Chris Shipferling is managing partner at Global Wired Advisors, a digital investment bank that assists online and e-commerce businesses in optimizing their business sale process. Chris shares his insights in how to optimize your business if you’re looking to bring in a majority partner for your business.
Q: Can you tell me a little bit about Global Wired and what services you offer that are of relevance to Amazon sellers?
Chris: In a nutshell, Global Wired Advisors is a lower middle market investment bank. We’re focused primarily on businesses in the e-commerce, SaaS and digital agency space. To date, we’ve only sold most of the businesses had at least some type of Amazon presence.
We are investment bankers, not conventional business brokers. I come from an executive sales and marketing background, and my three partners all came from very large institutional investment banks, Wells Fargo, Bank of America, Citibank, Deutsche Bank. This means that when we take you to market, we take you through an investment banking process so it’s more detailed and it’s more thorough than going through a broker. (Who is essentially a listing agent) We put a lot of planning and we put a lot of strategic thinking behind it with our broader internal team.
Q: When do businesses come to someone like Global Wired Advisors? Are they at the point where they’re looking to get to sell their businesses altogether? Or are they seeking sort of co-investors and sort of capital infusion to grow the business?
Chris: We do only majority buyouts. What that means is that we don’t typically help find minority investment – we’re not out there helping a business find an investor to buy 20% or 30%.
Most of what we do are sell side engagements where we’re helping a company find a majority partner – someone who wants to buy 51% and above of the company. Primarily it’s 80% to 100%.
Q: Why does the company strategically consider looking for a majority partner? Is this purely, they’re trying to harvest a business that they’ve developed in time to sort of take the profits that they’ve earned? Are they trying to access the economies of scale with being part of a larger company?
Chris: Oh, all of the above. It just really depends on the situation. Unfortunately capital is very hard for e-commerce to get. There’s not a lot of debt funds vehicles that are out there lending, and when you’re a growing thriving business, one of your largest capital expenses is going to be inventory.
We run into that a lot, which is, “Hey, I literally can’t afford to grow the business anymore. And I’m showing profitability on paper, but unfortunately I’m making very little or any money as a business owner. And even though I’m showing that my business is making millions, I’m not making anywhere close to that.” They want to go ahead and say, “Hey, that’s my reward for blood, sweat and tears for three years. I was only making $150,000 or $100,000 a year out of the business. Now I’m about to have a several million dollar liquidity event.”
Secondly, there are owners who realise they don’t have the skillset to grow the business and manage that growth past a certain point. They are looking for a capital partner to either buy a majority of the business and help from a resource perspective, or go ahead and just sell the company outright.
Q: If you’re strategically considering selling out, either to obtain a majority partner or just to take your profits and move on to your next business, how do you start preparing your business?
Chris: Oh man, that’s a loaded question. I’ll keep it high level and start kind of with one, two and three.
From a sequential perspective, number one, identify how organised are you really from a financial perspective. Do you have P&L documents? Do you have a 13 week cash flow statement? Do you have any type of cash flow forecast? Do you have a balance sheet? This is the most basic beginning questions. Finding the right CPA will help give you the best financial organization.
Financials are the rudder and if you don’t have the rudder and/or the rudder is broken because you can’t read it, it’s pointless. No one knows where the ship is going and how much the ship is worth.
Number two, identifying what makes you unique and really be able to articulate that particular bullet point. In this world, we call it the moat – what am I offering that no one else is offering, which is effectively giving me that protection to continue to build revenue for my business and to continue to grow the business?
Number three, I would say, have a look and ask yourself, am I growing and thriving? And does this business have a lot of runway? Now, that’s where I stop abruptly and say, that question alone takes a lot of time to understand. It takes a lot of questions, a lot of thinking, a lot of strategic planning and we’re really good at that. Our firm has great acumen when it comes to helping a business owner identify the future growth opportunity of the business.
If you come to us knowing the answer for all three of those and achieving metrics that are healthy, you are potentially ready to go to market. Then the next question after that is: what’s my goal? What are my particular exit goals as the business owner?
Q: Is it common to actually start engaging with businesses and for them not to have defined that goal in their head?
Chris: Sure, and we help businesses all the time to define their goals. Internally, we call it the intersection, and that intersection is, what’s the vision of the company? What will the capital markets think about this business? And then, now what are the goals of the business owner? And so, sometimes we can answer one and two pretty quickly, which is, I know where this business is going. We can tell them what the capital markets will think. From that point, it helps inform what the goals may be for the business.
Q: You would have thought that that would have been sort of the foundational question that companies say, “Look, I’m seeking this sort of a partner for a wide percentage of ownership to achieve X goal.” Have you found some people that have that a bit fuzzy in their heads?
Chris: Yes, and I’ll tell you why – it’s really more specific to Amazon businesses: they just didn’t realise how fast they would grow. Many of the business owners got into it and it was a side hustle. Now this is a multimillion dollar business The business does not have an exit plan because the business owner was content to sell $100,000 a year and now selling $10 million!
Q: Would you advise people that come to you to try and spend some time thinking about those goals as they’re building the business along the way?
Chris: 120%. And it’s not necessarily goals around just exit planning. It’s more company and business goals. It’s a great healthy question no matter what business you’re running and no matter how you feel about an exit: what am I going to be when I grow up? Because every business hits that inflexion point where they know, they know the plateau is coming and they know that they’ve got to think through the next click. When they’re thinking through that, that’s when goals need to be stated.
Q: How are businesses travelling right now, given COVID? Obviously there’s the advantage of explosive growth of online commerce, but on the downside, there’s all sorts of financial and liquidity concerns that are coming to the fore. What are you seeing?
Chris: E-commerce is doing extremely well. There are businesses that have seen a slowdown, but for the most part, at least all of our clients, we’ve seen a halo effect of increased sales. We have fast-forwarded 10 years in the amount of retail sales percentage penetration that e-commerce now has in the United States. That is unbelievable. And looking forward, Target and Walmart here in the US have cancelled Black Friday. You know what that means? Most consumers will be shopping online.
Q: Does that bring its own challenges?
Chris: Yes, because this created a massive logistic challenge. The companies that are thriving the most were the ones that were prepared from an inventory perspective, and truth be told, they were only prepared by accident. No one knew that this pandemic was coming.
Now I will say this. We attended a big trade show in February here in New York. And while we were there, we were talking to a lot of business owners and there was a lot of rumbling because COVID was already happening in China. We were watching it happen, with factories were shutting down. Inventory and supply was already a conversation a lot of business owners were having. There was also Chinese New Year, where a lot of factories shut down for several weeks. So while I said some companies were prepared by accident, I think there were actually business owners who were somewhat clairvoyant and were a bit more prepared. But they’re through a lot of the logistics problems now.
Q: Thank you for sharing your insights.
