipment company that he grew to seven figures. After selling his business in 2019, Ben decided to spread his knowledge about achieving profitable ecommerce exits to other entrepreneurs. That same year, he was named the Emerging Entrepreneur of the Year by Elevator Awards.

Here’s a glimpse of what you’ll learn:

  • [1:05] Ben Leonard discusses trends in the ecommerce M&A (mergers and acquisitions) space
  • [4:28] Advice for preparing to sell an ecommerce business
  • [8:51] The importance of branding and marketing in ecommerce M&A
  • [12:09] How to build a brand identity to entice potential buyers
  • [17:56] Ben shares how his company facilitated monumental transactions
  • [25:18] Evaluating one buyer versus multiple buyers
  • [28:35] Ben’s investment and mentorship equity initiatives
  • [38:26] Final selling tips: treat your business with respect

In this episode…

Traditionally, in the ecommerce M&A (mergers and acquisitions) landscape, private equity-backed brand aggregators have purchased low-valued businesses at high EBITDA (earnings before interest, taxes, depreciation, and amortization) multiples. But this has led to resource depletion, and brands are struggling to sell for an ideal price. So how can you evaluate today’s buyer culture effectively to position your brand as a top choice?

Ecommerce broker Ben Leonard notes that the most frequent mistake business owners make when exiting is determining a price based on brand goals. Selling depends mainly on a potential buyer’s requirements, so it’s imperative to structure your business accordingly. When positioning your company, you must consider five interrelated factors: brand identity, growth and profitability, risk, transferability, and documentation. Branding influences the other constituents, so developing quality products and understanding your target audience promotes longevity, decreases risk, and facilitates a seamless transfer to a buyer’s existing system.

Tune in to this episode of the eCommerce Profits Podcast as Joshua Chin welcomes the Co-founder of Ecom Brokers, Ben Leonard, back for his third interview to discuss preparing for a business acquisition. Ben explains the five central factors potential buyers consider, the importance of branding and marketing in ecommerce M&A, and advice for evaluating one buyer versus multiple buyers.

Resources mentioned in this episode

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Episode Transcript

Intro 0:04

Welcome to the eCommerce Profits Podcast where we feature top founders and experts in the ecommerce Industry and take an in depth look at their struggles and successes and growing e commerce brands profitably.

Joshua Chin 0:18

Alright, what’s up people? Welcome back to the eCommerce Profits Podcast. With us today we have a third time returning guests. Because is it the third time?

Ben Leonard 0:28

I’m pretty sure it’s the third time Yeah.

Joshua Chin 0:30

Ben Leonard, then is the founder of Ecom Brokers. And that’s ecombrokers.co.uk. Then you’re at the forefront of the action. That is the m&a world in ecommerce. Let’s kick it off with your outlook, general general sentiment on things with deal activity in the midst of possibly looming economic recession. And how things are panning out in Europe and the US. What’s your

Ben Leonard 1:05

absolutely, yeah, okay, cool. So yeah, good to be back. And thanks for having me. It’s been pretty wild last year in a bit. You know, prior to 2020 to 2020 2021, we saw a lot of crazy stuff going on in mergers and acquisitions. In ecommerce, we saw a lot of pretty average, sometimes pretty poor businesses being sold for lots of money, very high multiples of EBIT, da. And that was really because of combination of COVID. And the macroeconomic environment. Of course, those two things were were very tightly linked anyway. And the behavior of buyers. So many of the buyers in the ecommerce space are private equity backed aggregators of brands, they are rolling up ecommerce businesses into a portfolio. And the business model is cashflow arbitrage, right, so they’re buying profit at a low multiple, let’s just say, two and a half to three times profit. And then within their portfolio, all the brands that they buy are worth more than the sum of their parts, they sit at a much higher multiples, say more like 7910, even up to 50 lakhs. And then they optimize those businesses to improve the profitability. And the idea is that they’ll eventually sell along or go public. And what happened was, as sales around COVID, went crazy, and we saw this booming ecommerce, those guys and the investors in them banked on that continuum they banked on, right, this has been the big change that we’ve been looking for, and everyone’s coming to ecommerce, and the sales are gonna stay high. And therefore they threw a ton of money at it. And they bought loads of brands for lots of money to see what would stick. But of course, that’s not what happened. Right, the COVID shopping spree ended sales fell. We saw lots of issues with supply and demand due to factory closures, we saw issues with shipping prices. And essentially the macroeconomic environment changed. So these buyers could no longer get money, dirt cheap. And as a result, we shifted from a seller’s market to more of a buyers market where it’s much more difficult to sell your business, your multiples have been much lower. And whereas previously, someone with a pretty average ecommerce business could probably sell it for a lot of money. Now we’re seeing a situation where only really strong brands are able to sell their business. And it’s been a huge shift. A lot of people are frustrated now because a position where they can’t sell the business or can’t sell for as much as they would have liked. And a lot of people are still feeling quite smug because they have a fantastic business. And they’ve been following my advice, which is to build a strong brand. So that as we come out of this situation, they’re much better able to sell it. If I

Joshua Chin 4:00

if I were running a strong brand, and I follow exactly what you taught, and things are going well, despite the the economic climate, and I’m not in a hurry to sell the business. What’s your advice for someone like? Like like that? Would you wait it out until the cycle kind of comes back? Or would you still say it’s still good time?

Ben Leonard 4:28

My advice is find out what your business is worth. And then you’re in a position to make an informed decision. Because people are often surprised as to what their business can be worth they have either over or underestimated that in their own thinking. And then when they get a better view from a third party and independent third party experts, then they’re better able to make an informed decision as to right okay, this is actually worth more than I thought, at the point in my life where it makes sense for me to get serious about an exit strategy sooner than I thought Or they might say, I’ve got some work to do. But now I’m in a better position to decide, okay, this is where I am, this is where I need to get to. And then you work with the right experts to reverse engineer your expert, your your exit, and get you where you need to be. So my advice is find out what your business could be worth, so that you have that information at your fingertips. Interesting. Now,

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