Nov 7, 2019
Sometimes a business can go through the acquisition cycle once, twice, or even more.
A deal that was pivotal to our development back 2011 came back through Quiet Light this year and our very own Brad Wayland is here talking to the buyer, Richard Bell, about his recent purchase of a business we originally sold 8 years ago.
Throughout his career, Richard Bell has mostly been in the high tech world. He’s worked in sales, product development, marketing, business development, and mergers and acquisitions. He stayed mainly on the strategic side of running a business before deciding to make a purchase of his own last year. He started off small, looking to take his breadth of behind-the-scenes knowledge to bat with YUGSTER, the e-commerce business he bought. While Richard’s thorough due diligence process may have initially overwhelmed the seller, the two worked well together in the end. Richard did a lot of the work up front, showed the seller he was serious, and greatly reduced the risk for problems once the deal was done.
Mark: One of the darkest periods in the history of Quiet Light Brokerage happened around 2011. I wasn’t sure what I was going to do with Quiet Light at that time. And due to some personal situations going on with health issues with a family member of mine I took my eye off the ball of Quiet Light for a little bit of time and found ourselves in a position where frankly we didn’t have a lot of money coming in. We had a lot more money going out and not a lot of deal flow at the same time. It was at that point in time when a great listing, a great business literally just fell on my lap and I was able to get that listing on the market, get it sold within a few days or at least found a buyer within a few days and it really represented kind of a life vest for me which really helped in bringing Quiet Light Brokerage profits back off the brink of extinction. One of the great things about this business that I love is seeing some of the companies that we touch early on grow and sometimes come back to us. When I originally started Quiet Light Brokerage my previous company that I’d sold came back through Quiet Light. I sold it again. I actually ended up selling that company a total of three times which was pretty fascinating to do. Today we don’t have Joe on the introduction. We have Brad because Brad talked to one of his previous clients; a buyer that just closed an acquisition and they bought the business that served as a life vest for me back in 2011. Brad, how was the conversation with Richard?
Brad: You know it’s really great. I didn’t actually know that background. I think he sent me an email and said hey I’ve got a lot on my plate. This is a good listing. Do you want to take a peek at it and see if you can put a value on it and help them get it sold? So I didn’t know that backstory I just knew that you had sold it once previously. So it’s one of those situations where we had a guy that was in Richard the buyer; we had a guy that was looking for an investment. He had inquired on a little tiny listing that I had out at the time it’s like a hundred thousand dollars and came to the conclusion that it wasn’t a good fit. But I had picked up on that this guy was like a serious M&A guy. I could already tell from the get-go like why is this guy looking at a hundred thousand dollar listing? This guy supposed must be looking at much larger listings than this. So I was a little surprised and ended up floating in the details of this listing that we had for a daily deal site that kind of needed someone with the ability to kind of handle a lot of moving parts. I felt like he seemed like the perfect personality for it. And so I floated it his way and the next day he sent me an LOI and it was just really smooth sailing from there on out from his side of things. He just was a really great buyer to work with and so I wanted to bring him on the podcast. I think he’s done several things that have been really interesting with that company.
Mark: How is this due diligence process different than say your average buyer out there?
Brad: Yes. So when we do these deals they always look a little bit different. After we get an LOI why we are involved sometimes a lot in the due diligence process. Sometimes we’re not involved very much at all. We have kind of standard folders and things that people want to look at; bank statements or proofs out of PayPal or your credit card provider. Things like that where people can kind of verify the numbers. In the case with Richard I found out after he got under LOI he had done like 200 million dollars in acquisitions in the corporate world. He was a very seasoned and experienced M&A guy. I can’t remember how many transactions he had done but he had been responsible for some very large deals for I think a publicly-traded company. And so he put his diligence request together and he said hey I’m working on my diligence request and I sent them over to the seller. I think the seller about passed out. It was just; there was nothing wrong with it. It was very thorough but when you get these really experienced guys sometimes you think that means it’s going to be a piece of cake for the seller but it doesn’t always mean that. Sometimes if you’ve got a seller that’s really done it’s kind of like hey I’m just ready to move on and I don’t want to look at it anymore. It can be a little bit of a challenge. And so we definitely dealt with that a little bit on this one where we’ve got a really seasoned buyer who had a very nice thorough package of diligence information that he wanted gathered. And then we had a seller that was really ready to be finished. And when he got the packet I think he felt like oh my goodness I just put all this work into getting the listing ready now we’re going to go through this diligence process that is way more exhausting than what I did whenever I bought it on the front end. But honestly it was two great guys; the seller was a great seller, the buyer was a great buyer and they worked very well together and I think they’ve continued to be friends post-transaction.
Mark: That the seller that you worked with was the buyer when I sold this business, and he still remains one of my favorite people that I’ve worked with out at Quiet Light. He is a fantastic guy. I think people sometimes get intimidated especially in the sell-side when they see these really long due diligence lists. But I’ve learned over the years, and I don’t know how you feel about this Brad, but I’ve learned over the years that a thorough due diligence list is a good sign. It’s usually a sign that the buyer is extraordinarily serious because look you have to generate all the information the buyer has to digest that information and that’s really tough. And it also reduces the risk after the sale. Because if they’re doing a thorough due diligence the chances of something coming back on you after are pretty small because they’ve done their homework.
Brad: Yeah I totally agree with that. I actually tell my sellers all the time if they are complaining about the due diligence process I always tell them the work you’re putting in now is saving you headache later. If you’re going to go ahead and give them all the things that they need today they’re not going to be the type of buyer that’s coming back to you and saying hey man I really need you to help me with this or that I need to take advantage of these hours that we carved into the APA and train me on these different things. And I definitely have seen the transactions where they don’t ask for much and then I find out later that the buyers had to come back to the seller several times asking for things and it seems like it is a better situation to just kind of lay all the cards on the table and do the work upfront and kind of have the ability to be done with the business and kind of transition to your next thing.
Mark: That’s a lot of chitchat on our part let’s go ahead and listen to the interview.
Brad: Welcome to the Quiet Light Podcast. I’m your host today Brad Wayland and we are joined today by Richard Bell. Hey Richard how are you today?
Richard: I’m doing great, thanks. Nice to see you.
Brad: Good. Yeah. So we’ve been doing this series of podcasts on folks that have bought something from Quiet Light and now we’re kind of following up with them; seeing how things went, learning about why they bought, what they learned early on, what the challenges are and so today’s kind of one of those profiles. And this one has a really unique kind of proposition that I want to kind of get into later but we usually start off by just getting some background. We don’t do like these fancy intros. We let our guests kind of describe themselves. So Richard give the profile of what your career has looked like and tell me kind of where you’ve been.
Richard: Sure, I’m happy to. I’ve done a variety of different roles which I think is one of the reasons that set me up well to do or set me up to do well with this job of running this business. I mostly worked in the high tech world with one particular company called Akamai Technologies. And within that company, I had spent time in sales roles, technical roles, product development, marketing, a lot of time in business development, and mergers and acquisitions with business development side and really partnership focused. And the roles I had after I left Akamai were very similar positions where I had a chance to really look at strategic issues, touch on a lot of different things across the whole breadth of running a business so it set me up well for the position I’m in now.
Brad: Yeah that’s great. I remember; I think you had inquired on another listing that I had. I think it was a pretty small listing and we got talking about it and you gave me some background I think in the time you told me like hey I ran M&A for a big corporation for a long time and gave me some pretty staggering numbers in terms of the dollars of deals you had helped close for your business. And when I heard it I was thinking about this potential listing it was coming up for this business called Yugster which I thought was the strangest name. I was not familiar with it even though we had sold it in the past but Yugster was Yours Until Gone and it was Yugster.com. And Mark Daoust the founder of Quiet Light called me and said hey we sold this business like years and years ago and now the guy that we sold it to is interested in selling it again and asked me if I would like to take a look at it. So when you started talking and I could hear your operational background I thought this might be a good fit for you and I think I just said hey I’ve got an idea I want to kind of float to you and I feel like that’s kind of how we started it. Is that what you remember?
Richard: Absolutely. I mean I started looking for a business probably six or nine months before you and I ever even touched base. Part of that was me doing homework on sort of what was out there and how to look at these businesses that were a lot smaller than the kinds of things that I’d looked at before where we’re talking sale prices in the nine figures; so very large businesses, large multiples is in stack. And so I wasn’t quite sure how to go about buying frankly a smaller business. And there’s a lot of chat out there. I mean you know that and you know there’s a lot of brokers out there who would just put a listing out for anything. So you end up learning quite a bit about what’s really there and what’s meaningful just by going through that process. And we did look at a business for another e-com site that you had posted up there and I think we had decided it was a little bit too seasonal for what we were doing. And then you threw the Yugster thing out there. I think it hadn’t even gone public and I’m like Yugster? As a marketing guy that was like just you know what that is. But yeah that’s exactly the story and so I think when I got my teeth around that one it actually made a lot of sense for me. I was kind of excited about it.
Brad: Yeah. And correct me if I’m wrong but so the business model was it had been a drop shipping business I think since day one and it still had a very impressive; you’re looking at it and I’m looking at the sign and I’m thinking this looks kind of antiquated. It looks a little bit like it’s seen its better days. But when I looked at the results and we’re talking about a low eight-figure business that was on some slightly declining trends and I could just tell that the light bulb kind of went off for you about like I think I might better inject some life into this and I clearly could see that you’d be able to handle the size of a business that was from what you had done before. But what specifically about Yugster was interesting to you? Like when you first looked at it what were you thinking like this is a good fit for me because of what?
Richard: Like I said I went through this process where I started talking to some different brokers about a variety of different businesses to help me get educated about what’s out there. There are a lot of businesses out there especially in the e-commerce space that are really it is an Amazon store. Somebody who is importing some private label from China and then they’re essentially listing it on Amazon and having Amazon do fulfillment and so forth. It doesn’t, and the issue I got to is that it doesn’t really leverage my skills. There is not a lot of value that you can add to some of those kinds of businesses. Maybe you get a few more distribution channels or what have you. What I saw with Yugster was really interesting to me that it was a fully operating business. Yes, it was drop ship but they had relationships with a sizable number of vendors. They had a functioning platform. They were not dependent on other marketplaces like Amazon which could be all over the place or eBay or whatever. They had their own storefront. It had been established I think in 2005 or early 2006 when it went live. So it had a long life which is really important in terms of longevity and the brand and so forth. And the other thing that I; the two other things that I really looked at and I liked about it, one was it had a core staff. There were talented people that had a good resume and seem to know what they were doing. And it also had a really solid customer base. They had a loyalty program they’ve run for many years. These were customers that had been buying from Yugster repeatedly and they had it tiered up and they were kind of passionate about the business. And these sort of strong customer base, loyal customer base that’s established, the staff is there and a technology platform that I thought I could really make a difference with because I do have a strong tech background; all of those things kind of came together for me and made me want to dive in with Yugster.
Brad: Yeah that’s interesting. So of course as just kind of a layperson when I go to the site I think of it as like a daily discount kind of idea. I see like maybe a generation ago iPad or MacBook or something like that. Is it retail-focused folks like me or is it more like small businesses that are like hey we need iPads for our production floor? We don’t need the latest and greatest we need to get 10 of this. Is it a mix of those types of customers or who really is the customer that comes to this place?
Richard: A really good question and it’s changed a bit. So the business model just to kind of flesh that out a little bit more for the audience it is a daily deal site. And what that mostly involves is sort of inventory end so people might have a couple hundred or something left and they just want to get rid of it. It could be there’s a lot of refurbished product out there that like you’re saying is a year or two behind and for most people you need the latest and greatest Apple MacBook Pro or is one that’s two or three years old is going to work just fine for you even the things like vacuums and what have you. And so there’s a range of products but we get them; we typically really focus on running them for a period of a few days. We sell out the inventory and then we move on to the next product and cycle through it. Our customers have; we’re historically very male. So 70, 80% male buyers; the profile would be sort of bargain hunters, people that are somewhat shopaholic shows up in the mix as well. Since we’ve moved the business over to; I took it over last year and we kind of modified the site and the product mix and we’re actually closer to 50-50 male-female at this point because we have a lot more home goods than we used to. And one of the things so your point about selling to businesses I’ve actually noticed a significant increase in the number of orders from businesses. We really used to have only a small handful but now I’ve seen things like schools. I’ve seen a school order like 20 Chrome books from us. They’re going to use them with smaller kids and they just don’t need the latest and greatest. They just need a laptop. Ipads, as you suggested, is another great example, I’ve seen a bunch of those go out for businesses that are needing it but the latest and greatest current generation isn’t required for what they’re doing. They’re doing order entry or checking people out kind of thing. Yeah but it’s definitely shifted and I think some of that is the changes that we’ve made in the site and the business as well which I think we’ll get into this.
Brad: Yeah. You mentioned the staff I kind of want to jump to that. So from what I recall you’re in Washington are you in the Seattle area?
Richard: I am yeah.
Brad: And then this business was in Salt Lake I believe and there was a physical office there. And how many employees were in that office?
Richard: There was about nine.
Brad: Okay, and so what have you done with that? Have you kept that office there, did you retain that staff, what have you done in terms of changing that since you bought the business?
Richard: Great question; so because of my background being in tech most of my career the majority of the people that I manage were actually remote, some as far away as China or India in different roles that I have. And so I’m very personally very comfortable running a remote staff. And so one of the things that we did is actually close that office because it wasn’t adding much in the way of value and home office everybody. So the whole organization now is based out of their own homes and we use a lot of EG Suite technologies or a lot of video meetings, audio calls, whatever, Slack to communicate and stay very, very highly interactive between us. But everybody just works from home in their jammies or sweats or whatever [inaudible 00:18:56.1] worked. So I think you asked about did we keep the staff and we kept 100% of the employees. We gave everybody a job offer as they came over because we wanted to really evaluate what they could do with different leadership and sort of reenergizing the business. And we made some with that some staffing turnover since people that pursued other opportunities or maybe weren’t the right fit for us where we were going. But I’d say about 80% of the staff is the same as what it was when I acquired the business.
Brad: Yeah that’s really interesting you know at Quiet Light we run a distributed team as well and so we’ve got eight brokers in the States, we’ve got two overseas, but it is an interesting timeframe that we live in where I actually go to an office. If you see behind me my house is not behind me but I have five children at home so that can be challenging at the house. I choose to rent an office but I do think it is interesting in this day and age that remote works so well and I feel like as a general rule people are happier when they can choose where they go to work.
Richard: And I will actually tell you that the last round of hiring we did was for some new buyers that we brought into the business and the ability for both of them to work from home was actually a big competitive advantage in getting them to come on board.
Brad: Yeah, that’s really interesting. So we don’t really use this as like a sales pitch but as you’re sitting there talking about what you guys do; I mean our listeners, we have a lot of listeners to this podcast and a lot of them are small entrepreneurial shops, some are like PE firms and you’ve got your like solo entrepreneurs so I’m just kind of curious where do our listeners kind of fit in to the kind of product mix that you guys offer at your business? Like what are the types of things that they might be most interested in that you sell on a daily basis now?
Richard: Sure. I mean I would say for that kind of audience you’re probably looking at mostly the technology and maybe some of the home goods for example. So on the tech side, we sell all kinds of computers; Windows and Macs, desktops, laptops, Chrome books, iPads, even phones. Obviously, that technology suite is something that just about every entrepreneur or business will need to some degree. If you’re somebody who’s looking for like I said the absolute latest and greatest it’s not going to be on our side and I’ll be upfront like we don’t sell the latest Mac books at all. Almost all of our tech in that sense is refurbished and you pay for what you get. I mean if you’re buying a refurbished laptop and you’re buying 300 bucks for a Mac Book it’s going to be older. But for an awful lot of people that are simply doing email that kind of thing that works just fine. And we also have a range where we go from let’s say a Mac Book at 300 all the way up for a Mac Book at 1,200. So you get to choose sort of what level you want and what you really need. But there are generally some pretty good bargain prices in terms of the type of technology and look that people are after. On good side, I mean coffee bar if you’ve got a home office everybody needs coffee. You can’t function without it. So one of our vendors; an awesome vendor is the exclusive factory refurbished provider for Ninja products. Ninja makes some incredible home appliances. There was this great little ninja coffee bar that’s sort of a single serving fresh ground coffee maker and they sell like crazy. People love them. And so yeah I think there are some tech products and some home products that would be a good fit for any business person.
Brad: Yeah that’s great. I want to get into some of the changes that you’ve made but one thing I want to kind of back up to that kind of struck me and not something I’ve seen that often was your deal structure. I remember talking to you and kind of floating you the price and you said yeah I’m a cash buyer so we can leverage that; no problem. And then when we got to LOI and you called me and said hey I think I’m going to utilize some SBA on this and I’m going to put down way more than what they’ll require but I’ve got an SBA lender that I want to tap into. I just kind of like for you to explain to our listeners kind of as much as you’re willing to share about that process what you’re thinking was and like basically how you kind of navigated that SBA process?
Richard: Yeah actually that’s a really good question because I guess it is a little bit unique. I did have the cash going in to pay 100% of it down, the issue for me really was just in one-word flexibility; being able to conserve my capital, put down enough to be meaningful so the SBA approval process was a no brainer. But not be running really tight on sort of the amount of down payment I did but keeping and a good chunk of reserve capital because there’s always been sort of a possibility that I might acquire other businesses that I would add on to this as well and you want to have that flexibility in place. And I also wanted to make sure that once I had acquired the business I didn’t want to have to use all the capital for the acquisition. Obviously, you need operating capital and you would build that into any plan. But I also wanted to be in a situation where I had enough investment capital inside the business that I could invest in the company and make the changes that I wanted. And so when I looked at the overall sort of combination of things it made a lot of sense to sort of mix us up a little bit and take; I would have to look at the paperwork again but I think we did something like 40% down cash and 60% finance. And what that essentially did for me is mean that within the business I had a good chunk of capital available to pay for all the technology changes and enhancements that I wanted to make to move the business forward because we knew we would need to do that going.
Brad: Yeah I found it very interesting; so SBA we have just a massive number of people reaching out to us looking for SBA eligible businesses and wanting to talk to us about it. And I will say that one of the common pitfalls that I think that our buyers kind of find themselves in is trying to maximize the SBA situation for themselves. So a person thinks okay on the high-level point an SBA loan can be a 10% down kind of situation. That’s in the absolute most ideal scenario would be a 10% down. So someone has $250,000 in capital that they can put down on a business and so their mind immediately goes to okay then I’ll buy a 2 ½ million dollar business. And what I’ve kind of found over time doing these SBA deals is that those end up being a tough deal. If anything goes even remotely wrong then now all of a sudden the deal is falling apart; maybe the valuation doesn’t come back high enough, maybe there’s more inventory than was expected and SBA can’t cover the inventory. So actually you were the first person that I’ve had to do that and I’ve had a couple of people do it since but you’re the first person that came and said hey I can pay cash but I’m going to go ahead and use SBA. And honestly, I think SBA has a lot of advantages and a lot of disadvantages. The advantages are from a broker standpoint it really opens up our buying pool. We can offer something as an SBA. We really open up the number of buyers that can come in. But for the seller, SBA can be a grind to get through especially in these situations where people are putting down the minimum amount. I think with what you did was interesting because I never got a single phone call from the SBA lender in your deal. I never heard anything about it. You kept me updated on kind of where things are going and that is not typical for what we do with at Quiet Light. A lot of times we’re introducing them to an SBA lender and then we’re getting the play by play and we’re delivering information back to the sellers about what’s going on. In your case you said I’m going to use SBA. I thought you put down 50%; maybe you put down 40% I can’t remember, but you put down a big chunk and just said I want the flexibility and I think that really proved to show just a really wise move on your part from a business decision and it didn’t hold us up at all. We literally got that thing closed right on time where we were expecting in terms of timing at least the way that I’d kind of set the expectations for our seller.
Richard: I would just add to that Brad. I think the advice I’d give anyone considering buying a business is get your house in order. One of the reasons the SBA process on our side went smoothly was because our finances and sort of our credit rating; everything was cleaned up so that there was nothing weird on our credit reports. It was all sort of looking pretty and accounts that needed to be closed or resolved were done. So when the bank looked at things; they look at your credit report, they look at your house, they look at your mortgage, your payment histories you want to be able to give them a very clean robust picture and be able to give it to them boom here it is. And then we also had a very clear picture of the financials and what we were going to do with the business. We gave them a 30-page business plan that essentially laid out here’s the financials, here’s what we’re going to invest in, here’s the changes we’re going to make, here’s the timeline, here’s the results and they were conservative. They weren’t sort of wild willy-nilly captain. And so between getting our own personal numbers kind of cleaned up; and this is everything just from credit numbers to even just having a nice clean resume. I mean you’re applying to SBA and they want to see your business history and what you’ve done. So you can’t take the resume that you use for your job five years ago and just slap it down. It’s got to show the bank that you know how to run a business. And so there’s a lot of little things that you can do to get ready and so we had those in place before you and I even got into this acquisition process. The other comment I would add about doing the sort of 10% down, I mean we could have gotten approved on a bigger deal at 10% down. I would never have done it in a million years. And part of this maybe comes from my M&A experience which is obviously a lot larger kind of mix. But one thing I learned is that no matter how good you are at diligence, no matter what you know about this particular industry, any business you have is going to have some surprises and it’s going to have some ups and downs. And so one of the problems I see with people that would be doing sort of this 10% in sort of right on the bleeding edge you’re not going to have enough capital to be really flexible. You’re going to struggle with investments and here’s, and this is maybe not something that people don’t really think about that much but buying a business is stressful. You’re running a new business. You’re investing. This is potentially your whole income, your life, what you’re doing, a good chunk of your personal assets are going to get tied up and it’s stressful even if you have tons of money to play with. Putting yourself right on the edge where your finances are squeezed that tight where you’re doing 10% down and that’s everything that you’ve got it just adds to the stress level in a way that’s not good for running the business. It’s not good for you personally on a health basis. So I think if I can look back at it and say what’s my advice to people to get through an acquisition process using SBA prepare; good credit cleaned up, get all your documentation in order, get your resume pretty and all that stuff but don’t squeeze yourself so tight that you don’t have flexibility, you don’t have capital to invest, you’re going to panic if you have any ups and downs. It’s not worth it. That’s too much stress when you really want to be thinking clearly, being able to make smart decisions with some perspective on it. You for sure know this Brad it’s really hard to make perspective when you’re tight on the finances and you’re panicking. So all those things factored in sort of where I went to. But I would definitely encourage people to make sure they’ve got enough of a cushion and flexibility to run their business confidently.
Brad: Now I totally share your thoughts on that. And in my operating days that is really exactly how we tried to run the business. If you don’t have a good amount of cash on hand it just makes something that’s already difficult to do running a business that much more difficult and puts additional strain on you whenever you get some of those unknown kinds of problems that come up. One of the things I remember about you; I actually don’t refer to you by name I tell people one time I sold a business to this M&A guy that had done a lot of corporate deals and let me tell you something if you think that diligence folder that you saw today is involved I should show you his because I remember it was a thorough deck of information. You had that thing all laid out perfectly. It was like okay one of the things I think I learned there is the pros have seen everything. So when you laid out that diligence folder and I saw it I was like it was organized, it was great, there was nothing wrong with but it was lot. It was a lot of information. You’re very thorough, very detailed, and it kind of makes sense to me that it’s gone well for you doing this business. Okay, I want to get into; so I was thinking about doing some podcast episodes and I think I emailed you maybe a month ago and said hey I went to a Yugster and there’s no more Yugster. So talk about the rebrand and then let’s talk about some other changes that you made.
Richard: Yugster had a cult following behind it. And cult followings are great. There’s a lot of loyalty that goes into that. But it was not a brand that was going to work well to sort of reach out to a larger audience. And so we, the team; I got the leadership team that was in place one of the first things we did was restructure internally to kind of give them really clean roles and responsibilities in purchasing and marketing because it had all been sort of blurred before. And what we then took off and did is really sit down and think about the kinds of changes we wanted to make in the business. The brand was a big piece of it. And we did really dig in on the idea of keeping the extra brand but we also knew that we needed to give it a refresh, improve the look and feel of the website, and sort of get it to a healthier sort of message and make it more attractive to people. In the end, when we kind of dug through it Yugster as a brand itself wasn’t going to scale for us. It wasn’t going to bring in a larger audience that we were sort of now starting to pursue and chase. So we spent some time doing; figure out what brands you want to work with, see what domain names are out there. We knew we wanted a dot com. We also knew that we wanted to keep a little synergy with the Yugster. We didn’t want to go too far away from it and so as you mentioned, in the beginning, Yugster had become Yours Until Gone and YUG would show up throughout the branding of the site. The loyalty program was called YUG points. There was a lot of YUG that showed up. And so we figured if we kept the Until Gone piece of it that would be a nice connection. And so it turned out that that brand or that domain was actually available for purchase. This is where we made some of our capital investment; it was actually buying that domain name. And it’s worked out great. I would say that the marketing team did; it could be a case study frankly in the rebranding going from Yugster to Until Gone. I won’t say everything was perfect but it was as good as I’ve ever seen it done. And what the team put together and it was fantastic. We had a few customers that didn’t make it over but the vast majority did. And we went live with the new Until Gone site which we can talk about some of the software stuff we did here in a second on September 1st. And I can tell you, Brad, if I showed you the detailed financials you’ll see them start to grow through December and then there’s this inflection point September 1st where they just kicked up and you start seeing this nice steady growth curve. And I think a lot of it had to do with we made changes over the summer to the Yugster’s site to clean it up, make it a little bit more polished, but there’s only so much that we were able to do. Once we went to the new site which was a completely revamped look and feel and brand I think it; for all the customers that we were bringing in, it just gave them confidence. That look and feel was a lot more professional; a lot more polished than the old site had been. And while we lost some of the cult kinkiness that was tied in with Yugster I think the more professional side appealed to a much larger group who were more willing to buy and make purchases through the site. And that’s why we see the growth and that’s continued to accelerate as we came into 2019.
Brad: Yeah when I saw it actually; so I was kind of going through my list of deals and I’ve closed 20 deals at Quiet Light since I’ve been here and so I was kind of just looking at it and trying to think about what would be good podcast episodes. So I’d gone through 14 of them or so when I hit Yugster and as soon as I hit it and I went to the site I was like I know there’s a story here because I mean it looks fantastic. I remembered what the old site looked like. I see what the new one looks like. It’s like I could totally get that you were very thoughtful about how you approached it and how you kind of kept that Until Gone. I think that was really smart. So I totally could see the thought process from a marketer’s standpoint of what you were doing and it seems to me like it did go really well just from an optics standpoint on my part. So it doesn’t surprise me that your trends are good. We’re getting somewhat short on time let’s get into the software a little bit. I want to know what kinds of changes you’ve made to the stack and just kind of go wherever you want with that but I kind of want to know what you’ve been doing there?
Richard: You know we can make a podcast about that in and of itself. There were some really interesting lessons learned I guess but I’ll try to keep it focused for the group because not everyone’s a techie. But basically, we have replaced 100% of the stack at this point. The original plan had been to upgrade the existing stack and put a new front end on it the new Until Gone front end basically and then do a bunch of workarounds creating APIs. And what APIs are for anyone who’s not familiar with it they are programmatic interfaces that allow third parties to engage with your site. And so, for example, we wanted our vendors, our partners who were doing shipping to be able to work with us via API rather than exchanging text file CSVs for example. And the reason for that is just sort of accuracy, the time to market, and so forth. And there were lots of opportunities to do that to help our vendor and ourselves frankly work better together. Once we got into the details and we started looking at the Until Gone site design and what we wanted to do it would have required too many changes to the existing platform that would have left behind, in all honesty, a lot of stuff that we still needed to change. And so I think we closed the deal the first week of May last year; May 7th, 2018, by the end of June we had made the decision to do a full stack replacement top to bottom. And so we sourced a company actually here in Seattle to do a new website front end design and to then actually do the implementation on Shopify. We’re on Shopify plus because we’re large enough that we need to be on the bigger platform with the capabilities that they give us. And then that meant that we had to build a new back end because with the number of vendors we work with, with the way we work, with the flexibility we wanted to do it would not have been possible for us to just rely on Shopify. Now that won’t be the case for a lot of e-commerce vendors but we operate more like a marketplace and we need to process a lot of purchase orders out to our vendors and take products in and not every product goes on-site and so forth. So we had to have control over that back end and so essentially we built out a completely new platform stack that operates; there’s an admin portal, there was a huge amount of infrastructure for integrating with Shopify and providing all the APIs that we essentially built out. And what we’ve done since then is build some custom APIs. We’ve integrated with ShipStation which is a shipping management tool that a lot of our vendors utilize. We’ve integrated with ChannelAdvisor. We’ve integrated with a great company called Quitch just similar to ChannelAdvisor but a little bit more technology-focused. We’re finalizing an integration with Celera Cloud which is another one of these integrator platforms that a lot of vendors and suppliers utilize. And so that’s given us just a huge amount of flexibility because it was sort of getting rid of a lot of the deadwood that had existed previously. We’ve been able to do things that we weren’t able to do previously and really take advantage of technology to reach our customers better. And so some examples of that we actually built a little ad engine so that we could serve our own products as ads to our customers and notification emails. We’ve done things with targeting where we’ve essentially built kind of a; think of it as a mini CRM, customer relationship management platform where the marketing emails that we send to them are fully targeted to their interests, their likes, what they prefer. Each of these changes as we’ve gone into the stack had given us sort of an incremental growth and helped us improve that curve, show better metrics, and have better control. It’s also allowed us to really tightly integrate with our vendors and we continue to invest in it. We have some new capabilities coming out this week frankly that we want to get in place before Q4 that will allow us to do some things that will really improve our shipping and our customer service related to that because that’s always a big issue with customers. So I’m happy to get into more it detailed Brad but I don’t want to take up the time just talking about coding and Google Cloud and what we did. That’s not our focus here.
Brad: No, I think you hit some great highlights there and actually it’s been interesting to watch Shopify and it’s kind of dominance really in the kind of hosted stores platform. I think WordPress as a CMS is now like 35% of the world’s websites and I can tell you from my perspective of operating for many years and kind of coming from that custom website world where we built everything from scratch because it gave us more flexibility and then seeing the kind of out of the box solutions come on the scene and then seeing Shopify and Volusion and WiX and these other players come on the scene. But it really seems like Shopify has asserted some dominance in the space at this point or just I mean there’s entire; I’ll be speaking at an event in San Diego next month and at that event, it’s Shopify sellers. I’m going on a podcast in two weeks. It’s just Shopify folks that work with Shopify every day. And we find a lot of our sellers now when they have high margin products are really utilizing the Facebook Pixel for marketing and for some reason Shopify plus the Facebook Pixel is just the combo that everyone wants to use. It’s just Shopify is just kind of become this I think of it became kind of like WordPress for the CMS. I feel like Shopify is kind of becoming the e-commerce shopping cart or store hosted platform for the e-com side. Did you have any struggle with choosing to go with Shopify? Was that a tough decision for you?
Richard: No, not really I mean I think we really looked at Shopify and BigCommerce. They’re really the sort of two that we were down to at that point. We did look at Magento which is both a platform that you can just open source and build your own but they also have a hosted option. That was much more complicated and had a tech stack that we weren’t sure we really wanted to work with. So it really came down to Shopify versus BigCommerce. And honestly, it was a combination of the partner we ended up wanting to work with was more comfortable with Shopify. And we also looked at Shopify and felt like you were saying given their market share and their size it was a good fit and I think it made sense to do that. I will say I came from a platform world so I’m very comfortable with using these kinds of platforms and I will say there are tradeoffs. There are huge positives; as an example of a positive, when I wanted to implement Apple Pay on the site and our payment processor already supported it. So I did all the things I needed to do with Apple, I hooked it up with my payment processor, went into Shopify, one checkmark and it’s live and ready to go. The Facebook Pixel is another one. You configure the Facebook stuff in Shopify, it’s done like that. Google Analytics is the same thing and so there’s a lot of functionality that’s built into the platform that you don’t have to customize; that you don’t have to tweak but you can still change things like your notification emails to make them personalized for your look and feel. So I think there are some really great things there in working with a platform. The flip side there is some loss of control. You don’t have necessarily quite the same flexibility. There was a feature we were talking about the other day in my management team’s meeting. The reality was if it was on our platform we could do it in a minute. It’s just on Shopify it’s going to be difficult to get it live and implemented not because of anything I say it would be a real flaw with Shopify but just because when someone else is running a platform there’s sort of some constraints that you get into it. But I’m comfortable with the Shopify decision. I think I’d make the same one again. I think given their size, given the number of big brands that are using them now it’s a good solid fit. So yeah I would go there again.
Brad: Okay. And one of the things I kind of wanted to at least ask was the biggest challenge; what’s been the biggest unforeseen kind of thing that you have had to tackle at least that you’re comfortable sharing?
Richard: Sure. I mean there are always surprises in acquiring any business and challenges are going to come up. You end up having to do more of something than you expected and so forth and it kind of throws you. I would say in this case I was actually; probably the biggest challenge was the technology side. Not because it was inherently a bad decision or difficult to rebuild the platform and do what we did; it was absolutely the right decision. I guess the point I would make is we weren’t expecting to make that decision for 12 months. It was kind of something we were looking at as a 2019 project and it ended up being a 2018 project. And so what I had actually hoped to do was use the existing platform and like I said give it a facelift; redo the front end, make it into Until Gone but rely on the same core operational platform and just maybe do a few extensions. And it didn’t end up being possible to get where I knew that we needed to be. From a marketing; branding capability perspective we had to make the changes. And so basically from July through the end of September, it was heads down coding. I wrote more code in those two months than I think I had in the previous 10, 20 years.
Richard: My career has not been as a coder I’ve been in sort of management but we had to build a completely new platform from scratch and so it was a lot of stuff that we were putting together to make it work. And that continued through Q4 and even into this year as we add new features. And like I said earlier now we’re at a point where we’re really adding some really unique distinctive capabilities. We’ve even thought about spinning out some businesses to take the stuff that we’ve built and Shopify has this huge app ecosystem; apps that you can plug into Shopify and extend its core capabilities. A lot of what we’ve now built are things that are unique and not available within that ecosystem and so we think there are some opportunities just to extend that and make that sort of additional part of the business. But I would say that was my number one sort of challenge or I guess surprise and sort of what we did. And at times it’s taken me away from running the business in a way that I wanted to. But I think it’s ended up like I said being in a good place at this point.
Brad: And it’s really interesting and I do think the Shopify kind of app marketplace is pretty vibrant. We had a lead come through a couple of weeks ago that we were discussing among the team, it was a collection of some apps and I think it was bringing in about $80,000 a month and recurring revenue from a group that had built several apps in the space. So I do think that there’s a pretty large market there to tap into. Well, I really want to thank you for coming on the show today. It’s really helpful to our audience. I hope it ends up being helpful to you. People reach out to me all the time when I’m on these podcasts so I hope that you get to make some good connections from coming on and giving us some of your time. Do you have any parting pieces of advice for those looking to buy or sell an online-based business?
Richard: I guess since I haven’t sold a business of this size I’ll maybe not give advice on that just yet but as a buyer, I would say don’t sit on the fence. It’s one of the best things you can possibly do. Get out of your corporate life. Find a broker that you trust, that you like, that you can build a relationship with and tell them what you’re looking for. Don’t make stuff up or blow smoke or try to sound bigger than you are. Be honest with them. Tell the broker what you’re looking for, what your strengths are, what kind of things would keep you engaged and challenged so that they have a good idea because their job is to connect you. So if you don’t give them the honest picture they can’t help you. But don’t hesitate. Owning your own business, running your own destiny I think is something that’s just fantastic. It’s challenging. It can be scary at times but if you’re thinking about it go for it. And I’ve definitely liked working with Brad. He was always a straight shooter and honest and I’m not saying this just because you’re on. I’d say this to anybody but finding a broker that is a straight shooter that’s honest and upfront that makes it easy; that’s huge. And I loved working with Quiet Light and Brad and I would definitely do it again if I had another business to go after.
Brad: I appreciate that and honestly, you were one of the easiest buyers that I’ve ever worked with. I mean you brought all this experience to the table and honestly that is what we do, we’re matching people up a lot of times. That’s the game that we’re playing and we may or may not be helpful in the other aspects of it but really to do well as a business adviser in Quiet Light we really need to be able to listen to what people are telling us they want and then pair that up with things that we have that are for sale. And I don’t know that I’d take a whole lot of credit for it but I do think that you were the perfect person to take over this business and I’m really glad to hear that it’s going really well for you and I hope that you continue to have success in the future.
Richard: Thank you, Brad. I think it was a good fit and I hope the improvement we’re seeing continues. It’s a great course we’re on and I appreciate your help making this connection happen.
Brad: Thanks a lot for coming on today Richard. We really appreciate it. For the listeners, we will see you the next time. Thank you.
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