It’s Time: Sell Your eCommerce Business and Get Back to Reality - Knowing When and How to Sell your eCommerce Business
Today the host becomes the guest!
As listeners, you probably know lots about Matt already but here are some things you might not know…. Matt is a huge Liverpool Football Club fan, in fact, he would buy Liverpool Football Club if I could afford it. Matt loves to cook up delicious food in his outdoor kitchen (that he built himself) with his family. He is also a whizz at woodwork and can pretty much build anything!
Matt recently sold one of his eCommerce skincare businesses. We chatted about all things eCommerce business sales with Matt and learnt all about the process he went through and the lessons he learnt.
How did you get started in eCommerce and then get involved with Jersey Beauty?
I got involved with the web back in the late 90s. When the internet was starting to take off, a friend of mine came to me and said, “I need one of these website things.” No one had a clue what a website was back then, and I only knew of one company who could build websites. I knew I was okay with computers, so I said to my friend, “I'll tell you what, if you buy this piece of software, I'll figure it out and I'll create the website.” It was a cheaper alternative for him, so he bought me eight or 900 quids worth of software, and that’s what started the journey and that's how we got involved in all things web.
It didn't take too long after that to think, “oh, we can sell stuff online now.” So back in 2002, we launched our first ever eCommerce business, the company was called Tan Mad, and we sold tanning products. I bought the products off a friend of mine who was a wholesaler of tanning products and we just put them online and just started to see how it went, then six months later, it was going really well, and I actually sold that business to the guy I was buying the products from. So he bought the business and that was my entrance into eCommerce and buying and selling eCommerce businesses.
I got involved with Jersey Beauty because when I wasn’t building websites, I was working at a company where I designed and installed health bars, saunas and steam rooms and all that kind of stuff. One of our clients was a guy called Andy Topman, Andy lived on the island of Jersey, and he had a couple of health clubs on Jersey. When I stopped doing the saunas and steam rooms for a little while, and focused more on the web stuff, I said to him, “you should really think about selling some stuff online, because eCommerce is going great.” In 2006, the island of Jersey had some massive tax advantages when it came to selling products online. They didn't have to charge VAT on products that were being shipped to the UK if they retailed under a certain value. So I said to Andy, we need to take advantage of this and so in 2006 Jersey Beauty Company was born. It was a conversation that was as ridiculous as that, it was not thought through. We didn’t do a single bit of research, we were just like, let's just sell that and see what happens, and we just had a go, and it turned out to be a very fortuitous conversation. That's how Jersey Beauty company was born. I wish I could sit here and say to you, it was because of some really clever strategy on my part or a clever strategy on Andy's part, but genuinely it wasn't, it was just blind luck. Right place, right time. We just had a go at something and it worked.
You have been involved with Jersey Beauty since 2006? Why did you decide to sell? How did you know it was time?
I'm of a generation with the idea that you build a business to sell it, so if you ever start a business you would always start it knowing that at some point you're going to sell that business. You either buy it yourself, or somebody else ends up buying the business from you. So I always knew in the back of my head at some point somewhere down the line the business would either collapse as it would go bankrupt, or I would sell it. They would be my two exit options, I suppose. There was a third option, that it would do so well, I would hire a management team to run it, and then stay as a shareholder and live off the dividends for the rest of my life. That was never going to be an option in all reality.
I think in terms of selling I always knew that somebody would buy it and over the 15 years of running Jersey Beauty Company, I must have been approached at least half a dozen times from people wanting to buy it or at least wanting to have a conversation about wanting to buy Jersey. I started every conversation the same way, “sure let's have a conversation and see if this works for you and see if it works for me.” Finally we found somebody where we thought, actually it's going to work for you and it's going to work for me, so that's how it sort of came about. We didn't sell Jersey out of desperation because we needed to sell it - I think the last year or two, probably the last 18 months during lockdown, I thought this is probably a really good time for us to sell Jersey now. Also after 15 years doing one thing it's nice to have a little bit of a change.
If any of our listeners who have eCommerce businesses, what can they look out for in deciding if it's a good time to sell for them?
There's a number of things you have to think about when it comes to selling a business. Obviously the key one everybody instantly jumps to is price. How much is somebody willing to buy your business for? And is that a price you're willing to sell your business for? These are two key questions you've got to ask. Let's assume that you're ready to sell the business, it's almost like selling your house - you know what you've put into this house, you've invested time and energy into it - it’s got you on all of the walls, it's part of the family, so selling it is not necessarily a straightforward thing to do. So how much you sell it for, is like a market valuation but then there's another aspect to this which says how much am I willing to let this go for? You've got to be happy with the price that you're selling the business for, fundamentally because you don't ever want to wake up one morning and go, I wonder if I could have sold it for more if I held out a little bit longer? You don't want things like that to eat away at you. So I think you've got to get to a place where you're okay with the valuation of the business. There are all kinds of companies out there that will help you value your business. They're like estate agents or real estate agents. They come in, they'll give you a valuation, they'll tell you what you think you can get it for and they'll go to a list of prospective buyers that they think might buy it.
So, number one is obviously you have to be happy with the price. Number two, you have to be happy with who's buying your business. And you have to be prepared to let go of it and let them take the reigns. I think that's super critical. Get someone who you think will manage it well, who will help your customers, and if they're taking your staff on, get someone who will treat your staff well.
You could sell your business to a competitor, who is already in a similar field to what you do. For example, with Jersey, we ended up selling it to Gorgeous Shop Retail Group, they were a competitor of ours. So they already had the warehouse, they had the distribution, they had the staff, they had the marketing team, so there was a lot of Jersey they didn't need, they could almost plug and play it into their system. So it became quicker and easier and a lot less liability on them.
The other thing you've got to think about is what does it mean when your business is sold? Whoever's buying your business is going to want to tie you into certain conditions and certain warranties, so you’ve got to make sure that you're happy with them. Think about what you're prepared to give and what you're prepared to let go of, and what you're prepared to be restrained by.
Finally, you’ve got to get yourself a good lawyer. They're going to cost a fortune, but you're going to want to make sure that contract you sign is good and right and healthy and righteous. Otherwise, you could be in a whole world of hurt, so make sure you've got a good lawyer.
What has your experience of selling your business taught you?
Selling a business is very, very hard work. The purchase took a long time, the contract took a long time and getting all the information together took a long time. So one of the key things is to get your documentation in order from day one. There's a lot of things that come up in the due diligence process, this is where you spend half your time. There has to be due diligence from the person buying the business to the person selling it, to make sure it's clear what is being sold and what is being purchased. That whole due diligence process takes time, and it's a faff, and you end up going backwards and forwards on where a comma is in a sentence and all that sort of stuff.
What you need to start doing now is making sure that everything that you do from a business point of view helps later on down the line from a due diligence point of view. For example, the way the company is structured, the way we do reporting and recording of accounts, the way we record information like privacy policies, GDPR compliance and all that sort of stuff, which you'd really never want to think about, you have to get all that done now. Then in a year's time if I change that policy, I need to put the updated policy in the due diligence documents so that I can just hand it out, I don't have to then figure it out later down the line. There's a lot of these sorts of processes that you can go through now which will help you later on down the line, that for me has been a big learning experience. So for the next business that we sell, we’ll be a lot more prepared and a lot more proactive.
Essentially, it’s a lot of work, it’s a lot of pain, you're going to be tied in with contracts and warranties, it’s not as straightforward as somebody just giving you a check. But if you find the right buyer, and you sell at the right price, and it's the right time for you to exit the business, it's a great way to end that particular chapter of your business life.
If you sold another eCommerce business again, what would do differently?
I would structure the company differently. Again, just to make it really clear what the other person is buying. With Jersey, we had a lot of overlap between different companies, so making that cleaner from an earlier start would have been good. I think generally be really clear about what it is that people are buying.
The biggest thing I think you can do is to think about your business as the person buying it, rather than the person selling it. You as the CEO, as the owner, as the person that's running your business, have to change how you look at it. Instead of looking at this business like someone that loves it, and someone that cares for it, and thinks the whole thing is just totally amazing, you've got to put yourself in the position of a buyer, so ask yourself: “Why on earth would I buy your business over this one over here?”, “What is it about you that is unique and different?” When you think about it from your customer's point of view, or your buyer's point of view, it changes the way you view your business, it's like actually some of the stuff which you care about, they don't. So let's not get hung up on the details, let's figure out a way to maximise the value to the buyer. Think about your business from the person that's buying it.
What would be some top tips that you would give our listeners if they are considering selling their eCommerce business?
My top tip would be to really make sure you want to sell your business and start preparing for that sale from day one rather than when someone approaches you. If you know in three years time you're going to start selling your business you have to think about that now and start making provision for that. Be sure you want to do it and start acting today.
What does the post Jersey world look like for you?
The plan for us I think is to carry on doing what we're doing, carry on building eCommerce businesses. We love eCommerce, we think it's a great business model for us - we know it, we understand it, so we're going to carry on doing eCommerce businesses.
We’re involved in a company called Vegetology which sells online vegan and vegetarian certified vitamin supplements which is going really well. We're also still carrying on doing the stuff we were doing before like coaching and consulting eCommerce services and helping other people grow their stuff online. We've got some great courses coming out hopefully in the new year, which I'm super psyched about. So, life is definitely busy post Jersey that's for sure, but post Jersey is all still eCommerce. Why would I want to be anywhere else?