The 2-Week Holiday Test That Decides What Your Store Is Worth

Steve Hutt
Welcome back to eCommerce Fastlane. I am your host, Steve Hutt. Now today’s conversation really is all about your Shopify business and what it’s actually worth and why I believe that maybe the number that has nothing to do with the value of your business is revenue. It’s, that’s one thing I’ve learned a lot over the years where a lot of people are just fighting this top line, but that’s not really the truth about the exit. valuation. And if you’re somewhere between— I know a lot of people listening today, but if your brand is between maybe $500K and maybe $2 million a year, somewhere in that range, and you, and you’ve built something that has product-market fit, something that’s real, but you’re likely still the person that, everything runs through, you’re wearing— as the founder, you’re wearing a lot of hats. I can guarantee you that this episode is definitely for you. And whether you’re ready to sell your business or not, I still believe that, there’s this dependency of your exit valuation, I think, is setting a ceiling. If we— and that’s why I think this episode is really going to help. I’ve prepped a lot for this because I’m really— I think it’s an under-understood— a lot of people don’t understand what the variables are if in fact in the future you may want to exit. My guest today is Bawar Ahmad, and he’s the co-founder of a company called eComma. That’s ecomma. co. Now, before he started buying Shopify brands, he spent years running paid social. I believe for hundreds of different brands. his firm now buys Shopify stores outright. They, from what I understand, they operate them. I think he said today, as of today in our green room, he mentioned that over 73 deals now have been closed, through his business. And what’s interesting is that he buys them, operates them, and then sells them later on. And he’s interesting because he’s actually been on both sides of the table, more times than, well, than anybody that I’ve ever spoken to. And I’ve been podcasting for 8 years now. So he’s a very interesting fellow that’s that, both sides running an e-commerce brand, improving it, and then exiting from it. So I’m hoping by today’s— by the end of today’s episode that, you’ll understand like how a buyer decides what your store is actually worth. So it’s good to have that context first. and I think there’s also another side of it too, like where maybe a founder of a business, that’s who’s listening today, like where do you lose value in your business without even realizing it? So I’m hoping we unpack that. So, Bawar, welcome to eCommerce Fastlane. Thank you.

Bawar Ahmad
Thanks, Steve. Happy to be on. And indeed, so I love talking about the buying and selling because from both sides they’re quite exciting. As a buyer, you’re shopping,.

Steve Hutt
I know, it’s wild. It’s a wild— it’s a wild side of it. And you have both contexts on either side, which I think will make for a pretty impactful show. So let’s just backtrack a little tiny bit just to set some context. Like, you— from what I understand, you bought your first business, and I believe it was a declining shoe brand. From what I understand, this was, I don’t know, in 2020 or something. Can you talk about that acquisition, and maybe what did you actually get handed to you maybe on day one once you owned this business?

Bawar Ahmad
Yeah, yeah, I love this story. So, okay, when we first bought the business, we thought it was like Amazon, right? You just click, you buy, you spend, you get, all be fine. Yeah, it wasn’t like that. So when we bought our first business, I remember very well, it was from Eastern Europe. person, which we have only met via Zoom calls, like Google Meet and stuff. So we ended up, signing a contract, we wired the money, and it was the day that, we were supposed to get the business handover, which would’ve been like the account logins and, all the assets involved around the business.

Steve Hutt
Mm-hmm.

Bawar Ahmad
And then we got most things, but except one thing, which might’ve been the most important one, which was like all the advertising accounts. Now apparently they were using one account like across multiple businesses. So they said, yeah, we’re not giving it. But we already paid, we went all the way to do it, so we still proceeded with the deal. It’s only one thing, and I think if most e-com founders or even e-com buyers, the main value of an e-com brand is its marketing assets. So if you don’t have it, what do you do? You’re starting from scratch.

Steve Hutt
Yeah.

Bawar Ahmad
So we started again from scratch. We used to say this is a failure into success. Because it was like quite a hassle, but give it 3, 4 months, we turned it around and we’ll still be able to sell it for almost like triple the amount that we bought it for. So we were happy. And that led to the idea of eComma that we would like acquire, add value, grow, and then exit later on, which, well, we’ve been doing with a lot of joy for the last 5, 6 years and indeed 72 acquisitions.

Steve Hutt
72.

Bawar Ahmad
Wow. Yeah.

Steve Hutt
That’s amazing. It’s interesting, you use the term a lot, and you think you call yourself an aggregator. and, and I think maybe in the past there’s been a little bit of like negative connotation. I think about maybe Thrasio and what happened there with, this— I, I, I think they would be more of the pioneers around this Amazon thing. I think they, I don’t know when they were launched, but they were worth billions. I think they took a lot of money from some major asset management companies. I think they hit almost a $10 billion valuation, but eventually at some point I think they, they went bankrupt, a few years back, and I think they don’t know, I don’t know, $500 million in debt. And, and I think they got some fresh funding and started all over again, but it’s, it’s weird. So can you talk a bit about that, maybe your methodology and the difference? Because you’re still calling yourself an aggregator, but I think your methodology is a little bit different than maybe, some of the Thrasio or other partners that were doing this thing years ago.

Bawar Ahmad
Yeah, yeah, I love the story because we learned a lot from what happened there.

Steve Hutt
Yeah.

Bawar Ahmad
And what was happening around, we deliberately stayed away from it to some degree. So if you look at them, what they, what, like, how their model was, the model was like to combine everything into one, having one team, one everything, have one supplier, one fulfillment, consolidate and, actually risk more the business. And because they had so much pressure from funding, like they just wasted billions and hundreds of millions, they had to deploy. And when you have to deploy, when there’s so much money in the market, what happens? The valuations go up. Like, you, you’re buying these businesses for way too expensive.

Steve Hutt
Right.

Bawar Ahmad
I think they were buying companies for like 6 to 8 multiple, and they moved away from the fundamentals. Like, get a good business at a good valuation, at a fair valuation, have patience, and then sell later on. But when, COVID passed and the whole e-com boom past with it and it came to like a normalized growth line, that’s when they went under. Like you can see who’s swimming naked the moment that, this market used to be behind you is now in front of you and you have to catch it. They got hit by the wrong train. But from our side, we keep the businesses still very separately. We don’t combine, we have some synergies in terms of, when we know we can find a better supplier or better cost-efficient way of running the company. But overall, these are standalone brands, which we believe they should be won as standalone brands. And we buy them with clear fundamentals. We’re not leveraged.

Steve Hutt
Yeah.

Bawar Ahmad
So we don’t have like high investment pressure from places. So we can make decisions with some clear rationale, by making decision. And I think combining those 2, having them as standalone, and just sticking to the fundamentals, we have yet to lose money on any of the deals we’ve ever done. So talking 72, not one was a miss. I— if there was wood, I would knock on it. But, so I think stick to the fundamentals and not rushing and not just chasing, the market. And the other day, I think it’s very key as a buyer side of things. Yeah.

Steve Hutt
One thing I remember too about this whole Thrasio thing was it— and I think that in, in retrospect, as an outsider looking in, I found Like, I think originally there was 3 or 4 founders in the business, and they were just going absolutely ballistic, buying. I think they, they went up to almost 1,600 employees. They had 10 offices around the world. I think in 2 and a half years they acquired 200 brands with 1,600 employees. and I think they were just, like you said, they were going nuts and they were buying them like, like 6 and 7x. and I think, I think that at the— I mean, in the early days, I think it was like, 2 times, revenue or, or, discretionary earnings or whatever. but then I think, then it’s, I guess buying these brands started getting a little bit scarce, and then they started buying them for like 6 and 7x, lower quality brands. And then I think that’s what caused a lot of their issues. And then I think, and then 2020 hit, and then, so it just, it was overall was an operational craziness. and you’re right, they’re sharing too many resources, instead of like, talking about individual business models, right? And then trying to run them accordingly. So Can you talk a little bit about your— because you’re different. I think, I don’t know how many employees you have, but you’re probably in the 30 to 40 range. But you’ve netted out, you said what, 72 deals now? Can you talk a little bit about maybe that difference about them, old-school aggregators being so aggressive in wanting to acquire and thinking that they have this knowledge and process versus like your mindset about, no, no, no, we’re a leaner, and you use the word fundamentals a lot. So I just want to unpack that a bit.

Bawar Ahmad
Yeah, so we are a team of 45 as of now. So one thing we— I’m sure if they will listen to this, they will have some jealousy, which is that at that time you didn’t really have AI backing you.

Steve Hutt
Right.

Bawar Ahmad
Probably if we were 5 years ago, we would have needed an operation of like 150 to 200 people of doing the things we’re doing today. But one thing we take a lot of pride in, we have when AI came, like even before the ChatGPT comment, we were already a lot on automating and then using some machine learning to still get better quicker than relying on humans. So right now, for example, if something works on one brand, it takes maybe a couple of days to expand it across all the brands. While at the time it might have taken months or years, and by the time you implement it on the last business, might not even work anymore. So you’re always chasing your tail.

Steve Hutt
Mm-hmm.

Bawar Ahmad
So I think you have to have, and this may be some fundamental business sense, is that just stay lean and mean as you can. You’re still growing, you’re still not a huge organization, so you still have to watch the cost, watch the team, be very diligent about what you focus on, and just being very back to the fundamentals, which for us is, at the end of the day, it’s about revenue and cost. It’s just money in, money out.

Steve Hutt
Yeah.

Bawar Ahmad
So how we can minimize the money going out, so we’re very, we’re not overspending, we’re not going very crazy on when we buy the business, let’s go, all in on a new marketing channel, go very aggressive. We are very diligent and we give, we have very short feedback loops, I think is what I’m getting at. And we are very focused on just money in, like revenue, which we start with revenue first, and usually cost later. And we have a lot of, we built later on a lot of our own tools and product stack that we can actually feel way more confident about adding value. I’ll give you one example. We do a lot with voice AI. Like we still think to this day it’s quite in-depth, just implementing simple voice agents on a brand. It’s like one of the fundamentals. You have a new channel of speaking to your customers. it just, it just will lead to like higher engagement with your company. High engagement means high revenue. So it’s very plain for us to do it. We don’t try to overdo it, overcomplex it. We just stick to it. And I think just keeping doing that for very long term, like, we’ve been doing it for 6 years now, keep doing it for 10 more years, we should be good to go.

Steve Hutt
Yeah, sounds good. So what are some of the variables that you look at if, if an operator is thinking about potentially exiting their business. I mean, I think a lot of people have read a lot of different books and stuff about that, about, like just exiting in general and how to have, a clean P&L, maybe not being so operator-dependent. But you obviously have your own either checklist or things that have clearly worked for you when you look at the business. When someone comes to you and says, hey, I’m doing $5 million a year, I’m losing some of the passion in the business, but it continues to be— there’s some growth or growth potential that’s currently happening in that industry. What do you look at when you start engaging with somebody? Are there certain very specific things that you want to see and that helps you and the team make decisions, if you’re going to open the door to negotiations for an acquisition?

Bawar Ahmad
Yeah, I love to flip a question around. Okay. To first, step into the feet of a seller. So one thing I love to— what we have seen maybe 80% of the time, like 80 to 85% of the time, is that this is what happens when a seller wants to sell. So first they are unaware of the idea of selling their company. They’ve been running it, let’s say, 3 to 5 years. In our experience, entrepreneurs tend to lose out on interest or on motivation 3 to 5 years in. That’s like usually when, new things come up, they get shiny thing syndrome, life changes, whatever it is.

Steve Hutt
Yeah.

Bawar Ahmad
So that’s when they, they, they, there’s a right moment for someone, to even have the idea of selling. So maybe they listen to a podcast like this or they read it somewhere. So like, hey, I’m curious if I can sell my company. They go to Google or to Claude and like, hey, can I sell my company? If so, how much? And they find these online calculators, which are like these marketplaces where you can list your business on. They’re always higher than, what’s eventually being purchased for because it’s part of the model, right? So they want to show you the amount so you can list with them, pay the subscription, and, it’s good for them to just get the deal in.

Steve Hutt
Right.

Bawar Ahmad
So you see a number, you get set to it, you almost already mentally sold it even before doing anything. You just see the number like, wow, I can have this amount in my bank. I would like that. So they go to the platform, they list it, they promise them the moon and they go to market and they start with a lot of interest because again, these marketplaces, they’ve sold you the moon. So they push you on top of the email list, they push you on top of the page, they make sure all the VIP buyers know and you get suddenly flooded with a lot of interest. They come all on your plate and then slowly by slowly they die out.

Steve Hutt
Hmm.

Bawar Ahmad
It still happens that, most people aren’t interested or a lot of people are just looking for whatever reason, they’re not that interested. Maybe your business isn’t that special as you thought it was. So give it, a month or 2. And again, the seller has mentally already sold it. They move away from, this is my company, our company, to I am me and that’s the company. So they make the separation mentally. And what happens when you make separation mentally and you step away from the business, you focus less on it, you’re less motivated, and the business typically takes a decline. It usually takes a step back, it doesn’t grow as much anymore, the forecast that we discussed before, it doesn’t really end up happening. So they go to market, and slowly but surely desperation comes in, and they end up selling for a bottom price or against very bad terms, or for whatever reason. So we are very aware of this. First of all, we went through this ourselves very early on. Second of all, we’ve spoken to too much, too many of them to have seen this. So what we like is totally the opposite of this. These people as well, they’re not very structured. So they’re very emotionally driven, which is the majority of the market, to be honest. They don’t have clean financials. So we don’t really prefer those because we are experienced buyers ourselves. We like the opposite way, which means we meet someone, who really understands the process, who knows what a fair valuation is, who is very prepared, very structured, they have clean financials. Like the moment, like we always say, if it takes you days to get a response before even buying the business, you already know the moment you send them the payment how fast they’ll respond post-acquisition.

Steve Hutt
Right.

Bawar Ahmad
So, we look a lot around the person itself, like is it a person we enjoy doing business with? Are they fast responding? Because the truth is, whenever there’s a buyer, you’re taking a risk and a lot of things are unknown. Even us doing 72 of them, still some things are unknown. You cannot always know everything before you buy. So we still rely for at least a little bit on the owner. So it would be nice to rely on someone you trust, right?

Steve Hutt
Mm-hmm.

Bawar Ahmad
So first point is like almost a no-brainer. We look at the person. So that’s one. If the person doesn’t match, we don’t even proceed. Like, we need some personal alignment. Step 2 is around the business. So people think that, as you said about revenue, a lot of people would make the mistake, they look at what has gone into the business in terms of cost, energy, late nights, but the buyer doesn’t care.

Steve Hutt
Mm-hmm.

Bawar Ahmad
Like, the nice quote goes, the buyer, yes, they pay for the past, but they buy the future.

Steve Hutt
Right.

Bawar Ahmad
They almost only care where is the business going from today, right? So we are the same thing. We take the business and we try mentally to forecast what will happen realistically in the next 12 months to 36 months. So we map it out, we take the past as like a reference to some degree, but, it could be a seasonal product, it could be a product that has sold very well in the last 5 years, but We don’t feel very confident in the future for whatever reason. So we look a lot around the fundamentals. And then third, it’s the story. So same thing as anything we sell in this world. It is about if we believe the story of the brand, yes or no. Do we really believe and think this is something that will still matter in a few years, or is it just a random product, a random brand that actually doesn’t really matter anymore and there’s no real story behind it? that, even future customers will stick to it. so once we have all those 3 in place, we’re like, this is it, we’re going. And we move fast, we don’t let go. We’ve lost on too many great deals. That’s the biggest money we’ve ever lost, is missing out on great deals. So we hold it with 2 of our hands and we go quick.

Steve Hutt
Yeah, one thing I’ve learned too along the way, and I’ve seen some different train wrecks that happened or exits that have not happened, and I think one of them I find is, is that the founder, is still the face of the business. And I think transferring that, off, especially if your mindset is that at some point in the future I’m going to be selling the business, a founder-led business in the early days makes complete sense because that you’re the passion behind it. But I think at some point you have to differentiate yourself, or at least the face of the business, and transfer for that, maybe more to the brand. What’s your comment on that?

Bawar Ahmad
Yeah, I think it’s very spot on. So at the end of the day, a business valuation, or sometimes even if it is even sellable to some degree, is all about the opportunity and the risk. So part of the risk is, for example, founder risk, right? So every buyer, every Some, every buyer they know that the moment the owner changes, there’s always a step back. The question is how much? Like, if the owner has done such a great job by building a great team, by almost doing nothing really on the business that’s really independent of the owner, and the best test for this is let the owner go on holiday for 2 weeks.

Steve Hutt
Yeah.

Bawar Ahmad
And see how many phone calls they get.

Steve Hutt
Yep.

Bawar Ahmad
If it’s more than 3, the business is still dependent on you. So we always ask this question as well, and whatever they say, we just double it. So if they tell us 3, we think it’s 6. We— so it’s about reducing the risk. So it could be your own. The owner is usually the biggest amount of risk involved in any of these type of deals, but it could be a supplier, it could be one of your employees. If let’s say you have one person somewhere overseas who does all your paid media. Even if that person leaves in a couple of months, it’s gonna be quite risky. So as a seller, you should think about this, like how you can remove risk from the business and how you can increase opportunity, right?

Steve Hutt
Yeah.

Bawar Ahmad
So risk, basic stuff, as you mentioned, move away from founder-led marketing in the beginning to get that product-market fit in and just get the ball, get a snowball effect in. For sure. But sooner or later, you have to go away from startup mindset to, let’s say, let’s say more scale-up mindset, where it’s more your team and systems in place that does the selling or does the next step in growth. If you cannot reach that, your valuation will take a hit.

Steve Hutt
Yeah.

Bawar Ahmad
There will still be buyers who probably will take a risk. We are one of those, to be honest. But, it’s not much work to change that. But the extra value you get is huge, sometimes triple or quadruple of the amounts you could get the other way. For a lot of these, what we found, a lot of these sellers, they’re usually very good in one or two things. They’re either very sales-driven, like very sales and marketing, sales and marketing very strong, or they’re very good in operations. They know the product, they know the backend very well. So it also starts by knowing your strengths and weaknesses and trying to remove those with the company.

Steve Hutt
Yeah, it’s interesting about the whole, having the business run without you in the room. I think I talk a lot about SOPs, these standard operating procedures, and really thinking about the business as a whole. and really, I, I would think— and, and I think you hit the nail on the head about like hiring or promoting people from within the business, that, that can do what you do. Because I think, a buyer, I, I believe, is really— is, is, it’s, it’s paying for a team, not necessarily a plan for a team, right? There has to be people doing it, be the CEO of the business but not actually the day-to-day operations of it. There are team members that are executing, the things that the original founder did by doing everything in the early days. But now we have an SOP and a proper leadership structure in the business, and I’ve seen that before. And then I think I’ve seen that progress happening with the Shopify businesses that I’ve been involved with even inside Shopify, I could see their growth happening and how they made— they didn’t take an exit, most of them, but a lot of them, I could see them wanting to expand out because I think a lot of founders, feel a little bit of burnout a bit because I think you mentioned the 3 to 5 years and maybe some of the passion is gone. Part of it is because they’ve not chosen to create an SOP, to think about where can I be in 24 months and having the proper team in place. for the— and then they execute at a better level because they have the mind, the mindshare of being able to focus on the area that they’re involved with for the business, right?

Bawar Ahmad
Yeah. And what I truly believe when you mention this, like, if you’re— you either build to sell or build to keep. Yeah, build to keep, you might get away with no SOPs for the rest of your life. You can manage some lifestyle business. But if you’re building to sell, which if you probably ask founders 99%, they like to sell at one point. You just have to think about this, as you mentioned very clearly, very SOP-driven, very systems in place, very win yourself back in time. You always got to think like, how do I win myself back? How again do I de-risk the business? How I make sure that if I go on holiday, I got less phone calls over time, even to a point that you’re the bottleneck. Like, what thing buys love, what we love to death? is when we find out that actually the founder is a bottleneck.

Steve Hutt
Yeah.

Bawar Ahmad
So the moment we remove the founder, the business even does better. It’s like Christmas morning for us when we see one of those passing by. So the moment you can start thinking about how to exit in the future and you’re building to exit, you standardly start thinking and working differently. company, right? You might not care about, every month’s numbers. You care way more about, in a few years where you’ll be. And that’s when the change comes, and that’s when you become way more sellable, than if you wouldn’t do it.

Steve Hutt
I see. So it sounds like it’s interesting, like, during the whole potential acquisition process, it seems like— I mean, your, your main comment here is about that you should continue to operate like you’re not selling. Like, things like Having new creative or, getting new inventory, like full spend, like probably, I think it sounds like it’s a really expensive mistake maybe on an exit to assume that maybe assuming the sale’s going to happen and maybe letting some of the performance slide during the due diligence phases. What’s, what’s your thought around that?

Bawar Ahmad
Oh yeah. The amount of, if you’re gonna nickel Steve for every time you heard, oh yeah, we turned off the ads because, we’re in the selling process. or we start buying new inventory so the new owner can take it over, we won’t need to buy and sell companies anymore because it happens a lot. And the idea makes sense, like, hey, I’m gonna sell, I am done with the business, just sell it and I just step away. But what you mentioned, it’s so expensive to make the mistake. It’s so expensive to assume that you have sold without actually selling.

Steve Hutt
Right.

Bawar Ahmad
We have this saying, you have to be always open for business. It’s like you have a restaurant, yes, it might be selling, but every day you got to open the doors. Every day the customers come in, you have to leave with a smile. And as long as the business is not sold, as long as, the ownership hasn’t on paper but also financially transferred to a new owner, you have to keep running business as if it wasn’t in the selling process. That’s a very big mistake people make. And that’s why we say the people who understand this, they understand the structure, they’re also the ones that, the success rate post-acquisition is higher with the people who understand this. So as a buyer, you sniff out very quickly which type of seller you have. Is it someone who’s like very emotional and they’re already like clocked out?

Steve Hutt
Right.

Bawar Ahmad
Or is it someone who’s like, hey, I am here, I don’t really need to sell, I would like to, it would be nice, but we believe in this and we’re always open for business. You’re always leaning towards the second. Like, at the end of the day, you have 2 types of buyers. You either have financial or strategic. Strategic is very rare. Like, probably hands down is that 98% of acquisitions is pure financial. Only 1 or 2% of acquisitions in this space happens strategic. So strategic, they might not care. They might even prefer it because for some reason they can, they can very easily turn it around. But don’t rely on it. It’s very rare to happen. The financial ones, they just purely look at opportunity and risk. And when they see stuff like this, they of course want the less risky business. And the truth is the amount of buyers there are for the amount of sellers, it’s not very equal. There are way more sellers than buyers. So buyers have the hand to pick. It’s not like the COVID times, like Thrasio, we’re doing very expensive acquisitions because there was less demand than— there was more demand than supply. Right.

Steve Hutt
supply.

Bawar Ahmad
It’s the opposite now. And in these scenarios, you have to stand out, as a potential business to be bought. It’s make sure it’s as low risk as possible, as high opportunity as possible, and you have a very nice life.

Steve Hutt
Now you say you move fast. That was one of your comments. What are some of the smallest brands that you actually make an offer on? Like, and then are there any that just get like instantly rejected? I’m just trying to understand that the revenue or profit band that makes sense for you?

Bawar Ahmad
Yeah, so we have found out is that the ideal size for us, it’s a minimum of $100K profit per year, up to $2.5 million profit a year. And $100K is not like, we’ll be very eager. Like, $100K is more like, we’ll take a peek, you might likely get rejected, but at least we’ll take a peek around $100K profit a year. So we take over those. So it, the, how do you say, the supply of businesses from $0 to $100K or $100K+, it’s a big difference. And we love the $100K+ because the amount of work it takes to take a company, let’s say, from half a million to a million, is as much work of taking a company from $50K to $100K. So if The moment you do $100K, it’s like when selling becomes very high probability, given you don’t do all the fundamentals. And that’s why we love to operate. They’re a bit more established, they have a bit more history, they have a bit more of team processes in place to keep it stable. One thing we mostly also care about is stability. And I think we talked about this before the podcast is that we don’t like seasonality. We don’t like volatile businesses. We don’t like where one month the ad spend is $1 million and next month it’s, $5,000. It’s like we like some stability because that, makes a certainty more that this is reproducible in the future. So as long as we— but the few fundamentals we like are just stability, it’s, cash flow positive, it’s that customers are happy. A lot of people forget about it, is that we find a business, amazing finances, and we Google their name plus reviews, and we see like 1.2 stars from like 1,000 reviews. It’s very tough. Like, one day you’ll run out of new customers. So we like to stick to those fundamentals, and once we got it, we move quick.

Steve Hutt
Yeah.

Bawar Ahmad
I think one of the USPs that we have as Acquire is that Once we get the details in, we’ll know within a day or 2 if we’ll make an offer or not. We’ll make the offer usually within 48 hours. Once you accept, we aim to have the deal closed and the money in bank within 10 days.

Steve Hutt
Hmm.

Bawar Ahmad
We’ve done, we’ve done so many of these acquisitions that we know what to look for. We know what the skeletons are, so we don’t need much time, to do our due diligence. We have a lot of software and systems to help with this. And within a couple of days after we accept the offer, if we want to proceed or not, we send the contract over. Should be as simple, plain and simple. We do a lot of things on trust. We sign the contract and then we wire the funds and we don’t do earnouts and a lot of things to keep things, which as a seller, honestly, don’t rely on earnouts, right?

Steve Hutt
Yeah.

Bawar Ahmad
So if you decide to sell your company, just focus on the cash upfront. Like, consider that as, what you’re actually getting for the exit.

Steve Hutt
Yeah.

Bawar Ahmad
Everything else, it’s nice, it’s a cherry on an ice cream, but don’t think it’s, it’s really gonna happen because you cannot— once there’s a new owner, they make the plan, they make the decisions, they decide what’s gonna happen. And they might decide, what, we don’t wanna make profit for the next 2 years, we wanna invest in growth. And if your earnout is based on profit, you’re ruled.

Steve Hutt
So, yeah.

Bawar Ahmad
try to focus on the cash upfront and not really on earnout. And that’s why, in our offers we typically have no— like, very rare cases we do earnout, but it never happens. I just cash upfront.

Steve Hutt
Yeah, I always wondered about that, about the earnout side of it, like, especially on the e-com side, because it’s just like, like, is what— as an acquirer, that’s the worst thing you want. I know you do your own due diligence and make your own decisions, and you have a process that’s clearly working, but I find it very interesting that it would be scary to acquire something and all of a sudden things, even after your due diligence and money being wired, sometimes in larger deals you’d be really scared a little bit about, well, is this thing going to run the second we get admin logins and access to like the whole process and systems and team? what happens when the founder is no longer involved and they’ve got their money? it sounds like a really scary thing, but it sounds like you’ve also have school of hard knocks a bit where you’ve worked through this process and know some of the pitfalls that can happen and what’s— what great or success looks like.

Bawar Ahmad
Yeah, yeah. I think, I think from one side we feel more confident that we’ll do a better job than the founder.

Steve Hutt
Okay.

Bawar Ahmad
Again, when you do like 70+, you see, you see patterns on how to run a business and, what people make mistakes. So we feel generally over the overall more confident than the buyer. And often it all comes down that if something happens, and that’s why we really put focus on a person, on a founder, you should be able to trust them or rely on them that they’re good people and they still try to help out.

Steve Hutt
Yeah.

Bawar Ahmad
So that’s why we don’t like to do people we don’t trust or we can’t really build this relationship with that we like doing business with them. When you don’t like doing business with someone and you have like a bad gut feeling, Yeah, usually it’s right and it’s better to not do it, but we really, we really put a lot of focus on the founder.

Steve Hutt
It’s interesting though, Shopify had a really interesting, mantra and they, they called it like the no asshole policy. like you have to treat everybody kindly, and respectfully and, not, not being an asshole, right? So I can see that.

Bawar Ahmad
I’ll steal that one. I’ll put it in the book.

Steve Hutt
The no asshole policy. Yeah. what’s interesting, so you buy a business and you, you feel confident clearly that, it’s, it’s, it’s a good deal for everybody. Everybody wins. You continue to take it on and grow the business. So when you sell one of these brands, like, who’s buying it? And like, like, like, what are they paying for, that you didn’t pay for? Because clearly someone else is seeing the upside after whatever you do with it and improve it. I’m just trying, I’m just trying to figure out, who the next buyer is and how you find them. and, yeah, and then how you get this increased valuation.

Bawar Ahmad
Yeah, if you would— if let’s say we’ll talk about the market, like if you would make like a painting of how the market would look like, on the left side you have the sellers and the right side you have the, the buyers. And for people listening, close your eyes and just, give it a shot. If you’re driving, keep your eyes open. on the left-hand side you have the sellers On the right-hand side, you have the buyers. On the left-hand, you have usually millennials, Gen Z, millennials up to around 40, 45-year-old people selling the brands.

Steve Hutt
Okay.

Bawar Ahmad
Right. They’re usually solopreneurs. They’re usually people who don’t have teams. They’re very on themselves. They’re always at home. They don’t really socialize that much. They’re very dialed in, monk mode or whatever they’re in. And on the right-hand side, you have the buyers. And the buyers, they’re usually 40, 50, 60+, financial background, strict, very rational people who are very busy. Either they’re working sometimes full-time or they have their own business going on, maybe have multiple investments, maybe they’re running a PE firm or something in that line. So where is the mismatch? The buyer doesn’t want to buy another job. They want a business that’s running without them and they want to just make a return. They have maybe some real estate portfolio, some investments, they just want to go into something else, something fun, something maybe that, the family can co-run.

Steve Hutt
Right.

Bawar Ahmad
So on the left-hand side, you have all these solopreneurs that, have no systems, have no founders, and they don’t want to stay on. So you have this huge misalignment of the market. And one thing we found is that we can come in here, again, we feel more confident than the seller to run the business. So all these people on the left, we can quite easily take over the business and give a fair valuation because we know the risk and we have minimized this on our end, which the buyers couldn’t, who were on the right. So we took over the business. And then on the right-hand side of people, you have all these people who doesn’t want to buy a job. So what we have, that look, we’ve bought the business, we have reduced a lot of the risk, we’ve consolidated, we’ve had Plan B suppliers, we’ve expanded new channels, we have a whole team involved. We will sell the business to you. We will even offer to run, to keep running the business for you. Like, from today’s day, we’re still running like 47 out of the 72 businesses that we will run it for you on behalf of you. So you still have, you can do everything you want and you can just focus on the strategic vision that you’ve had that you just want to focus on and still, have a, quite passive role into the company.

Steve Hutt
Right.

Bawar Ahmad
that exchange, de-risking, increasing the opportunity, that’s like a huge valuation for the buyer side. and that’s how we’ve been, successful, let’s say, in the market.

Steve Hutt
Yeah, it’s amazing. Well, how do sellers actually— this is a contrarian question, but like, how do sellers actually get underpaid? and, and should a seller— how should they push back, when a buyer like yourself, for example, makes an offer? I guess I’d like— I’d always like to think about the contrarian side, because people are like, hey, what, I may or may not sell, and if I do get a decent offer, is that the best offer? And should they push back? And why? I know that we have— there’s a laundry list of things to look for, in the business. But as the seller, is, is there anything that you would give them as advice to make sure that they’re getting the maximum valuation?

Bawar Ahmad
Yeah, 100%. So from the moment you get the offer until you sign the last contract, it’s a never-ending negotiation. That’s the truth. So what happens is that the buyer is very good in identifying risks. Like if you put someone on the street and they would look around, they will only look for the negatives. It’s just human nature. It’s something wired into, from the caveman time probably. And it still happens with the buyers. So the moment they do diligence, the moment they speak to you, they’re almost looking for risks, for negatives. So they will push on that a lot. And your role as a seller is to be upfront, to be honest, but also to keep it realistic. Like if someone’s talking about, well, you only have one supplier, what if they decide to undercut you and do their own offering? You can be quite upfront, like how often does this happen? Chinese suppliers don’t really have interest to go to consumers and deal with everything behind. They just want to sell to you as a brand owner and you’ll be fine. So as a seller, your role is going to be to defend your position, to defend your company and keep it realistic. So that’s one thing that always keep in mind. And don’t just give in to try to be the nice guy and getting deal done. No, just be upfront. This is not a risk. This is maybe a smaller risk. than you think it is. This opportunity actually, like, if it’s only one channel, might even be opportunity to expand to multiple channels,. So that’s one side, that’s one side of the valuation part. Second part is they will try, buyers will, we don’t do it because we don’t like doing business that way, but they will try to do as much earnout and seller finance as possible. And then they’ll try to get out of it later on. It’s just,. It’s unfortunately, but it happens a lot. So again, push for as much upfront as possible.

Steve Hutt
Yeah.

Bawar Ahmad
Take that as a win and the rest is nice if it comes, but don’t really rely on it. But, try to be firm on how you do it. People forget about the terms is also very important. Like if you heard the quote, you determine the price, I determine the terms, I will win. Like if you would tell me, look, I wanna sell my brand for $1 million, I’m like, hey, let’s make it $2 million, doesn’t matter, but I’ll pay you $1 a day.

Steve Hutt
Yeah.

Bawar Ahmad
So the terms might even be more powerful than the actual purchase price, which a lot of sellers, they focus on the purchase price, but having warranty clauses, having clawbacks, having, for example, risks involved, that if this happens, you get penalty A, whatever those things happen, focus a lot on the terms. Keep it industry standard, keep it not complex, especially when performance comes on EBITDA. What’s EBITDA? If they charge a management fee to themselves, is that considered part of the profit that you’re getting earnout on?

Steve Hutt
Right.

Bawar Ahmad
So it’s also focusing on long-term. So I highly advise getting legal help, getting an expert involved early on because it will save you a lot down the line. Do it upfront. Doing LOIs usually when the moment comes. I’ll give you one more example. Buyers, they don’t like to buy inventory. We don’t like it as well. Because if you have a brand and you have, let’s say, half a million dollars worth of inventory, as a buyer, if you want to buy that outright, part of the acquisition, you need to do due diligence on it. How do you do physical due diligence on the other side of the country or other side of the world? You have to go there, see it, check it, get an expert involved. What if it runs out? So one thing happens a lot in the market, it’s they sell it on consignment. So they sell the inventory, so they buy the business, and whatever inventory you have, they buy it back on consignment as they use it to their customers.

Steve Hutt
Right.

Bawar Ahmad
So a lot of things can go wrong because what’s the consignment price? Is it the raw cost? Is it cost landed? Is it how about fulfillment cost? the monthly warehouse costing, for example. So a lot of variables that comes into this consignment agreement, and this is also where you have to be tight, very strict on what you’re willing to accept, what you’re willing not to accept. My advice is offer them discount, let them buy everything outright.

Steve Hutt
Yeah.

Bawar Ahmad
It’s usually the best. Just get the money upfront, you don’t have to rely on it, you don’t have to chase it, gives you peace of mind, you can focus on something else. It’s about opportunity cost perhaps, but get them a discount. discount, let them buy it outright, and you save yourself a lot of headache later on.

Steve Hutt
So what do you think, this is like my, my last question I’m just thinking about before we wrap up today, but like, when you’re buying a business, and you’re paying a premium today, do you believe that things have changed over the last few years? Because you’re obviously looking at things inside the business What do you believe maybe has changed over the last few years in the business that would allow you to pay a premium for that business that maybe was not a variable a few years ago?

Bawar Ahmad
That’s a good question. let me think about that one.

Steve Hutt
My one thought is, this is, this is what came into my mind, was more about AI visibility, because I feel that like, even though it’s such an early stage right now in a, in a business, and I know that Harley Finkelstein from Shopify has made a comments saying that, hey, AI-assisted conversions is significantly higher than any other channel. It’s a small amount of revenue right now, but the long term is, is that, wow, if you’re really forward-thinking and setting up your Shopify catalog correctly and having this AI visibility in, in Claude and ChatGPT and whatnot, that is an interesting moat that you’re building today that maybe others are not thinking about. That was the first thing that may— reason why I’ve asked that question was the AI visibility component. Might be something why you might want to spend more, but I’m just curious on your overall methodology.

Bawar Ahmad
Yes. So I think it’s a fair point, like the optimization around these AI platforms. I’ll give you one better that we have realized, let’s say maybe a couple months ago, that we are in a catch-up race. So one thing that we predict for the future is that the cost of the, the, the, it’s going to be easier to build a brand, a company. It’s easier to, if someone’s successful doing A, for someone to copy whatever they’re doing at A. So we expect the place to be more competitive overall. You have more smaller players that would just, flood the market to some degree where the barrier to entry used to be lower, it used to be higher, it’s now coming down.

Steve Hutt
Right.

Bawar Ahmad
So one thing we have predicted is that a lot of this barrier to entry will be reliant on agents, on AI agents. So a company could be like, look, I’m going to launch product A. So they have a marketing agent doing the marketing. This is very cheap to do creatives. So what we have now figured out is that if before AI you need to launch 10 videos a month, 10 new creatives in paid media a month to keep the platform stable and keep still performing, because every everybody can do 10 now. It’s you have to do like 100 a month.

Steve Hutt
Yeah.

Bawar Ahmad
But now to do 100, it’s the same effort as you would have doing 10 in the past. So in terms of effort, you still can do it the same because it’s still like a competitive advantage thing. But the thing is, that curve will just exponentially go up. So the 100 will become 1,000, will become 10,000, just hypothetically speaking. So what we have noticed is that the businesses need right now these agents set up that grow with exponential growth, that are in line with this exponential growth over time. That if still to this day you’re still doing a lot of things manually, you’re still relying on one person to get creatives out, you’re still doing a lot of manual work in there, you can never really exponentially grow this. Maybe linearly, but exponentially it can be very tough. So one thing we have figured out last few months ago is like, hey, actually these companies, these marketing companies, We should focus way more on which agents they have in place, how they’re performing, and how can they exponentially grow with it. Because again, in a year from now, the amount of effort it takes now to make 10 creatives or 10 ads or 10 product launches or 10 landing pages or 10 domains, whatever it is, in a year it’s gonna be 100. you can do 10x the output, you do it now. But if you’re not built right now to keep up with that growth, you’ll be lagging behind. So we’ve put so much effort, focus now on how are all these agents set up in the companies when we acquire one. Do they have it? They don’t have it? Okay, we have to set it up. How does it mean? What does it cost? What’s the whole setup? So we’re playing now the catch-up game, let’s say, with this whole agent setup. And I think that’s something that we’ll see a lot more in the future from, is these agents that they have these loops. of self-improving that, that are all linked to the frontier model. So they’re all in front of the, or at least next to the, to the best competitor. So you don’t fall behind. So to some degree, we’re just following AI models. I think that’s the main thing of it.

Steve Hutt
That’s amazing.

Bawar Ahmad
So relying on that. Yeah.

Steve Hutt
So that’s the reason why evaluation would be more premium is because they’ve thought about and are forward thinking about having agents take care of certain roles and responsibilities and executing. It’s funny because Gary Vaynerchuk, from VaynerMedia, he’s always been pounding the pavement about this whole attention economy. Just the fact that, social media is still free. but it’s just a matter of like, getting the word out there. You don’t have to have paid media. You could, at scale through AI agents, able to produce content. Video now is incredible. voice now is incredible. Now the quality through ElevenLabs and different people that have incredible technologies that are out there now. and I think that’s a really interesting comment you made about that. I think people need to be forward-thinking and not scared of it. they need to start testing and using it because that has a long-term, positive effect on the valuation in the future if an exit is in your cards.

Bawar Ahmad
Yeah, yeah. And I think the truth also is, is that these AI models, they get very fast still very, very fast better. So when I go to sleep sometimes, there’s like a new breakthrough with AI modeling.

Steve Hutt
I know.

Bawar Ahmad
There’s another breakthrough happening and I’ve missed the last 8 hours. So I think as a company, you just gotta somehow attach your businesses to grow with these models. And if you’re not doing it, you’ll be behind 100%.

Steve Hutt
Yeah, 100%.

Bawar Ahmad
If you’re not the customer support, I don’t know, being linked to the best frontier model, you’re having the voice agents or you have your creative output or you have your forecasting for inventory linked to the frontier model, in 6 months they’ll be twice as good. So you got to be somehow attaching your link. We say the companies should be queryable. AI agents and AI, whatever it is, should be able to read the whole company with a database that’s just queryable by AI. And then the AI should then be able to at least start with suggestions, but overall optimize itself as it grows.

Steve Hutt
Yeah.

Bawar Ahmad
If you don’t do it, you’ll be behind.

Steve Hutt
What a time to be alive right now, to be honest with you, in commerce. Been doing this a long time. So have you. And I just want to thank you, number one, for coming on the show today. I just really appreciate this is a longer episode than I typically do, but I feel that it’s incredibly important to. get the education out there that, if the thought in your future is to exit your business, then potentially e-commerce could be a great opportunity. I know that you know we chatted in the green room before recording, and I understand for my listeners today, that we want to talk about maybe like a, a pre-market preparation checklist or some thing that you want to offer. so maybe I’ll, I’ll pass the baton to you What do you believe some of the next steps are for those that are listening that are maybe interested in maybe opening up a dialogue about a potential exit through your business?

Bawar Ahmad
Yeah, I love the question. So selling a company takes like 6 to 12 months to do it properly. So if you’re open to one day or you have thought about one day selling, start now. Start by making sure your business is structured. and systemized. Like, I’ll give you one very quick win. The amount of times that we speak to a buyer and we get the financials and we get the bank statements and we see Uber Eats or we see DoorDash or we see those kinds of costs on the bank statement, it’s not a very great thing to do. So keep personal and business expenses, for example, separate. Start with clean financials. Next, start finding a strong partner. Who helps you sell. It could be a broker, could be M&A advisor, could be platform. You have big ones like Flippa, Acquire, BizBuySell out there. They’re amazing platforms. They have good people as well to reach out and see what’s possible. And then once you go to market, always be open for business. Don’t start the idea of a business sold yet. Don’t start a new thing already. Keep running the business as if nothing is being sold. And only once the money is in, you should be good to go. If you want to fast-track this, you don’t want to wait the whole time and you don’t want to take the high of the risk, we believe we have quite a strong offer. We think it’s a no-brainer. Like in terms of valuation, we’re very close, even most of the times even higher than the market price. And we close within 2 weeks. So you just fill in the form on our website. It’s somewhere on ecom. co. For the people who listen, I love to give value. We also have like a free due diligence checklist. You just shoot me an It’s like my name at ecommo. co. Okay, just shoot me an email. I’ll send you a free diligence checklist so you’re prepared to get through diligence,. And if you’re willing to skip everything, just fill in the form on the website. You will get probably an offer within 1 to 2 days. And, if it fits, we hope to buy the business from you within 2 weeks and you can start sipping your margaritas on some island.

Steve Hutt
That’s lovely. All right, so it’s Bawar. So it’s B-A-W-A-R. So we can probably email you directly if needed. I know you’re on social, so through LinkedIn, and then obviously just go into eComma. co directly, and then you can go down that journey. So once again, thank you for this great education. I mean, you can’t see— I joke on this podcast a lot, but you can’t see it, but I’m literally on page 2 of notes. That’s a good episode. Number one, it’s longer than normal, but number two, I’ve learned a ton. I’ve written tons of notes.

Bawar Ahmad
Thank you.

Steve Hutt
Here. I’m excited to get this into, the show notes page. all the links and resources and all the things that you’ve mentioned, I’m gonna make sure they’re all in there. And, once again, thanks for transparent sharing and I just wish you continued success in helping businesses improve themselves. and then potential exits. I think this is really great. So thanks again for recording.

Bawar Ahmad
Yeah, no, thanks, Steve. I really enjoyed this. You, you’re asking amazing questions. I love it.

Steve Hutt
Thank you so much.