An 8-Figure exit is a thought that many eCommerce brands have toyed around with. Is it worth it? How do you make your way to a glorious exit? What are the things you need to know well beforehand?
Last DTC Breakthrough, we unlocked the answers to these questions—and more. Damon Lye, Co-Founder of ErgoTune and EverDesk+ had an 8-figure exit in 4 years. Meanwhile, Luke Ong is the B2B Sales Director and Director of Acquisitions at Una Brands, an eCommerce aggregator.
Sometime last 2021, Una Brands approached Damon and started talks about doing business with them. Aside from closing with an 8-figure exit, the two companies are still working together to continue growing and extending the business.
So here’s a quick recap of what you need to know if you’re gunning for an 8-figure exit.
Those three building blocks are:
Things you need to think about before selling
You can’t just decide to sell one day and make 8-figures the next. Often, there’s a misconception that selling is pretty easy money. The truth is, a lot goes on in the background.
Why are you selling in the first place?
Try to think about why you want to sell in the first place because this will contribute to your end goal. Are you selling so you can have the capital for another business? Or because you want to take a break?
Damon recalls his thought process. Aside from wanting to take a much-needed holiday, he says it all boiled down to answering two questions:
- Do you want your wealth to be that concentrated?
- What is your risk rate?
At that point in time, the brand made up 95% to 99% of his net worth, and that meant that his assets were concentrated in this one brand.
The concentration of wealth is also tied to the second question. Because his wealth is concentrated in one business, there are a lot of risks involved.
They were already at that stage where they had to start diversifying into other channels, and this potential acquisition by Una Brands came at the right time.
Damon calls it “de-risking.” They had done a great job at growing their business, and it was time to level up.
Your accounts and financial books must be in order
If Damon had to do it all over again, he would have prepared his financial statements and accounting documents early on.
It was a major distraction to deal with while the negotiation process was going on. Here’s a quick rundown of some tips from Damon:
- Choose the right time to exit. If you do it during Q3/Q4 it can get pretty crazy. Get your house in order then try selling in Q1 or Q2—hopefully, your rocking Q4 will add to the valuation.
- Plan six months or one year from now if you’re aiming to exit.
- Get all your business documents ready. Prepare your cash flow statements.
- Choose the right partner to sell to especially if you have payouts dependent on future growth. You don’t always have to go for the highest offer. Damon didn’t, because their deal was structured in a way that there were future payouts.
Get in the right mindset
Selling is a huge decision. So it’s very important to get in the right mindset and be really sure of your decision.
It’s important to stand firm and know that this is the right decision right now. Make the decision, and once there’s a decision made, do not second guess it.
What you need to know about your potential buyers
Here’s what aggregators really do
Una Brands is an eCommerce aggregator and they buy out or acquire eCommerce brands in APAC. They have a couple of markets in Singapore, Malaysia, Indonesia, China, Korea, Taiwan, and Australia. Right now, they even have some brands based out of the US.
Contrary to what most people think, aggregators do not simply buy and say goodbye.
Luke says, “Beyond Beyond the acquiring, which is the first part, the next part, more importantly, is that we want to help brand owners scale their brands. We are not the experts, but we like to work together with the brand owners to do that.”
They are always on the lookout for brands that have the potential to grow and become global household games. They acquire and then they work with the founders to plan out how the brand can further scale.
What aggregators look for in a brand
So what do these acquirers look for? How can you make your brand attractive?
Aggregators actually have what they call “a valuation scorecard” which they use to rate a business. Some examples of the criteria:
- Revenue growth
- EBITDA (earnings before interest, taxes, depreciation, and amortization)
- Stage of growth
- Bottom line margins
Basically, each component has a corresponding weight. Once all components are rated, the final computation decides if the brand will be acquired.
However, despite the technical aspects, Luke emphasizes that “There’s no hard and fast rule. I think every brand is different, but we love to meet and see what we can work out.”
Lastly, Luke explains that they don’t go for the big ones. Instead, they look for medium brands with the potential to expand.
Key takeaway: An 8-figure exit is actually the entrance to something greater
While an exit can give founders a much-needed break, it is actually more of an opportunity to grow the brand further. Planning out your exit and choosing the partner to sell to can create a huge difference.
Unlock the full sessions of DTC Breakthrough and who knows? Your 8-figure exit might be on its way.