Podcast appearances and mentions of joe why

Happy Friday YOU! I'm back with a new episode recapping this insane, joke of a week. HOW is this happening in our country?? This election is being stolen and my head is about to explode. Where's Joe? Why can't he give transparency and back the validity of these votes?? Wake me up in 2021 already, JEEEZE!!!! In today's episode I cover the sephora sale, my new and unnecessary Christmas tree, keeping the magic of Christmas alive and anniversary gifts.Here's the flocked Christmas tree I bought.Song this week is David Guetta/Ava Max "Let it Be."Built Bars Baby! My code never expires so try BB's today. They're best eaten cold. LISAPAIGE for your discount!VitaFive gummy vitamins are my favorite and now they have kids gummies! LP15 for your discount!LISAPAIGEMADEMEDOIT.com for my amazon finds, holy grail tanning serum, favorite coffee, and everything else.Catch me weeknights on The Chad Prather Show!

On this episode of Quiet Light, we talk to Steven Pope about how to handle any problem you're having with Amazon. Steven is the founder of My Amazon Guy, a full-service Amazon agency, currently assisting 80 clients. They seek to help their clients and others with all of the possible Amazon travails businesses face. Topics: How and why Steven started his agency. Dealing with Amazon account suspensions. Best ways to rank organically on Amazon. The outlook for American-made products. The number one action item in advertising. A major success story for Steven's agency. How to hone in on what changes will make a difference. Transcription: Mark: Joe, one of the things that you do with Quiet Light is you have a pretty wide network of people that you're now talking to. And I know you recently talked to Steven Pope. He is an agency owner. He helps Amazon business owners solve problems. I know that it's like crazy generic for me to say that but when it comes to owning an Amazon business, there's a lot of different problems you can have; everything from suspended accounts to; I mean, you name it. And I know you guys talked a little bit about the services he offers. But not just the services he offers, you talked about some of the problems that people face and how he goes about solving them. Joe: Yeah, there's something; look, we generally don't have people on pitching their products and services, simple as that. And so when I got this email introduction to Steve and set up a 15-minute call to grill him a little bit on who he is and what he does, the first thing I did was ask for five rapid-fire questions about what to do on Amazon if this happens and he answered them all and it was great. And then he said I've got 300 videos on YouTube that does the same thing. I give it all away for free and if people want to hire me as their agency, then I'm here for that as well. So I just dug into those videos and I love it. I think that you should hear him talk folks. You should listen to some of the things that he suggests and he gives it away for free in this podcast as well. I ask him the questions. I drill deeper when there needs to be a follow-up question. But then he also and it should be in the show notes, he also has a YouTube channel. It's My Amazon Guy on YouTube where he's helping people solve problems. One example is a woman and this is; and I talked about a little bit, single SKU, 100% of her revenue is coming from a single SKU on Amazon and oops she got suspended. Mark: Oh. Joe: Right. And for a week and a half or so, she cannot solve the problem and so she's losing five or six thousand dollars a week in revenue. And Steven has a process for that. It's not rocket science. It's three separate sentences that help get your account unsuspended quicker… Mark: What are those three sentences? Joe: He goes over them in the podcast. I can't recall. I recorded it yesterday Mark. You know how my memory is come on. Mark: I was hoping to tease it so you actually listen to the episode. Joe: Yeah, okay. So you actually have to listen to the episode. Mark: There we go. Joe: Why don't we just go to that? So that's our teaser, go to it… Mark: We are really not pros of this already. Joe: Not at all. If you have anybody else like this that's an expert in the space that gives it all away, regardless of the fact that they also have clients that pay for the service, introduce them to us, because I think this type of information is fantastic. Because everybody hears yeah I hired an agency and my customer acquisition went through the roof. We hear it as well. But this person was referred to us. I grilled him. I know who referred most of his clients to him and I have great respect for that person and they've been on the podcast as well. So give it a listen. Hopefully, it's going to help everyone that has even if it's just 10% of your revenue on Amazon, it's worth a listen and worth getting over to that YouTube channel to get educated as well. Joe: Hey, folks, Joe Valley here again with the Quiet Light Podcast. Thanks for joining us. Today I've got the pope with me this morning I had the was that was last week's podcast and today I've got the pope. You probably get that a lot, don't you? I'm sorry. Steven: The Popemobile jokes when I was a television reporter days, yeah, I remember them. Joe: My full name is Joe Valley when I was in college the Peanuts folks; the Snoopy, Charlie Brown, and all that, it was a big Valley girl craze back then. And there was actually a Christmas or birthday card that said something about Joe Valley Beagle for sure. That's my only connection with something semi-famous. You've got a big one to the pope. Anyway, we're here to talk about Amazon. Your business is The Amazon Guy and you're going to share absolutely every possible secret you know about… Steven: Every single one of them. Joe: Every one of them. It's going to take a while, folks. Steven: Yeah, everyone who's listening to this will be a millionaire just by simply listening. Joe: No action taken whatsoever. Okay, well, let's over promise and deliver right now. We just did. All right enough of the jibber-jabber. Let's talk about you. Give us for the audience a little bit of background in yourself; who are you, what's your business, how did you start, and all that kind of stuff. Steven: You bet. So my name is Steven Pope. I'm the founder of My Amazon Guy. We are an 18 person digital agency at the Atlanta, Georgia area. One-stop-shop. All things Amazon. Everything from search engine optimization, to PPC, design, and logistics all in one place. My background, I started my agency after a side hustle in consulting Amazon for several years and one day I lost my job. And very much like the private labelers that are listening to this who are running their current day job and they're looking for something else to change their lifestyle or whatever else, this one forced me to change. So within 48 hours of getting laid off and I was working for a lighting company, I decided to start an agency and the rest is history. We just help people grow sales. Joe: And you're also living it as well because you have a brand that you apply your own services to and share that information on your own podcast as well, right? Steven: I do. So I own a brand called Momstir and it's M-O-M-S-T-I-R. And it's a brand where we sell funny wine glasses with funny sayings on them and very much a side hustle brand to try and figure out and keep my skills sharp. So a lot of agencies try and build out their like, hey, let me go network, let me go show up and shake Jeff Bezos' hand and plaster a photo on my website. We just get crapped on. We just go into accounts. We don't leave our house. We don't go to conferences, complete referral-based business. And I think that's the right way to run an agency. We just go solve problems left and right and grow sales every day and go in and get our hands dirty. Joe: And you folks know my position here. You know that I get e-mails and calls all the time from agencies and I have the privilege of working with clients and seeing if they have agencies or not. When Steven and I connected, I just went with some rapid-fire questions to see if this guy had any idea what he was talking about and it turns out he actually does. So I want to duplicate some of that here on this podcast for you. E-commerce business owners that are 90% Amazon or 20% Amazon and want to be 90% Amazon. But let's first start with the fact that you do have 80 clients now, active Amazon business owners that you and your team of 18 work with, right? Steven: We do. Everything from air purifiers to tweezers and everything in between. Joe: All right. Let's talk about Amazon Suspensions. You mentioned in our pre-call that you had a woman call you and her account has been suspended for several days or something like that. Tell that story briefly but how you go about getting something reinstated? Steven: You bet. So there's a difference between suspension and listing yank. So suspension your account is down, you can't even log in or get your money out. Listing reinstatement and this is where you have a product that's been yanked from the catalog. Each has their own problem and their own solution. Amazon is a siloed organization and so it can be a very daunting and confusing process for sellers, no matter what the problem is. We could be talking about anything that goes wrong at Amazon. It's literally impossible to have a single point of contact at Amazon so like me as an agency, we don't even have a single point of contact. We got one guy that we talked with on a monthly basis and talked about advertising with and outside of that, we're doing the same thing sellers are doing; brute force, sellers support, ticketing, emails, you name it. The difference is that because we've seen the trends between the accounts, we're able to see what works currently. And I say that because what I talk about today may not work 90 days from now and that's because the platform is shifting at such a rapid pace. It's entering its maturity phase. We've seen Amazon change all the rules constantly on a whim, which is why you shouldn't be 90%  Amazon sales. You probably need to diversify if you want my opinion. But let's talk about this, so I got a call today from a single mom and her listing was yanked. This account, $30,000 a month in sales, one product, and all she could do… Joe: Bad idea, first of all, but go on. Steven: So she was in tears talking to me today. And I share this with genuine care and knowing that this is her livelihood and Amazon took her livelihood away. And it wasn't even for an egregious thing. It wasn't like she broke a rule. One day the algorithm crawled her catalog, looked at a bullet point, and said, this looks like something we don't like, yank. And so she did all the right things. She fixed it. She made the changes to the ballpoints. She contacted the support team. She got on the phone with what's called the captive team in America. She sent listing evaluations, e-mails. She did all of the right things and can't get the listing reinstated. And so for seven days, her business has been down. And if it doesn't get fixed, she can't afford what she needs to do to live or run a business or run her household. Joe: So that's something you're confident you can fix based on the phone call you had with her? Steven: 100%. Joe: How long will it take? Steven: That's the part I can't guarantee. If an issue like a listing yank is down we have a near 100% reinstatement rate, but what we don't have is a timing reinstatement guarantee. For some accounts, we'll get in there and we'll fix things within 48 hours and other times it takes 30 days. And it has nothing to do with the talent that we have or the process. It's just that Amazon's system sometimes just is absolutely breaking and they don't have; they use the 80:20 rule to an extreme. If they can get rid of 80% of the bad actors with 20% of the effort knowing they're going to screw over 20% good actors, they're okay with that. Joe: Lots of actors these days, I guess. Steven: And because of that, even if you're doing all the right things, you will eventually run into this problem. Your listings will get yanked. You'll get suspended. Whatever it might be, you will face a challenge that economically damages you and you have to act quick and you have to be concise. And whatever you do, don't submit 10 tickets. Don't do that. Your appeals need to be concise. You need to be giving them exactly explicit what they ask for and make it easy on them to help you. Joe: Do you have any language on your site that tells people exactly what to do? Steven: We do. Yeah. We have a page. I'll give it to you for you to put in the show notes, which is basically a plan of action to do when you run into a situation like this and in high-level summary, you do three things; admit the problem, how did you solve the problem, and what are you going to do to prevent the problem from reoccurring? And those could be two to three sentences a piece. If you do that and you format it, just like I mentioned, you have a greater chance of success. Joe: You don't think that they should write 17, 59 paragraphs for that seller account to Representative Reeve? Steven: No. Joe: No, I'm kidding. Of course. Steven: Nor do I think you should mention that you've been on Amazon for 15 years and you're a half a million-dollar business. They don't care. Joe: They don't care, yeah. Steven: The person reading this is looking for reasons to not approve your requests. They're not looking for reasons to approve it. So give them exactly what the request with no fluff and then you'll have a higher chance of getting approved. Joe: Okay, so I'm just going to say to those folks that have a hero SKU like that, knock it off, takes some of the money, launch a new listing, and spread out your risk so that you're not in a situation like that. What's the best way to rank organically? You're launching a new product, what's the best way to rank on Amazon, how do you get from page nowhere to the top of Page 1? Steven: So two types of situations we could be in; situation one is you're launching a brand new product and situation number two, you've had a product on Amazon and you're trying to take it to the next level. I'm going to talk about the product launch first because there's what's called a honeymoon period in the first 14 days of having an item on Amazon. You want to maximize traffic to the listing and maximize sales during that honeymoon period because it will leapfrog the listing rankings in a very rapid succession. If you can show Amazon that you're for real, you're the real deal, this is your first product in the account and you got a hundred sales in the first two weeks, they're going to pay attention to that. In the past, people would use programs like viral launch or some sort of giveaway to make this happen. Those programs no longer are as effective as they once were so you can't just solely rely upon that. What I recommend you do is; I'm assuming you've got a budget for the product you're doing a launch for so I'm assuming you spent two or three grand on the product. I would set aside $2,000 for Google and Facebook ads in the first 14 days. Spend it. No guarantee you're going to get sales out of it. No guarantee that you're gonna get a good ACOS. That's not the point. You're trying to train the algorithm that the product is important and that you personally can bring traffic to the Amazon platform. They will reward you accordingly. From there, it's almost 90% Amazon PPC in the first couple of months. And then from there, you can start relying more on SEO. For the other products that have already been there, the longer you've been there and the lower the run rate you've had, the harder it's going to be for you to start gaining. So there's a bunch of core key practices that we could discuss; back end search terms, make sure you've got 250 characters that are unique, have no commas, no duplicate words, make sure you got misspellings in there, and include a couple of Spanish keywords, front end, you got titles, bullets, images, A plus content, all of those need to be maximized. If you don't have every one of those fields maximized you're going to be losing out on keyword rankings you could have gained otherwise. So everything you do on Amazon to grow sales can be boiled down to two things, driving traffic and improving the conversion rate. SEO is almost primarily a traffic generation strategy. However, if you rank four words you don't convert on, you will stop ranking for those words. So if you're selling an apple slicer product and you want a rank for foot rubs or foot lotion or whatever; it's the first thing that came to my mind, it's not going to work. I guess I need a foot rub right now. Joe: I guess so. Steven: But in any case, there's so many different things that help with ranking on Amazon, and the one that I would say is your quick five-second hack today for those that are looking for like, okay, that's cool, I understand I need to optimize but what can I do right now? Go into your A-plus content and make sure every single photo is maximized with a hundred characters per A plus content photo. So if you've got 20 photos, that's 20 times a hundred characters of keywords you're probably missing out on right now. And throw one of those to be Spanish, put misspellings under one of them. Amazon claims that they don't index the A-plus content. I believe they're big fat liars and I can prove it. I've put Spanish behind one photo, I didn't put it anywhere else and guess what? We indexed for it. Joe: How important are product demonstration videos in this conversion aspect? So ranking is one thing that's important but if you're not converting, what's the point? And eventually, their algorithms are going to say people are looking, but they're not buying so we're going to de-rank you I assume. How important are videos in that conversion process? Steven: Minimum. Joe: Really? Let's talk about that. Steven: So I'm coming from a background in television where I thought video was king, right? Content is king. But video on Amazon, I'm utterly surprised by how few people are actually watching the videos. And so, in my opinion, instead of spending $5,000 on some professional photoshoot, grab your cell phone and just talk on camera about the top product features for 60 seconds and call it a day and put it on your listing. Now, if you're running a corporation that's not going to resonate with your management staff. They're going to throw a conniption fit. Obviously, that's not going to work. But if you're a side hustling brand and you don't have a video today, fix it. Go out and get one. Shoot it on your cell phone. Put on the target demographic, whoever you want to buy it. It will help. But of all the things that we could talk about on today's podcast, video will be at the bottom of the pile and it's because nobody clicks it. Joe: Let's talk about American made then because we've got a situation in the world where we're in trade wars with everyone else. How important is; and I know you don't have a crystal ball that I see on your desk. Apparently, you need a foot rub. You're thinking about that while looking at me on video. Again, I don't know why people help me out here. But crystal ball American made products, given the trade wars that we are in. Is it going to be something it's going to be important on Amazon in the future? Steven: I consider myself a thought leader in the Amazon space, and that's why I'm going out and getting on my podcast. I want to talk about where I think Amazon is going. I personally believe manufacturing is coming back to the United States. Is it here today for B2C products? No, it's not. I think it will be soon. All of the symptoms are there. If you're looking at the symptoms there at present; you talked about the trade wars with China, tariffs increasing currency exchange wars, and all that good stuff. COVID is a second reason the entire supply chain and the entire world broke down. Globalization takes a hit when international events happen. So nationalism and hyper localization are likely to occur under these circumstances. In addition to that, the user base who may blame COVID on China is going to start actively looking for American made products. This is going to help you with margin issues where you're selling a product for sometimes 40, 50% more in cost. They're willing to bear that market just because of principle. And the question is, how do you manufacturer in the States and do so profitably? I do not know the answer to that question. Joe: I was going to ask that and maybe you know, the answer to this one, how do you find those manufacturers in the States? They can go to Alibaba and eventually get to the manufacturer in China and there are some services; we've had folks on, Zach from Gembah can help you with finding manufacturers but how do you find them in the States? Steven: I have tried to solve this problem for the last three years. I joined what's called the Georgia Manufacturing Alliance. So I'm in the Atlanta, Georgia area. I toured several different manufacturing facilities. And what I learned is that for the most part, the United States is a B2B manufacturing country and most businesses are focused on B2B products. So, for example, a facility I went to, they made toilet seats for airplanes and it's a special process to do that. Joe: Sure. Steven: They have to fire-resistant, right? Couldn't you can't buy that overseas because there's lives on the line. B2C products like gifts or day to day households; anything that's not topical or consumable, because obviously most of those are made in the states currently. Joe: Exactly. Steven: But home goods, if you will, it is absolutely cheaper to go overseas right now for that. There are brands like American Giants who hires 100% from end to end American made, American laborer and they are doing well. They're selling the Mercedes Benz version of a hoodie right now and they've proven it works, but it doesn't work on every vertical or every catalog, every type of item today. I think technology is going to be the last category that this will work for. But I do see the symptoms and I think if you were an investor today looking for how do I get ahead in five years from now; not today, but in five years from now, I would definitely set yourself up for American made manufacturing and an American made company run by Americans selling to Americans. Joe: Okay. Crystal ball. I love it. Let's talk about that person who has the American made products or an overseas product and they sell on Amazon, what's the secrets to sponsored ads? What can you tell folks that are listening that you do that they should be doing to help them lower their ACOS and increase their conversions? Steven: If there's one area that you need to hire out for if you don't have the expertise while selling on Amazon, this is the one. And it's because advertising is changing at such a rapid pace. If you haven't been watching two webinars a week or spending two hours a day on your ads you're behind currently. In the last two weeks alone, display advertising, the cat is out of the bag. That's what I would have given you two weeks ago but because segmentation approaches and every avenue available to advertise your product and generate traffic right now everybody is jumping on. Everybody's looking for that edge and so you have to be very quick. You're going to have to rotate your funds around. There are three types of ads today on Amazon, sponsored products, sponsored headline ads or sponsored grants, and finally, display. Every single month we have seen a new form of segmentation come out under one of those three core areas. Three months ago it was custom brand images. Display came out even more recently than that. The one that's coming out on 10% of accounts right now is retargeting; hitting people off of Amazon who have already viewed your products or who have already purchased your products. So those are two different things and then there's a third one that's coming out that is people who have search-related keywords off of Amazon to bring them into the platform. Two of those three are only available to 10% of accounts right now but the moment you get a glimpse and you see it on your account; nobody's giving you an announcement. Amazon is not emailing you and saying, hey, this is now available. You literally need to check your seller central portal in every nook and cranny on a weekly basis, because I'm telling you, you will find it 30 days before somebody shows you it. Joe: And the advantage to that is? Steven: You can quickly execute it and then generate additional traffic at a lower cost and get into additional areas where nobody else is paying attention to. So if you are on that display bandwagon before two weeks ago, you would have had record low ACOS, new sales you wouldn't have gotten otherwise, you could have shown up on your competitors page in ways that they couldn't predict or know how to combat. And you should still do display today, by the way. I think that's probably the number one action item in advertising right now. If you don't have display ads up, go do that. Joe: I got you. Okay, your average client is doing a million dollars a year in revenue I think, right? Steven: Yep, somewhere around there. Joe: Okay, give me a success story. Steven: Sure. So I have to think carefully now which brands have you made public permission. Joe: You don't have to name brands, you can just talk about the story itself. Steven: Yeah, so let's talk about a generic men's supplements company; let's call it that. Joe: Okay. Steven: The hardest category to sell in right now in Amazon is supplements so if you're looking for a product to launch, I wouldn't go into supplements and that's because of all the challenges and listing yanks and stuff we kind of ended about earlier. It's egregious right now how bad it is in that category but in any case, when I first started, my first client as an agency was a men's supplements brand and they tried to other consultants before me. They couldn't get past four grand a month in sales. Within 60 days we got them to $80,000 in monthly sales. A couple of months ago, they clocked in at 400,000. And it's because the grind; the My Amazon Guy process, the grind if you will, it works. You go in every day and you look for as much traffic as you possibly can get and find as much conversion as you can get. And it takes going attribute by attribute, ad by ad, design by design; every single layer has to be fulfilled. Where they may have previously failed, they didn't load their entire catalog to Amazon. That might sound like a core issue and some of you are like what you mean they didn't load their entire catalog but if you're an omnichannel brand today, sometimes you purposely don't load all your product to Amazon. I think that's a big mistake. The fastest way to grow an Amazon is load more product, launch as many as you can. Every three products you launch, one is going to fail flat, one is going to break even, one is going to succeed. So you've got a one out of three ratio to work but load as many new products as you can to your lifecycle on average on Amazon. Second, get on as many platforms as you can. Diversify. Amazon, eBay, Etsy, Walmart, Shopify; all of those are important. Joe: Not necessarily in that order, I'd like to know where would you go to first beyond Amazon US. Steven: Yep, Amazon US and you could talk about more marketplaces like Europe or Japan or Singapore and Middle East and Australia, I guess let's pause on the location geos for just a second, let's talk just marketplaces. And so after Amazon, if you have a product that can sell on Etsy that's the one I would go to next. It is the easiest to get on and will produce at a higher rate than it would have six months ago. And it's because when Amazon supply chain took a hit and the shipping timeframes went down Etsy doubled in size overnight. Doubled in size but did not double in competition which means that's your opportunity. We are seeing massive success on the Etsy platform right now. Joe: Any particular category? Because if I'm just selling supplements, I can't sell them on Etsy, right? Steven: You're not supposed to. It's supposed to be handmade and they're supposed to be hard to obtain items. I've seen everything on Etsy, though. So even, you know, it may not be the first platform of your choice if you're selling supplements or if you're selling something that doesn't go well on Etsy. Maybe launch on eBay and Walmart first before you go there, but I would still give it a look. Joe: I want to say that the transferability of an Etsy account may be a challenge. And transferability is one of the four pillars. If you can't transfer the control of the assets of the business, your business is not sellable or much more difficult to sell so we'd have to look into that again. The last time I had any significant Etsy account as part of a sale, it was tuck in hopes that you couldn't squeeze through to try to get the transfer of the control that Etsy account. So I would say caution there but if you're looking for that short term gain, it's fine. Where there's a will, there's a way. My particular buyer wasn't willing to go that route and he could have but he chose not to and that's okay. What about the idea of just simply feeding your stallions and maxing out Amazon.com if you're still growing and there's lots of more opportunity here in the US, why divert your attention to an Etsy or a Walmart or whatever it might be or the EU? Steven: So this is a good debate between focus and diversification. They have a massive amount of friction between the two. I believe it's easier to do diversity than do focus. The shotgun approach generally will lead to more success. That's my personal style. If you're a perfectionist, focus will work a lot better for you. So I would say that's a choice the business could make, a business decision if you will. Joe: And I have to say and interject that it depends upon your goals. If you're going to run the business for the next five years, I think diversification is really smart because if your business is more diversified, it's going to be risk-averse. The lower the risk, the higher the value in terms of the multiple. If you've got two businesses that are equal in revenue and discretionary earnings size, and one is 90% Amazon and the other is 40% Amazon, 30% Shopify, and 30% something else or other marketplaces but the discretionary earnings is the same, same number of SKUs, same hero SKU count and all this other stuff, that diversified business is less risk. Less risk equals a higher multiple. You're doing the same amount of revenue, but your business is much more valuable because buyers see that it is less risk and they'll pay more for it. My two cents. Steven: So I totally agree with that and you're definitely the expert on buying and selling, so I won't even go there. Joe: Have you noticed how I like to interject my opinion on buying and selling when I'm talking to somebody else about Amazon rankings and things of that nature? Steven: I couldn't have guessed why. Joe: It's amazing when you run the podcast and you get a microphone and you can say these things. You had talked about 80% of the work that you do in a seller account is fairly SOP oriented but there's 20% that requires just instincts and a deeper dive into the why of the particular problem or ranking solution. Can you talk about that 20%; what are those things and how do you really hone in on what's going to make a difference in your particular brand and ranking? Steven: So for the 80% that's SOP or standard operating procedure, you can follow a checklist and it can be clerical in nature. If you go through that checklist and you do an 80% job, you're probably going to succeed. The other 20% is the experience, the nuance, the analytical understanding to forecast, predict, and see what's going to happen under the chaotic nature of Amazon and e-commerce, understanding the landscape, and understanding what happened in the previous situation. So as one small example, understanding the notion or the difference between a coopting of demand versus a demand gen product, this is an easy to understand concept but doesn't even cross the mind of most individuals. So what do I mean by this? If you go on Amazon today and you want to sell an apple slicer, that product has been commoditized. You're basically trying to sell a commoditized coopting demand product. There's already demand, you just need to go get it and tsxake your share of it. If you're trying to come out with a patent protected product, gadget, widget; whatever it is that does something that solves a problem that nobody even knew was a problem, that's demand gen. The guy doing demand gen has a one out of 20 chance of succeeding, the coopting demand guy has got like a 12 out of 20 chance of succeeding; much harder but if done correctly, the demand gen product that wins., the one of the 20 will be gigantic in size and will dwarf everybody else. GoPro is a good example of this where they solved the problem nobody knew they had and now they have an entire empire. So if you're looking at analyzing data and you're looking at like how do I solve my problem, you're going to have to consult either an expert or you're gonna have to grind it yourself. You're going to have to spend so much time analyzing this question and watching all the podcasts, watching all the webinars, reading information, submitting the tickets in Seller Central on a daily basis until you hack it, or figure it out. That's what it takes. And that 20% is very hard and you want to understand like, what do I do in this situation? If you've never done it before it's really hard to learn. Joe: And it's probably going to end up producing 80% of the revenue if you click the rules there. You actually have book a coaching call on your website. You're not just working with clients and taking agency fee on a monthly basis, but you are doing coaching calls as well. Can you talk about what type of calls those are and how often you do them? Steven: You bet. So I probably do one a day on average. And I have a very different vision of what agency should be than the typical agency. I would give away all or trade secrets. I got 300 videos on YouTube answering literally every question. If you have pesticides gating on your product and you sell tweezers and you're like, why does this on my account, I don't even understand this? We give away the answer key right on the YouTube video. Joe: And how do they find that; is it My Amazon Guy on YouTube? Steven: Yes, and if you were to literally Google pesticides gating My Amazon Guy, you would find it. Or even just pesticides gating Amazon it'd probably still come up. But the point I'm trying to make here is we share all our trade secrets openly. We're trying to add value to the community because it comes back. I know that if I had value to you today over the next year; let's say you follow me for a year before you even pay me a dime, you will then come and say, hey, shut up and take my money. And so sometimes I will hear from people that have watched 40 of my videos and they just want to say hi. But on those calls, typically we're getting in and we're solving a specific problem. That's usually the number one reason one of those comes up is because, hey, I've got a business problem I need a solution today. I can't wait around and figure this out. Joe: Like that woman's account who was suspended. Steven: Exactly like that woman's account that was suspended. I offer ala carte services on my site for those that aren't ready to make a monthly commitment. Now, I prefer having monthly clients. It's an easier business model, don't get me wrong but we are going to serve wherever we can. We're going to add value where we can. We'll get our foot in the door. One of my largest clients; we did a one-hour coaching call and now they're my largest client. And it's because, from day one, we will teach and show and offer value and grow sales. That's what we do. Well, yeah, it's kind of fun doing a coaching call, you jump on, you're opening up a seller central account, I can draw on your screen. We can go in there and figure out hey, here's all the mistakes you're making, here's where you can best practice improve. We'll hand it all over. And if you don't want to do the work yourself, hire us. Joe: People, do it. I think that it's worth it even if you're just trying to learn something new and manage the business yourself. Go to YouTube, take a look at all of these three things. They give it all away. Normally, you're not ever going to hear me talking about an agency on the Quiet Light Brokerage podcast, we're here to help first and serve you first and in this way, I think we're doing that well. I think my initial conversations with Steven were me grilling him and seeing if my bullshit meter went up and it really didn't at all. So he's a straight sharer. He's helping first. He's educating, sharing it all; he's giving it all. If you want to do it on your own go to his website. Go to the YouTube channel. If you want to have a coaching call, go to the coaching tab on his Web site and spend an hour working with him and learning. Your business is very likely your most valuable asset, you should be spending time on learning how to run it well, number one. But strategically self-serving; look, this is what we do, folks, if you're not understanding the value of your business, what are you doing? You're just driving revenue for what? To put more money into inventory? How much do you take out with 80% year over year growth? Not enough. You will probably make more money on the exit, times two or three than you make running the business on a daily basis. So if you work towards that, understand the value of your business, set an exit goal, and reverse engineer a path to it, even if it takes two, three, four years, you've heard us with those types of clients that we'd love to have on the podcast that have successfully sold their business for millions of dollars. You should do it as well. Go to My Amazon Guy. Check it out. Reach out to Steven and learn as much as you can to improve your own business. I think he's one of the handfuls of people in this space that I've trusted within five minutes of speaking to him. I think you should. Steven: Thank you, Joe. I appreciate it. Joe: My pleasure man, good to have you on. I'm looking forward to working with you in the future. Steven: That sounds like a plan.   Resources: My Amazon Guy My Amazon Guy YouTube Channel My Amazon Guy Podcast How to Appeal Account Suspensions Listing Reinstatements Marketplace Launch Assistance for Walmart, Ebay, and Etsy SEO Articles Advertising Articles Campaign Segmentation Articles Quiet Light Podcast@quietlightbrokerage.com

One of the biggest challenges we face as business brokers is getting sellers to understand that we too are entrepreneurs. Getting people to do a valuation is one of the biggest hurdles because many think that just staying afloat is the goal, and the rest will come later. Sometimes later is too late. Today Joe and Mark are back sharing how to get valuation right. At Quiet Light we work hard to educate and help people find the growth paths that will get them the most value for their business in the event of a sale. We have a ton of experience in giving valuations and can guide current and future sellers to profit. When you build a great business with buyers in mind it will make the transfer so much easier. Episode Highlights: Why a business owner should plan an exit strategy early in the business building process. The benefits and tradeoffs of entrepreneurship. How long in advance someone should plan their valuation. How much it costs to do a valuation. The threefold beneficiaries of the valuation. The importance of the end goal while building. How the valuation process benefits the potential buyer. Ways selling a cohesively built business creates valuable relationships. The level of detail that is essential to a full valuation. Accounting tips for a better valuation as you go. How the valuation process gives owners paths hidden profits. The other three of a successful business How the invisible fifth pillar makes a difference in the overall value of your business. Mark's quick wrap-up of the importance of a valuation. Transcription: Joe: Mark, one of the biggest challenges that we have as business brokers is conveying to people that we're entrepreneurs first. We've all been in their shoes. We're technically still entrepreneurs, right? We run Quiet Light Brokerage. And getting people to get beyond the mindset of running their business and saying I'm not ready to sell I don't to have a conversation about exiting to actually thinking well in advance of an exit is one of the biggest challenges and honestly, it's frustrating. It's frustrating for me and that's why we work so hard to educate and help and we do this podcast so we can get more people thinking well in advance of their exit. But I want to ask you as the original founder of Quiet Light Brokerage, the man with so many stories to tell, why in your opinion should somebody even plan their exit and give it thought well in advance of selling their business; what are the benefits? Mark: Boy that's a big question and I could actually give you a number of benefits and since you put me on the spot I don't have them in order in terms of what I would think would be the most important. But I'll start with this one which I think might not be the most important reason but I think it might be the most applicable for most people. It will resonate with most people and that's this, having a business that is valuable in an exit usually means you have a very valuable business to own. That's the number one reason in my opinion. So let me explain that and flesh that out a little bit. Obviously, if somebody is willing to buy your business for quite a bit of money; let's say they're willing to pay a four-time or five-time multiple, what they're seeing there as a business that is desirable to own, it is going to grow, and it's going to kick off a lot of cash in the future which obviously if you come to me or come to any entrepreneur and say do you want to own a business that doesn't require a ton of work has a lot of upsides and is consistently throwing off money most people would say yes, right? If we talk about the four pillars which we do so often here, do you want to own a business that has a low-risk profile and good growth prospects as the two first pillars? Yes, most of us want to. So the first reason I would say is when you go through the process of planning to sell even if you decide not to sell your business the result of it is that you have a business which is more stable, you know the growth paths available to your business, and you have great documentation in place for the business. So that'll be my number one reason right out the gate. And I don't know if you want to discuss that or I can give you a couple of others if you want. Joe: Yeah well let's first tell the folks listening that there is no special guest today it's you and me and we're going to talk through… Mark: I'm special Joe. You're special. I am special. Joe: Actually, I just gave you hosting privileges on this. Mark: So we're special. Joe: Technically I'm the guest and then I'm not special. Hey, we're not having anybody on today because Mark and I have a ton of experience at this. We do valuations every day so we want to talk about the reason to have one done and then what we do. We'll talk about what goes into it, and what we discovered, and what we learned along the way. So yes Mark if you want to talk first about that first example that you gave an elaborate on it a little bit we can do that and then go into some details on what it's like to get a valuation and what we do here at Quiet Light Brokerage when we put someone through the process. Mark: Oh sure. Actually, I do want to get to the other reason because these are the two that were kind of vying for my attention when you first asked that question. The second reason is that you just really don't know what the future holds. In the 14 years of doing this; at the time of this podcast almost 14 and a half years that I'm doing this, the number of clients that I've run into that are unprepared for the sale is exceedingly high and the number of clients that are unprepared who wish they had planned in advance is almost universal. So if you find that you're unprepared to sell you you've reached that point where you want to and you realize you aren't there yet there's often some sort of regret. It's kind of like thinking about the person who goes into the dentist for a root canal wishing that they had visited the dentist more frequently before. That inconvenience at the time would have paid off. Or for the person reaching retirement age wishing they had done more to plan their retirement. There are so many of these examples where especially entrepreneurs would get focused on the here and now today which is important. Obviously, we need to take care of that without the eye towards tomorrow that when tomorrow comes it often takes you by surprise. For entrepreneurs, we're in such a really cool spot. We have an opportunity to generate income that frankly people in the regular business world or regular careers don't have the opportunity to make. The tradeoff is some of that stability that you would get in the corporate office world and maybe some of the benefits and everything else that goes along with that. But for us, the benefit; the gain is the income potential but also what most people fail to see is the value of the asset that they are building in and of its own right and that alone can lead to early retirement, that can lead to being able to invest in much larger projects, that can be catapulted into something significantly bigger. But it does not happen if you build an asset which can't be sold. And so not only is it good to own a business like this because it follows basic business principles of having a low-risk profile and high growth opportunities and is usually very well documented which is a good thing; it ties into those two elements but it also gives you financial flexibility for the future and also career flexibility for the future as well. And if you don't do it the flip side is you can build yourself a prison which I'm sure you've seen a few people build prisons for themselves and their businesses. Joe: That's very, very hard. You want the independence and life of an entrepreneur and you've built yourself a business prison that you can't get out of and you just can't get ahead. But let's ask this; people ask me these questions all the time, we have a conversation about exits and valuations all the time so I mean I'd just grow you with a few here. Number one how long in advance should somebody do evaluation and plan their exit? We always hear I'm not ready to sell, why should I talk to you now? Mark: At least 12 months, right? I'm working with a client right now and they wanted to do evaluations, see where they're at financially and I said that's great send me your P&Ls and your balance sheets and they did which is awesome. I had a chance to review them and I had some further questions for them. Nothing came back so I bugged them about it and nothing came back. I finally bugged them again and they said well you know what we're doing is we're actually going through and we're eliminating some of these discretionary expenses, we're going to be doing this, that, the other thing and alarms are going off of my head because I see them taking some tax that they probably shouldn't be, right? Okay, I understand where you're going. For example one of the things that they're doing is they're cutting back on advertising spending in order to grow their bottom-line earnings. Well, let me ask you, Joe, what happens when you cut back on advertising? Joe: That's a big no-no. It's convergent graph lines, right? Discretionary earnings go up and your total revenue goes down. Mark: Right. Yeah. Nobody likes that alligator going to the left. Because if you see a graph where the revenue is going down or earning is going up we know that earning is going to go down in the future or to regain the momentum you have to outspend on advertising in most cases. To make it a more efficient one thing but that's on another. So how long; sorry, you asked me a question and you know me, I won't shut up. 12 months at a minimum? I would recommend 24, even 36 if you can just because if there's big changes that you want to make; let's say that you really want to explore that new product line, give yourself some runway to be able to plan that out. Joe: Okay, how much does it cost to do a valuation? Mark: Well it doesn't cost anything. Joe: Why? If it's free what's it worth. I don't understand. What's the business model? You're doing valuations for nothing. Mark: Oh you convinced me. If somebody wants to do a valuation of myself you're going to be paying a lot of money. So for us, it makes sense, right? I mean the number of times when I've started Quiet Light and was working with clients in the early days so many clients were being turned away because; not in saying I won't work with you but I would do the valuation. They say I'm ready to sell my business and I take a look at it and Joe you know the conversation. You and I had this conversation. And I looked at your business and I said okay right now it's worth X but Joe if you wait a little bit time, do some of the things that you're doing right now, actually, you're doing a lot of good things, just wait a little bit you're going to add this much value to your business. Other people it's a little bit different, right? It's hey you know what you have your name, you are a doctor and you are selling an information guide about how to take care of athlete's foot. And your name is plastered all over this. Well, guess what? That's not a transferable business because everyone's buying it based on your name. So I'm going to have trouble selling your business and if we do sell it it's going to come at a discount. But Mr. Doctor athlete's foot if you take your name off of this and show us that it can run for 12 months just as well if not better than it is right now without your name plastered all over it instead of getting maybe a 1½ multiple you're going to get like a 3.2 or 3.3. Joe: And who does that benefit? Mark: That benefits the client. Joe: There are three parties that it benefits. Mark: I'm being quizzed here. Joe: You are being quizzed. So it benefits the guy who's running the business, it benefits Quiet Light Brokerage which is a weird model, right? We do it for free folks but in the long run, it benefits us because you're going to have a more valuable business. But there's this third party that benefits as well and that third party… Mark: Is the buyer. Joe: Right. They might eventually become our clients as well too. So it's an odd model. As my mentor said, Joe, it seems like you guys are giving things away for free on a hope and a prayer that they'll come back to you someday. And I said exactly Walter that's what we're doing and it works very well. We're building relationships and building trust and we're helping first. And strangely the more people we help the more our business grows and the more valuable their businesses become and the more buyers buy great businesses. And it's an endless positive cycle and works very well. With that said I remember being at eCommerceFuel a few years ago and I came back; I sat at the bar with one of the presenters, I cannot pronounce his name. All I know is he swore a lot on stage but he was really good. He was really good and I had a beer with him afterwards and he said something like well I'd have a valuation done but honestly it's free I'd feel like I'm committed to you. I'm obligated to you because I didn't pay you. If I pay you I can just walk away. And it's an interesting viewpoint but we are all about relationships and we want to help. We want to get it done. And the more conversations we can have well in advance of a sale selfishly it makes it a lot easier for us when it comes to the time to list your business. I'm in the middle of a valuation right now where there are two brands in one seller account and there's a royalty arrangement and they have a coaching business and different LLCs. It's just a mess and the add-back schedule is getting deep and long. It's almost as long as the P&L itself which raises the antenna of the buyers. We don't want that. We want to have this clean business presentation as possible. So I'm with you 12, 24, 36 months in advance. Have the conversation. Get an education on the value and the process of maximizing the value of what is likely your most valuable asset. I was having a conversation with Mike Jackness a few weeks ago and we're doing a presentation it was actually at eCommerceFuel and he said the problem is you can't talk too much about exits and planning with these guys. They're doing all they can just to keep the wheels on the bus, to keep revenue going, and not run out of inventory, and do all these different things. I'm like yes, yes, yes, but when they have a clear vision of the value of the business and the view of an eventual exit when the wheel falls off and they've got to put it back on it's a lot easier because they still know where they're going. Otherwise, they're just wandering aimlessly trying not to run out of inventory; solving problems without an end goal in mind which is it's exhausting sometimes. Mark: Yeah and I want to comment on one aspect here about the idea of benefiting the buyer because if you're a business owner you might be thinking well I don't really care about the buyer at the end of the day. I mean I care but when you talk to entrepreneurs and sellers sometimes the approach they take is yeah I hope that the buyer does well with it but that's definitely a footnote compared to what they get out of the sale and understandably so. I'm not criticizing anyone who has that sort of attitude. But in your opinion, Joe why should the seller care about whether or not the buyer gets a good deal? Not a good deal as far as discounted but a good business that they can make a good return on investment on. Joe: Yeah that's actually not very complicated. It's when you do the right thing you will be rewarded. If you build a great business that checks all of the four pillar boxes, that really highlights all of the financial key metrics in a very, very positive way; and these are things that we do in the valuation folks when all of those things are you know 8s, 9s, 10s or a really solid green light guess what? That buyer is going to pay you more for the business. They're going to pay a higher multiple with better terms and it's going to be an easier transaction for you. Most people that are selling their businesses sometimes it comes down to okay like Quiet Light Brokerage we had 2½ offers for every listing that we put out there in 2019. So buyers are liking our listings, they're liking the way the packages are put together because we work with our clients for a long time and sellers sometimes have a choice. And sometimes they want to choose who is going to be easier in the transition afterwards. When you build a great business and you think of your eventual buyer in mind that transition is going to be easy because you've got SOPs in place, you've got a long communication with your broker advisor here at Quiet Light that's going to talk to you about all of those different things and making that transition easier because that's one of the four pillars; the transferability of the business and all the things that generate revenue for it. So now you're asking a short question and I'm giving you a long answer, it's the buyer will pay you more, as simple as that. Mark: The buyer will pay you more. I would also add on there that I think we are quick to dismiss the power of relationships and the people that you're going to meet when you go to sell your business. These are really important things. I had a situation; as you know I have another business besides Quiet Light Brokerage that doesn't take up a lot of my time but I ran into an issue the other day. It was a really complex difficult issue but the seller and I are friends at this point. We know each other pretty well and I hadn't run into this before. So I sent him an e-mail and said hey how have we dealt with this before he came back with a nice long response and insightful and everything else. It was a really good resource for me to have and he and I are on good terms because he's treated me fairly all along and built a business that was worth buying, to begin with. He's a valuable asset and if I ever want to do new things in this space he would be somebody that I would look to partner with because he's already skilled in this area. And when you're selling your business you're typically selling to somebody who is highly skilled and a successful entrepreneur in their own right. Isn't that a good person to have you in your Rolodex? I don't want to overemphasize this point and say this is the only reason you want to do it. I think what you listed Joe what you explained I think that is really where you want to put the focus and emphasis. But there's a whole host of ancillary benefits to creating a transaction that benefits yourself first, the broker who is going to be working with you and your team your partner with you, and also that buyer making sure that they have a business that they're going to be able to succeed with. Joe: Let's talk about what we actually do in evaluation. Mark: Sure. Joe: I'm going to kick this off. One of the first things that; I've got a call this afternoon at 4:00 today I'm doing an initial valuation call with a couple of very experienced entrepreneurs. The first thing we need are financials. So as an entrepreneur, as a business owner, if you're not able to run a profit loss statement with a monthly view going back more than 12 months we're not going to be able to do a full valuation because the full valuation does a year over year comparison. I'm going to look at January of 2020 versus January of 2019 and hopefully ‘18 and so on. And that's part of the financial key metrics in terms of where the top-line growth trends are, where the advertising cost as a percentage of revenue is, and where it's trending. Is it seasonal? We're going to talk about the timing of listing a business sale. Even if you're looking three or four years out we're going to talk about some of those things and we're going to see all of that with the detailed financials. Now today Walker wrapped up a long email chain between all of us where he had a client trying to do a valuation and get his business listed for sale and all he had were quarterly P&Ls. What's the problem in your view Mark with quarterly P&Ls versus monthly P&Ls? Mark: It's just the level of detail, right? I mean I can go backwards. I can take monthly P&Ls and go over to quarterly and I didn't comment; we had a discussion about this within the company and I didn't comment on it before everything resolved themselves. There are some businesses frankly that I think quarterlies worked really well for and probably better for; businesses with lumpy income benefit from having a little bit larger of a lens that we're looking through to even that out so we can see what the real trends are. But it's good to have that option to be able to go to monthly because you have more detail. What you pointed out Joe and I think it's a very good point is that when you get into the transaction and let's say a buyer places an offer we get past a quarter and let's say that we're month one into the quarter, most buyers before they close on a transaction want to know what the business has done over the past month and that time that they're doing their due diligence. Did it completely blow up while they were doing that final piece of due diligence? So they're going to ask for these updated numbers along the way as they're going through the process. Well if you have to wait two more months in order to close to be able to get reliable updated numbers that's just going to extend your timeline, introduce further risk that something happens and the buyer has to pull out and will disadvantage you in that way. And again the lack of detail when I'm doing analysis on a business for a valuation I love looking at the trends I like looking at year over year trends and really I start to look at the different months. And it's surprising the number of businesses that obviously November December get a spike are pretty high but let's say like home and garden stores often get a bump right around April or May so that'll be a second quarter. Maybe it spans two different quarters and you really get a sense for how does this business breathe over the course of a year. Right? Joe: So we're going to look in great detail at the financials. So we want you to run a profit and loss statement for me to Quick Books or Xero with a monthly view going back as far as you can up through the most recently reconciled month. If it's an e-commerce business we definitely want to get those P&Ls on an accrual basis. If we can't get them on accrual basis because you do cash accounting at some point we're going to have to find a way to flip the land cost of goods sold to accrual. Why? Because if a business is growing like crazy you're taking a lot of cash flow from the business and putting it right back into more and more inventory and that's going to depress your seller's discretionary earnings. And your business is a multiple of seller's discretionary earnings which is net income plus add-backs equals SDE. Mark: Yeah I want to talk about this accrual basis because I'm seeing this more and more. People are hearing us, they're hearing this message, and I'm seeing more and more books delivered to us on a false accrual basis is what I would call it. So here's the problem, bookkeepers don't like to do accrual basis accounting because it's hard. It takes more work. It takes more reporting on a monthly basis. They need to dig in, see what you sold, tie that back to the cost of goods sold, and record that. What I'm seeing pretty commonly here is accountants who make a year-end adjustments for the cost of goods sold. And so what you end up seeing is cost of goods sold seems kind of flat or kind of lumpy all throughout the year and then in December all of a sudden everythings out of whack. It doesn't match up. Speaking about the monthly one of the elements that a buyer is going to evaluate when looking at your business if you're selling physical products business or even if you're selling; you can do this if you're SaaS business as well it's just a cost of sales numbers out of the cost of goods sold. One of the key metrics we want to look at is your business getting more expensive to run; in other words, if you're consistently bringing in 5 million dollars of revenue what does it cost to generate that 5 million dollars of revenue? Are your products getting more expensive? Have you had a discount on those products over time? Are there periods during the year where you have to do one or the other? If you are in SaaS business are the cost of sales going up; your commissions that you're paying out the salespeople if you're on a commission sales basis. You can't get these numbers unless you're on accrual basis accounting. And a buyer, a smart buyer, if you want to sell to a smart buyer will want to see this information to see is this trending in the right direction and if not then we need to work this into the valuation; so monthly accrual. Joe: When this false accrual practice is done it's generally done by a CPA not a bookkeeper because they're doing some adjustments for the end of the year. Although just to be clear everyone if you've got an e-commerce business with physical products you are going to file your taxes on a cash basis. But when you're looking at the value of your business we need it on an accrual basis. You should have a CPA for your taxes. You should have an e-commerce bookkeeper for your daily, monthly, quarterly profit and loss statements. You should not in my opinion or view do that work yourself anymore if it takes you three or four hours a month you're worth more than the $400, $500, or $600 a month that a really highly qualified e-commerce bookkeeper is going to charge you. Mark: Yeah and we've made this point before but I'll make it again. It all depends on how you enter the information or your bookkeeper how they enter the information into whatever accounting software you're using. If you enter the information as an accrual basis you can flip to cash with a click of a button. It's very easy to do. Joe: Very easy, yeah. Mark: If you enter your information into your books on a cash basis you can't flip it to accrual. I mean you can, you're just going to get the wrong numbers, right? The software is stupid in that way. It's going to try and it's going to calculate it but you've entered the data wrong. So if you entered it in as accrual you can file in cash, that's totally fine. But for the sake of accuracy, you should be entering it or having your bookkeeper enter it in as accrual. And ask your bookkeeper this too, when I hired our bookkeeper I asked them; I sent them an interview, a written interview and I asked them to explain what accrual accounting was. I know what it is but I wanted to see could they explain it. And I was shocked at the number of foot keepers that couldn't explain it in a clear, concise way. Joe: It's not hard guys. Just we'll move beyond this make your eye bleed accounting part of the conversation. Look up cost of goods sold accrual formula. That's all it is. It's beginning inventory plus purchases minus ending inventory on a monthly basis. That's ideal. But the point; one last point is that if you spend a million bucks a year on inventory and you're just doing adjustment or a guess we have to flip things sometimes to accrual. If you're off by 1½%, that's $15,000. If you're spending a million bucks on inventory, you're spending a lot of money; you may be doing 4 million 5 million dollars a year in revenue which probably means you're doing $750,000 in discretionary earnings. You might be at a four-time multiple at that point; four times the $15,000 that you got wrong on the inventory is $60,000 that you're not putting in your pocket in the sale of your business because you wouldn't spend $500 a month on an e-commerce bookkeeper. Or you're overcharging your buyer by that 15,000 times four because you guessed on the wrong side and things are going to fall apart or go off the rails in due diligence. So get it right, build trust, and move on. Okay, so first thing we need is a clean professionally done profit and loss statement with a monthly view. We're going to import that into the Quiet Light Brokerage import system. We're going to normalize the P&L. If you've ever looked at our listings folks you can see they look pretty much the same; our profit and loss statements. We do that because we see them in every shape, size, quantity, format, PDF, Excel. I mean it's crazy I'm surprised somebody hasn't mailed in a napkin at one point or another to Quiet Light. Mark: I had a notepad document once on a 20 million-plus business. Joe: We don't want our buyers to see that so we import it. We have an importing process where we're going to pull it in and we're going to analyze the key metrics; the financial key metrics that buyers over the last 14 years have told us this is what we look at. They're looking at top-line revenue trends. They're looking at gross profit, trends, shrinking or growing, and then they're looking at advertising cost as a percentage of total revenue and how it's trending. As Mark said earlier you could be spending a lot of money on advertising in the last six months to drive top-line revenue or the reverse and it all weaves together in a web, right? I've had a listing for sale last year and the seller said I handed my advertising off to a VA in late spring last year and I let him run it and five months in I realize things got out of hand and I pulled it back and took it over myself. We do a recorded interview just like we're doing right now on Zoom. We do it on video, we do it on audio, that's part of the package when a business is for sale. And that question may come up then it also may come up in the written client interview and then guess what it all weaves into the profit and loss statements and the financial key metrics when then you can go and look at the advertising trends going yeah look at that Joe was right in July, and August and September the numbers were up and advertising was 17% instead of the normalized 12% that it's been for the last three years. So you can see those different types of things. I had a situation just last week where I was looking at a profit loss statement where the ad spend went through the roof in December but revenue went down. That tells a story that he's struggling against competition and it's not really working out. He's spending a lot more money but sales are going down and lo and behold January and February are down as well. The numbers tell a story so the first thing we've got to get are the numbers, right Mark? Mark: Yeah. And I'm going to share something here Joe that I think was last week or maybe the week before, you actually did a valuation on Quiet Light brokerage. Joe: I did. Mark: Which was done not because we're looking for a buyer although if somebody wants to offer us 30 million dollars let's have a conversation. More importantly you wanted to look for areas of wasteful spending on our part and also key trends for the business as well. So let's think about this in terms of not selling our business, let's think about this in terms of business owners who want to run their business efficiently. Let's say you take the last three years' worth of your P&Ls and they're done on a true accrual basis and you take a look and you see that your gross profit margins have gone from 60% and they're dropping down to 52%. Now you might know why that's happening, you might know what's going on there but you can also identify that as a trend that if you were to correct that trend it's going to help the business. I worked with a client; I'm actually in the middle of doing a valuation for them and they keyed in on this on their own. They were very proud of this. They said look our gross profit margins are 42% right now but what we did over the course of the past year our revenue is down because of a very explainable reason but what we did is we found a product line. We found a method here to increase our gross margins from 42% upwards to 54%, 55%. We were able to test this on a singular product and it worked well and we plan to expand this. Well look what happened by looking at their margins and understanding the margins and understanding that's an area of opportunity they've uncovered a huge avenue to growth which is replicable and from a valuation standpoint it's great but from a business ownership standpoint, it's even better for them because now they can charge a charge more, pay less. Who doesn't want that, right? So let's exercise; again you asked why should we do a valuation beyond being prepared to sell should that they arise? It's a valuable exercise to do as business owners. Joe: I got an email the other day and it was from somebody named Anthony; let's leave it at that. And he wrote Joe this is really, really insightful. I had certain financial goals in the business and now I realize I'm that much closer to them than I ever was. This is making it so much more exciting to run my business every day which is exactly what it truly is. In that situation we determined, he determined; he came to the table with they've decided to charge shipping on items over a certain dollar value and that was going to add their estimate was $180,000 in additional discretionary earnings over a 12 month period. And then they had renegotiated cost of goods sold, they were going to save about $2 a unit and that was going to add $200,000 in total discretionary earnings over the next 12 months. That's $380,000 right there and with another $400,000 now they're at $680,000 they expect to be adding 2020. It's getting that much closer to their exit goal and it just defogs their window put your high beams on you can really see that much better when you're running your business it makes it that much more exciting. A lot of the things that we do talk about beyond the financials, Mark; it's not just about the numbers folks, it really starts with them. It's funny that it starts with them but that's pillar number four, documentation. Let's talk about the other three pillars briefly, Mark. Go ahead and tell me what the other three are. Mark: Risk, growth, transferability. Joe: It took me a while to remember what all four those are and I'm going to hold this up everybody; anybody that's on YouTube. I still have this on my desk after eight years. It says what they all are right there. Mark: I didn't make it memorable enough. Joe: Risk, growth, transferability, and documentation. Mark: How are you as a student in school? I'm just curious. Joe: Oh I fell asleep in accounting class I tell that story all the time. And the bottom part of that; oh look at that I forgot to turn my phone off you're hearing my Twitter. Mark: I heard a bird. Joe: The bottom part of that note there was that our business is relational, not transactional. I need reminders every day. Anyway, risk, growth, transferability, and documentation; we've talked about number four, risk. I've got a business that should be closing in the next few days and 70% of their revenue is from one SKU. What is that called? Mark: That's product concentration or a single point of failure. Joe: Or a hero SKU or a bad idea or a unicorn; all sorts of trouble. I had a conversation with somebody; a couple three years ago… Mark: Bad idea. Joe: Actually it's a bad idea. Mark: It's not a bad idea if it's sustainable just to be clear but yeah I get where you're going. Joe: Well here's the sustainable part, so there was a gentleman that I was working on a valuation for and he had one SKU that generated 90% of his revenue. And I'm like this is a bad idea. He's like well it's a lot less work Joe, it's very defensible, look at our reviews. I mean he had me convinced that it was actually a good idea. And then guess what happened? Facebook changed an algorithm and they're their ads that were working with no longer allowed and they never recovered. Their business was worth two million dollars one month and the next month it was worth like one maybe; two million, 50% cut just like that and I haven't heard from him so I'm sure it's gotten worse and worse and worse. It's a single point of failure. It's a hero SKU. It's a risk. So, therefore, buyers are going to decrease the value when it comes to the valuation. We're going to do it for you and we're going to tell you what buyers think but it's a decimal point or two or three. So instead of at a 3.2 multiple; I'm going to do some math for everybody, simple numbers at 3.2 if you've got $100,000 in discretionary earning you're at 320,000 in terms of list price. Two-tenths of a decimal point off because of a risk point you go from 320 down to 300 or 300 down to 280. It changes that quickly because of a single point of failure or because of risk in disregard. So that's part of the risk, it's the hero SKU; things of that nature. But there's also age, there are trends, right? So generally we want to have a business that's about 24 months old at a minimum. We sold them for less. There are exceptions to every single rule we talked about here. But 24 months is when buyers start to have confidence and they don't discount the value of the business because of age. The other thing to talk about is the trends, Mark, right? I just had a valuation call last night with somebody I've been talking to for six months. And I can't seem to get updated financials on a monthly basis. That's the challenge. And finally, I get them and we have a conversation. We're recording this on March 3rd. I don't have January and February's numbers. I finally have Q4 and top-line revenues down 25%, bottom line discretionary earnings down 30%. So the value of that business just went from three-point something based upon the numbers down to easily 2.5 on the top side. So it's risk because it's trending down and somebody has to jump in and fix that downward trend, right? Mark: Mm-hmm that's right; yeah, absolutely. And one thing with these downward trends you talked about how quickly the discount, just an observation multiples go down much more easily than they go up. It's hard to prop the value and that multiple upwards but people would discount much more aggressively when they start to see problems such as the concentration or as you said the bad idea. Joe: So it is a bad idea when somebody calls and says hey I'd like to sell, I'd say hey you really can't nobody else will buy it. Bad idea. So we touch risk, we touched on growth; these are the first two, let's talk about the transferability of the business. What are the key components to this pillar? Mark: Yeah, the transferability; the easiest way in my world to think about this is just can somebody step into your shoes today and run the business without having a significant decline. Or maybe another way to think about it would be what's the learning curve of the business, or do you have documentation in place that will allow people to be replaced if needed? The transferability is just that and it can encompass a number of things first of all that affects all businesses would be procedures. The procedures that you have within your company to run it on a day to day basis; how do you handle returns if you have that sort of business, what are some common customer complaints or concerns or questions and how do you handle those; do you have a process set up for that. If you're an inventory-based business what is your inventory ordering process and your forecasting process? That's something that should be in a standard operating procedure. So there's all sorts of SOPs. Outside of those elements, transferability can come into your customer acquisition process and I brought this example up before during this call. If you're a doctor and your name is all over the website for your great athlete's foot cure now you've set up a barrier to transferability because you're selling off your own personal reputation. And unless you're willing to give your name and reputation to somebody else which most people aren't and understandably so you need to get that off there and no longer be the key method for customer acquisition. And the last thing would be licensing issues or other requirements to run your business. We've seen this before. Joe you had a valuation I remember this clear as day at Rhodium Weekend when they were doing live valuations up onstage and somebody came with a business we were supposed to be working quiet with other advisors, everyone was going to do valuations so we could see what it looked like live on stage and what was the result; it was an e-commerce business, what was the result of that valuation? Joe: It wasn't transferrable because they were sourcing product from the old; it was the old school, they were required to have a retail space so the business was going to be very, very hard to transfer. And I want to comment on that. Mark: It used to very common where wholesalers would require that you have a brick and mortar store because a lot of the legacy brick and mortar stores were telling their suppliers don't let these internet people come in and just start selling this and so they would require that storefront but it still exists out there. The other issues that I've seen with these licensing issues would be not only the storefront issue but maybe if you actually have to have a license to run the business. And you see this like; we had this with somebody that was selling high-end hair products. And you think well, what's the problem there? Well in order to sell these hair products you need to have a cosmetology license. And so that's a transferability issue. It cuts both ways though. Transferability when it comes to licensing and then these hurdles does set you up with some defense ability that can actually help your risk profile be lowered; anytime that there's a hurdle to jump over a business if you jump over it you're leaving some of your competitors on the other side of that hurdle, so that's a good thing. But the element that we started off with the SOPs and the documentation of your procedures, it's something that everybody should be able to do and should have in place. What are your common procedures, how do you do it, let's make it easy? I know you have something to say here on this, the last thing that I would recommend people do and I actually just did this with Quiet Light Brokerage for your sake and for other people within the company, diagram your business. Write out everybody who works for your business. Write it out; you can draw it if you like to draw, you can use a graphing software. I used Lucid Chart; very easy to use Lucid Chart for this or just write it out and see who has what roles within your business and how does that look. I'll tell you what it's an eye-opening experience because what you find especially in small businesses is you have people who wear multiple hats. You might find some crossover there as well. So that's where I would put transferability. Joe: Too many people are focused on the top line and very proud of the total revenues that they're doing. But ultimately we're running these businesses to make money and to be profitable and we can help you hone in on that profitability and what your business is truly worth. So we've touched on what we do when we import and normalize a P&L and look at financial key metrics. We've touched on the four pillars which are risk, growth, transferability, and documentation. Within each pillar, there's five to six different points that we touched on in a valuation process and we really get to know this invisible; I call it a fifth pillar. Mark corrects me every time. You don't need to Mark, people know this. The person behind the business; the trust and credibility that they have is that invisible fifth pillar. It's the mortar holding it all together. Are you a good human? Do people trust you? Do people like you? Believe it or not, if you are people are going to pay more for your business. You do make a difference in the overall value of your business. So we do all of these things and then we create a profit and loss statement with a detailed add-backs schedule. We go through that with you and we firm up your seller's discretionary earnings and apply a multiple range to it. This is where it gets into the weeds and we won't do it today on this podcast. I'm actually going to go ahead and record a podcast following this one on the three levels of add-backs. There are six different points to each level and it's very eye-opening. A lot of people don't understand the importance of detailing the add-backs. A few folks are like why do I need a broker for I'm just going to sell to this consumer group that's buying up FBA businesses. You need to understand the add-back schedules so that if you choose to sell directly to them you're getting maximum value for your business or even better the real value for your business; not maximum, the real value. It's okay, you can choose to sell to whomever you want however you want but make sure you're getting your own numbers right and that's what I'm going to share on the next podcast. Mark: Fantastic. Joe: Okay, one more final thing. Mark: I was going to say we're getting close to time here. People are like my drive is done. I'm at the office. Joe: We are. You're so eloquent Mark with your words and your e-mails and all this. I say this all the time and people hear you speak. You speak very, very well so why don't you do one final wrap up on why you think someone should have a business evaluation done through Quiet Light Brokerage and how it's going to help them in the future and then I'll give my two cents as well. Mark: Flattery is not going to get you anywhere Joe. Joe: Tell them what I want you to tell them. Mark: Well that I don't exactly know, I'll tell them what I think. So the question is why should people get a valuation done to kind of wrap this up. Your business is most likely your most valuable asset and if it isn't yet hopefully it will be someday and you should know what the value of it is. More importantly, you should understand what drives the value of your business and also what's holding it back. My favorite part of evaluation when I'm doing one; and actually I've got a call here in seven minutes to do a valuation, it's going to be coming up soon, somebody is taking us up on this. My favorite part of a valuation isn't telling somebody what their business is worth right now because that's usually somewhat predictable. It's being able to tell them what I love about this business and what buyers are going to salivate over is fill in the blank, and this part you've done a great job here, the areas where you're going to have some friction in your sale and it's going to cause a discount on the business are these elements. Now what I'm doing there is I'm really giving some insight into where the business is today but I'm also laying out a roadmap for everybody that I'm doing that for to say if you want to grow the value of this asset work on these elements and you know what if there's an element of your business that's really good double down on it. One of the areas that we've talked about in the past is this pillar of growth, we want them to have lots of growth potential for the business; lots of growth prospects for that business and they need to be real. However, if you have easy obvious growth within your business take advantage of it because I would rather multiply a larger earnings number and get that going up because it's a lot easier to grow your value that way. Doing a valuation will help identify those aspects of your business; where is it valuable right now, what's holding it back, and what's the plan to be able to make it more valuable. You don't have to sell the business. If you do these things you will have a business that is more valuable and you're going to gain insights that you never really thought about. I will challenge everybody if you don't do anything else on this call we've talked a lot about finances so I'm going to change it up. Diagram your business and then feel free to email me if you thought it was a complete waste of time. Joe: Or you can go at Mark@QuietLightBrokerage.com. Mark: Tell me it's a complete waste of time. Joe: Mark with a K. Mark: Mark with a K. The only way it would be a complete waste of time is if you have like two people in your company. But then you know what? Joe: Send him an email. Mark: Yeah, right. But then if you're going to do that diagram out the other people that are supporting you. Your contractors, the vendors, the people that are key for your business to run and take a look at that and you might not gain a whole lot of new insights but you're going to see your business in a way that you've never seen it before. Joe: What you're hearing here from Mark is that we're here to help. We're sharing information with you and giving you tools to make a better decision for your business and for the future when you are ready. If you are ever ready to sell. In no way shape or form are we ever here to talk you into anything. We're going to share the information with you. And that was the reason I chose Quiet Light Brokerage back in 2010 to sell my own business. I talked to three different firms. Two were trying to get me to sign a contract. The third was giving me helpful information to build a more valuable business to sell when I was ready to sell. And that conversation was with Mark. Lastly, don't be embarrassed by the size of your business. Sometimes we'll go to Mastermind groups and someone will; I can tell they're uncomfortable talking to us because they're only doing $100,000 in profit. Are you kidding me? You're an entrepreneur, you've built your own business, you're doing $100,000 in profit which is 40% higher than the national average; I don't know the numbers, I'm going to get a correction on that Joe@QuietLightBrokerage.com. It's huge compared to the national average. Don't ever be embarrassed by the size of your business. The smallest one we sold in 2019 was $28,000. Yes, it was a pocket deal because Brad had a larger listing and the gentleman had two smaller sites he wanted to sell off. They're all shapes and sizes. Our average transaction size in 2019 was 1.1 million. It grows every single year but we go through all different sizes. We want to help you get from that hundred thousand dollar valuation to a million-dollar valuation. We've had clients where they first sold their business at 7,000 then 20,000 then 220,000 and now nine million and the next exit that that particular individual has set is 100 million. We want you guys to achieve your goals and we're going to help you along the way. But we're not going to talk you into a single thing. So reach out go to the website. It's the valuation form or sell form I think it is or it shoot us an email at inquiries@QuietLightBrokerage.com and we'll hook you up with one of the qualified advisors here who are all entrepreneurs themselves. Links and Resources: Quiet Light Brokerage

There is always a recession coming, we just don't know when. The US is in one of the longest expansion periods ever known but many predict a recession in the next twelve to twenty-four months. Business owners can make money in a growing economy and they can make also money in an economy that is pulling back. Today we are talking to Jonathan Slain, founder of Recession.com – a company he started in 2008 when he lost his fitness-based business. He saw an opening and borrowed the money to launch his successful recession-proof consulting business. In his new book, Rock the Recession, Jonathan and his co-author highlight ways savvy entrepreneurs can bounce back from internal recession and make plans to be buyers when opportunity knocks. Episode Highlights: Jonathan's recommendations for owners of online businesses to start assessing themselves as recession ready. How to benchmark a small online business with smaller revenues. Importance of board of advisors and mentors and how to find them. The cost and time involved in choosing advisors and mentors. Other actionable advice for someone running an online business to prepare for economic downturn. The importance of having access to capital and credit now rather than waiting for the pull back. Why Jonathan wrote his book. Internal recessions and how to avoid or rectify them. How to research whether what you're selling will survive or thrive. Advice for the business hunter in pre-recession times. Some final tips in Jonathan's own words. Hint; plan now. Transcription: Mark: Joe there's a recession coming. Joe: Is it? I'm not sure I thought it was here 18 months ago or was coming 18 months ago and now it's going to be fall of 2020. What's the story? How do you know this? Mark: Well there's always a recession coming, right? Joe: Oh, yeah. Mark: I mean we know we just don't know when but if you look at; I would encourage people listening; when you're in your car don't pick up your phone but when you get back to your office or get back to in front of a computer do a search for a graph of recession gaps and you'll get to see from 1900 until present when the recessionary periods were and when the non-recessionary periods were. And we are in a period of time right now, one of the longest expansion periods in our economy and so it's not really soot saying or you know looking in a crystal ball to see that there's a recession coming. We know it's going to happen, we don't know how bad, we don't know when exactly but we do know it is. And I had an investment professor in college who would say all the time bears get rich, bulls get rich, pigs get slaughtered and I always thought well bears get rich too but you need to actually plan for; I screwed that up, it's bulls and bears and pigs but whatever you need to plan for this… Joe: I'm just trying to think through what you just said so thank you I thought I was not keeping up with you. Mark: Well you know what I failed that class so maybe that's why I don't know the right answer. But bulls get rich, bears get rich, pigs get slaughtered. And the point was you can make money in a growing economy, you can make money in a declining economy don't get greedy; that's the lesson but there is an in lesson in there, you can make money in a down economy but how many of those listening right now are just looking at their last year being like that was awesome without any idea of what they're going to do when; not if but when the economy pulls back or they haven't pull backed within their own company. And I know you talked to somebody who specializes in this; he owns recession.com for goodness sake. Joe: I know what a great URL, Recession.com, it's Jonathan Slain and he's been through this. He started his own company in 2008 and just had to fight through meeting payroll and all these different things and learned so much in terms of being ready for the next recession and preparing for the next recession. And he's expanded beyond the actual economic recessions that we're talking about and focuses a little bit in helping companies with internal recessions so that if they had a client that had a subscription or SaaS business but only had 10 major clients and they lost two or three within a month or two that's an internal recession. If you've got a hero SKU that you're selling and 70% of your revenue is from that hero SKU you are setting yourself up for an internal financial recession with your business if competition comes in and hurts that. So he has a readiness assessment test; a recession readiness assessment test on his website and it goes through and compares how you are prepared compared to others and helps people take advantage of upcoming recessions and avoid the major pitfalls in being one of those pigs that get slaughtered. Mark: Well let's get right to it because I think this is an important topic for anyone. Anyone out there that has an online business, don't get too fat on your current earnings. Understand that businesses go through cycles, economies go through cycles, let's all survive this next cycle and thrive in the next cycle and it sounds like that's what we're going to learn here. Joe: Hey folks Joe here from Quiet Light Brokerage and today I've got Jonathan Slain with us. Jonathan is the author of Rock the Recession and is an expert in preparing for an economic downturn either in a worldwide situation or a nationwide situation or possibly in your own business. Jonathan welcome to the podcast. Jonathan: Let's rock. Good to be here. Joe: Can you expand on that background a little bit? We don't do any fancy introductions here. Can you tell the audience who you are what you're all about and where you come from? Jonathan: Yeah, so I come to you today from my home in Cleveland, Ohio but I really started my career; I have to disclose that I'm a recovering investment banker. And so that's where I started. From there I went on to own my own business which was five gyms all located in Cleveland. I think you mentioned earlier that I borrowed some money from my mother in law in the Great Recession so we can talk about that. And since then now I am full time doing consulting for large companies looking to grow revenue in or profit and that is what brought me to writing the book. And then when we were talking before we started the show getting me on Fox News lately. So we can talk about any or all of that but that's my story. Joe: Well congratulations on stepping up to the Quiet Light Brokerage podcast from Fox, it's a big show you're on now. Jonathan: Understood. Joe: Are you nervous? Jonathan: A little bit. Joe: We've got some pretty impressive people in the audience believe it or not; they're both buyers and sellers of online businesses, entrepreneurs that are building businesses that they're solopreneurs in some case sometimes they have remote VAs working for them sometimes they have staff. But what would your recommendations be for those that are; first we'll talk about the owners of online businesses and how they prepare for a potential economic recession. Jonathan: Yes. So the first thing that I would do is to assess where you are. So as a business owner it's really to benchmark how you're doing compared to where everybody else is in the market. So if you don't know where you stand then you can't figure out what you should do first to start to get better and improve. When it comes to benchmarking that was where my business partner and the co-author of the book; that's where we started. And so we put up a free tool. It's on our website so if the audience wants to go to recession.com they can go there. It's 20 questions. It only takes about 5 to 10 minutes Joe and you'll get a score from 0 to 100. If you're a zero then it's likely that you're going to go bankrupt in the next recession, if you're a hundred then you're licking your chops; can't wait to pounce when we hit the next downturn. So that's where I'd start. Joe: How do you benchmark in an industry like the online business with a lot of smaller businesses doing less than 10 million in revenue when none of the information is public? Jonathan: Yeah. So what I can tell you is that from all of the responses we've received to the recession readiness assessment, the average score right now is a 37. So I think for people looking to benchmark themselves with other private companies 37 is where we're seeing the mark. If you're above that score that relative to we've got a thousand plus responses you're probably doing better than the average and below that can be nervous. So I think that's one piece but it brings up a good point and I think part of what I was listening to on some of your other episodes is that private businesses, small businesses need to have their own board of advisors. And so that's one of the questions actually on our assessment is do you have a board of advisors? And I'm not talking about your lawyer, I'm not talking about your accountant, I'm talking about people that have a proven track record of making money in business preferably in a similar business to what you're doing to your online business and that will just give you straight feedback. Again I know that some people bristle when I say don't have your accountant or lawyer on the team. My issue is that your paid professionals may not want to tell you what you need to hear all the time for fear of losing your business. Joe: And I think that's a great idea. I call them mentors or board advisers whatever it might be. The question is I saw something on the hustle the other day, we focus on or I watched that and I know Sam and that was a question that someone came up with so like look I'm trying to find a local mentor or board of advisors; how do you find them? A lot of people gave a lot of different responses but what would your advice be in terms of trying to find the right type of mentor or board of advisor and is there a cost associated with it? Jonathan: So I always have a list. I call it the list. I keep it with me at all times. It's the 10 people I'd love to have on my board of advisors; the people I'd love to have as a mentor or a coach. And the issue is that most of them are not going to work with me right now. These are all folks that are super busy; they're overcommitted, and so they're on my list because once a quarter I bug them. I send them an email, I text them, I give them a phone call, I just drip on them and I try to wear them down until they finally get to the point where they're like fine I'll coach you; I'll mentor you. And that's literally I think how I've gotten a lot of my mentors because the people that I'm chasing don't have discretionary time. And so I don't think it's as simple as we listen to the podcast and we decide I'm going to do this thing and you just all of a sudden have a board. It's going to be a process that takes some time. In terms of the cost associated with it, I do think it depends on who you're working with. But I would think an honorarium of 500 to $1,000 per board member per quarter is fair. And I'll tell you that they shouldn't need the money. If the reason they're doing this is turning a little bit extra money I don't think you have the right person on your board. I think that in most cases they should be donating whatever you are giving them to their favorite nonprofit. And I think they should want you to pay them the 500 just to keep you honest and actually listening to their counsel and to keep them honest so that they feel like they have some skin in the game that they need to do some research; they need to read your financials before they get to the meeting. Joe: And how much time a quarter do you take up with someone like that? Jonathan: Yes. So my thought would be a four-hour meeting once a quarter and that they should do anywhere between two and four hours of prep of reading whatever packet that you send to them before the meeting. Joe: Okay, not too bad. What actionable advice can you give people that are running online businesses now in addition to the board members what could someone do now thinking okay, if there is an economic recession I want to do everything I can to prepare over the next 6 to 12 months. What can they do now? Jonathan: Yes. So the second step in the whole process would be to tune yourself and your business up. And by tune up I mean you're going to be doing things like looking at your line of credit. So do you have the right line of credit to be able to grow in a recession? Joe: Why do they need a line of credit? Jonathan: So by that, I simply mean capital access to cash if we get into a downturn and you see an awesome opportunity to buy assets to buy inventory for cheap, to be able to afford talent that you couldn't get access to during the recession or maybe they find a bolt-on opportunity for their business to purchase another business then you're going to need access to capital in order to make all those things happen. Joe: And what forms of credit would you advise someone seek? Jonathan: Yes. So I think that the best would probably be a line of credit that isn't secured by personal assets. If you can't get that done then look at a home equity line of credit and if you can't get that done then look at credit cards. The thing is to have access to capital; you don't have to use it. But here's the deal like right now when the economy is good this is the best possible time to go to your bank and ask for credits. When we're in a recession, when we're in a downturn the banks are not going to loan you money. They're going to laugh at you if you come and you try to borrow from them. I mean one of my favorite sayings is that you can go to a bank; it's like asking for an umbrella except when it's raining. So banks operate in the same way. They want to extend credit now because all the banks are competing for your business. When we're in a recession, when we're in a downturn they're going to start to contract their portfolios. They're going to start to mitigate risk. They're not going to want to open up new lines of credit especially for online businesses; especially for newer online businesses that they see as riskier and not asset-backed. Joe: I'm going to back that up, folks. I sold my business as you all know in November of 2010. I bought a house in June of 2010. I paid mostly cash for it. I sold my business in November and then got busy got delayed and didn't apply for that home equity line of credit until sometime in May the following year. Well, guess what? I had filed my tax returns. I didn't have employment. I had a ridiculous amount of equity in my home and I got declined for a home equity line of credit because of timing. It was ridiculous. It was 2011 at that point as well. So the economy was just coming back and I had a ridiculous amount of credit but because I didn't have a quote-unquote job or income at the time I got turned out for hillock. And I had been given previous advice exactly like this and this is from my mentor; a business person, a business advisor, always have some sort of line of credit available to you. Jonathan is right. Make sure if you can it's not tied to personal assets but the reality in this solopreneur world that we live in for the most part that's really hard to do. If you can't get that non-secured get secured and get it backed up as a credit line with your investment advisors or on your home equity line of credit or any other way that you can. What about credit cards and revolving credit cards; do you advise people to mess around with that at all or is that something that they should avoid? Jonathan: Well I would as a last resort. Again for me, you don't have to use them. But I'm a business owner too; I'm an entrepreneur I always want to have a backup in case things don't go as planned and so part of this is that I want everyone to look forward to the next recession. I know that's weird but that was the idea behind why we wrote the book. I mean the traditional plan for a recession is fire people and cut overhead and just survive and that book's already been written many times over. The idea here was what if we studied people that leverage recessions and use them as a way to hack the system to escape the usual need to hustle and grind to be able to grow your business and then sell it for a dream outcome. And so I'm always thinking of how can we use credit in downtimes to be able to buy assets to buy businesses from other people that weren't smart enough to listen to our podcast; from everybody that didn't prepare. And at the same time if all the stuff we're talking about isn't working; Joe, if people are listening and they're like look my business isn't growing and I'm in a recession myself then you need access to that capital just to survive. I mean at the end of the day we all need to protect the beehive as entrepreneurs because if the business doesn't survive then none of the rest of this matters. Joe: And that's almost moving into the second type of recession and that's just an internal business recession when someone has key employees that leave or hero SKUs where competition comes in. How do you help people in that regard or what actionable steps can you recommend to them that they take to avoid a situation like that or rectify it if it happens? Jonathan: Perfect. I mean I know a lot of people don't always agree with my predictions. I do think that we're going to have some sort of a downturn in the US economy towards the end of 2020. I don't think it'll be a full-blown recession but I do think as we get closer to the election that consumers and businesses will hold up in terms of spending and that will slow our economy down. But if you're rolling your eyes right now, if you're saying I don't agree with this guy I don't think the next recession still 2021 or 2022 and you're about to tune us out then just wait one sec. The idea here is that you brought up non-economic recessions so if your biggest customer leaves that would usually put most businesses into a recession. It could apply to a hero SKU in our case. If you have a competitor come in and attack your hero SKU; same difference, you're in a recession. If your best one or two employees leave and they go start a competing business, you are in a recession. The other one that has recently come up is what about government and regulatory changes? I mean I know the audience understands that vaping is a huge new business and everybody wants to get into marijuana, get into vaping well in New England they recently passed a law putting a moratorium on vaping while they studied the after-effects of it after there were several deaths. All of a sudden all those online businesses that were selling vaping cartridges were vaporized. And that happened overnight. It happened very quickly. So I want everybody listening to have a plan for how they can leverage those opportunities. Joe: Well the tariffs I guess could be considered a recession for some businesses. I've got a client who's tariffs are 42.6% on top of his cost of goods sold; a pretty big impact. Jonathan: They sell online? Joe: No, they don't. Jonathan: Okay. Well so it's thinking through if you're in one of those businesses what can you do? So the question then becomes you want to start to think about how you can diversify. And I know that the more practical tips for this are that I like to use online research. There's a site called Ibis World and it's a paid site. Joe: Is that I-B-I-S? Jonathan: I-B-I-S. Ibis World. You would have to make an investment but they provide industry reports on where they believe the future of different industries are going. So if you're selling line online they've got a report for that. If you're selling widgets online they've got a report for that. And the idea there is that you want to think about industries that will do better in the downturn and industries that will do worse. So in the book, we write about some of our favorite; some of the ones that got pummeled in the last recession, in the Great Recession and the ones that did well. The ones that got pummeled think like jewelry stores not good in a recession. If you're selling high-end jewelry online or in a store; not good, same thing with things like travel and tourism, discretionary goods. That's why I was selling personal training services in the Great Recession; not good. We all know that insurance and finance got hit especially hard in the Great Recession. Not good. So the ones that did well would be things like consumer staples; so if you're selling consumer staples like toothpaste, people are still going to need to brush their teeth in a downturn. If you start to get more exotic with your thinking; think about like veterinary clinics and veterinary supplies, people still spend money and take care of their pets in a downturn. And people don't care; if their dog is sick they'll put it on a credit card, if their dog likes Eukanuba and that's one of the most expensive brands, people will not change their dog food brand if we're in a recession. So if you're an online seller of those high-end pet products; I actually like that market. I think it will continue moving forward. My point just to answer your question though is that if you slow down, if you do some of the deep work of thinking instead of just being busy then I think all the answers are actually out there for how I will position myself, how I would start to diversify if I am in that hero SKU situation. Joe: In other words I had a neighbor tell me once; I was asking him, he was a bit of a mentor as well, he said Joe, you know exactly what to do. You just need somebody else to tell you to reinforce it. Same thing here folks; you've heard Mark and I say it and almost every guest that's ever been on the podcast, focus on the business. It's not about driving top-line revenue only, focus on the nuts and bolts of the bottom line part of the business and that's going to bring value; improve transferability, the documentation, the growth trends, the data behind the business and that's going to bring you more value in the short run and in the long run if you eventually do sell your business. And that leads Jonathan to talking about the other half of the audience; the people that are buying online businesses, those people that tune in week after week as they're on the hunt for that next business that they want to buy and they listen to us. What advice can you give to someone if they're out there hunting for a business in terms of looking for that business with a potential forthcoming recession? Jonathan: Yeah. So I want to start with the story and that's that Paul Belair who I wrote the book with; right before the Great Recession started Paul bought a business. He invested a million dollars with his management team to purchase the business and they grew it during the Great Recession. It was an HVAC business, so a business that helped out with heating, ventilation, and air conditioning; not a sexy business. And they sold it 63 months later. They sold it for over 70 million. Joe: He bought it for a million and sold it for over 70. Jonathan: So the purchase price was higher than a million but they put in a million in cash. Joe: I got you. Jonathan: And then they had some debt to fund the rest of it. Joe: Fair enough. That still sounds like a hell of a return on investment. Jonathan: Yeah well it's 70X on your cash plus; I can't tell you the exact number. He's under an NDA but in any case, it's even over 70 million. So that's why Paul writes the book with me but in terms of being on podcasts, you would prefer to be off playing pick-up ball in Florida. Joe: So hopefully he's using Amazing Aces. We've got a client that bought that business and it's a great brand. Jonathan: Really? Joe: Yeah. Joe: Jonathan: I love it. Well, it's Amazing Aces? Joe: Absolutely. Jonathan: All right I'm making; you know what? I'm still Christmas shopping for him. Joe: There you go. Jonathan: So I tell you that story because part of the way that they did that huge one million to 70 million dollar exit is that they picked a business and then they moved it such that it would have a tailwind in a downturn. And so if you're a buyer right now it's thinking about what kinds of businesses would get an economic tailwind if we were in a downturn and then like my mom says you've got to put yourself in the middle of the street if you want to get run over. So Paul… Joe: Very bad parenting; I don't know what the deal is with your mom but I got to say that's not very good advice. Alright. Jonathan: Paul put himself in the middle of the street because what he did was when he bought that HVAC business they moved it from doing mostly construction; so by construction I just mean when you buy a new HVAC system and they install it on the roof of your building that's a construction project. Joe: Yeah. Jonathan: Those units cost 5 to 20,000; that's a big project, a big investment. They moved it to doing service. So how could they take the equipment that was existing for a business owner and repair it because in a downturn; in a recession, people would rather repair their equipment than replace it. And so Paul saw that trend coming with his management team and totally changed the business to really capitalize on that. And that's how they were able to grow it into this recurring revenue business which again is another big thing I'd be looking out for your buyers. Joe: Yeah. Jonathan: Yeah. How do we get into a business that has recurring revenue? How can we be selling the razor cartridges instead of that one-time transaction? Joe: So find a business in a niche that's not going to be impacted by a downturn whether it's a critical service business or something like the pet space where people will spend money on their pets no matter what and adding some sort of recurring revenue aspect to it. Beyond that any thoughts in terms of their own personal financials and how to prepare for it in terms of buying; is it the same thing lining up as much line of credit and purchasing power as possible? Jonathan: Yeah well actually my favorite tip there is on the personal guarantee side. So I know right now with the economy booming; I mean consumer confidence is at record highs, unemployment is at record lows, the economy is still booming so banks are still willing to do more than they will at any other point in our economic cycle. I love the idea of capping, reducing, or eliminating personal guarantees especially for your buyers. So what does that look like to go to the bank and ask them to do the deal but to do it without a personal guarantee or to put a cap on that personal guarantee? Right now I think bankers are willing to have that conversation. You don't have to give up a blanket personal guarantee on all of your stuff. So this isn't possible generally with an SBA loan so don't worry about writing to me about that because I get it. But if you can do a conventional loan product can you get it so that you can cap those personal guarantees or reduce them? And it may mean that you have to shop banks, maybe you have to go to four or five banks, maybe you have to talk to your local credit union to make that possible. I just think it's worth having that conversation so that if we get into a downturn; if your business does go sideways that you've mitigated some of the risks that you would otherwise have. And it's free to ask. Joe: And on that aspect folks we've had Shakil Prasla on the podcast and Shakil has bought half a dozen businesses and he's done it mostly with non-SBA money and building up credit with banks and probably is avoiding that personal guarantee as well. So Google Shakil Prasla and Quiet Light Podcast and you'll find that episode. In fact, I think if you Google Shakil he's got a new course on how to purchase an online business as well so check that out. Jonathan before we go any last-minute thoughts or advice for anybody listening in terms of rocking the recession that may be coming in like 2020 in your words? Jonathan: Yes. The main thing is to put together the recession plan in the cool rational light of day as opposed to the emotional heat of the night. I want the audience to be thinking about putting together a plan now and then putting it under glass and then if you do have a recession in your business or you see on Fox or CNN that they're announcing that the economy's in a recession you can go over the glass break the glass take out your plan and start to execute it. The issue most of the time is that we don't have a plan and so when we get into a recession whether it's personal or affecting the entire country you're huddled in the fetal position in the corner of your office like I was when the Great Recession hit. I didn't have a plan. I had people knocking on my office door asking me what was going to happen with the business. And I just spent months trying to figure out what the plan was while all my competitors were executing and taking the best opportunities off the shelf. Well if you're still graciously listening to us that's what I really want for you is to be one of the people that can actually be looking forward to the recession and that can just move into execution mode when the next recession is announced. Joe: That's great advice. Thank you, Jonathan. How do the audience find out about more about what you do online and helping them rocking the recession? How can they find you? Jonathan: Sure. Recession.com is the website and yes we really do own recession.com. All my contact information is on there. They can get me at Jonathan@Recession.com or all the infos are on the site if they want to go do that. Recession Readiness Assessment. They'll see all my contact info right at the site. Joe: Excellent. Thanks for your time today Jonathan. I appreciate it. Jonathan: Alright. Rock on. Links and Resources: Recession.com Free Assessment Tool Rock the Recession Ibis World

This week we are talking about add backs, what is a legitimate add back, and how they affect your business valuation. The value of a business is dependent on earnings but it is also dependent on the company's discretionary earnings such as the add backs of owner salary and benefits. Then there are those one-offs – those non-recurring expenses which are also known as add backs. Those are the add backs what we are dissecting on today's episode. A seller's due diligence when it comes to discretionary earnings can help buyers see their potential ROI without any grey area. Episode Highlights: Why we work off the seller's discretionary earnings and what that is. How discretionary earnings are a case by case calculation for each business. The three levels of add backs. Why it's important to take a scalpel to those third level add backs. Questionable add backs – what can fly what cannot. How math and logic are the key tools to determine legitimate add backs. Transcription: Mark: Alright, welcome back Joe. I know you just came back from Blue Ribbon Mastermind; Ezra's event. It was up in Seattle, is that right? Joe: Yeah, a beautiful city and a great event. On a personal level, I had a great time. I took my 17-year-old with me and just explored the city in off-hours. Business-wise I'm telling you Ezra Firestone is sort of the Tony Robbins of the e-commerce world in my view. He gets up there, he's real, he says it like it is, he shares his own information to the Blue Ribbon Mastermind members and it's such actionable, transferable information. And the level of entrepreneurs and intelligence at the Blue Ribbon Mastermind I think is nearly unmatched; it goes very politically correct I think, right, nearly unmatched? Mark: Yes. I think every conference that we come back from is our latest favorite conference. But Blue Ribbon and Ezra's events have been fantastic since we started going to them. And you're right he's just a fantastic guy. He gives a ton of information and has a ton of insight to share. So one of these days I'm going to get to go to the event instead of you because I want to get in on some of these. Awesome, glad to have you back, we do have a couple of conferences coming up. We will be sending these out in our email; our newsletters that go out every Thursday or Friday depending on when we get our stuff together so pay attention to those. Alright, this week Joe you and I are going to do the podcast. Joe: That's right we have two very special guests. Mark: Two very special guests; that's right. We're not bringing anybody else in on this one because we want to talk about add backs; what is a valid add back or what is a legitimate add back? And I know for a buying perspective this can be a little jarring the first time. If you're just coming into the acquisitions industry; if you're looking for your first acquisition and you look at a profit and loss statement that we provide you might be wondering well why are these guys throwing all these expenses back at me, these were on the tax returns shouldn't they be included? So Joe why don't we start with that? Why do we work off to this number of seller's discretionary earnings and what is seller's discretionary earnings? Joe: That's a good question and a great place to start. Just defining it simply is the best way to go. So when you're running a profit loss statement as a business owner; hopefully in Quick Books or Xero or something like that, you're going to get a net income line at the bottom. So let's say you do it for the trailing 12 months you get a net income. But there are certain owner benefits that you get as the owner of the business. You have an Internet-based business; you may write your car off in that business. You may pay yourself $200,000 salary in the business. All sorts of things like that they're generally owner benefits and then there are some one-time non-recurring expenses; these are things that do not carry forward to the new owner so they're classified as add backs. So net income plus add backs equals seller's discretionary earnings or SDE. It is what business is in this general category are multiplied by; they're valued at a multiple of the trailing 12 months seller's discretionary earnings. So that's the critical nature of an add back; it can make a tremendous difference in the value of the business when using a proper formula. If you don't do that the add backs properly you're either going to under inflate or in some cases, unfortunately, some inexperienced brokers might over-inflate the value of your business. So it's critical for both buyers and sellers to know how to calculate seller's discretionary earnings and what is a valid or legitimate add back. Mark: Yeah and I think on that the thing I would like to just add here and emphasize is that there are rules to seller's discretionary earnings. I know I've talked to some sellers, I've talked to some other brokers frankly outside of Quiet Light Brokerage and they feel as if well if you can make an argument for it then we can add it back and they approach this almost as if it's just a free for all as to who can make the best argument. The fact of the matter is there is an actual definition for seller's discretionary earnings and there are rules to follow. Now that doesn't mean that there aren't some situations that require interpretation. And we're going to go into some of those scenarios in this podcast today where you have to try and figure out is this a legitimate add back or not? But at the heart of seller's discretionary earnings when we are showing seller's discretionary earnings what we want to do is we want to show a baseline number for buyers to understand what is my potential return on investment? When you think about all the different buyers that are going to look at a potential opportunity, every buyer comes with their own set of assumptions, right? Some buyers might already have infrastructures set up to run a business; maybe they already have a marketing team in place or maybe they' already have a warehouse if it's an e-commerce business or if it's a SaaS business maybe they already have a development team in place. Those assumptions need to be worked into their own evaluation of the business. What we want to show is a baseline number so that you as a buyer can figure out what your potential return on investment is for you. And that's going to vary from one buyer to the next. So seller's discretionary earnings that's all it is; it's a baseline number, we want to be consistent from one business to the next that's why there are rules as to how we calculate this number. Joe: Right and even though combined we've got 20 years of experience doing this and have sold well over a hundred million in transactions just the 2 of us combined it's still a case by case basis and you got to dig into each particular business and get an understanding of the nuances of it to determine whether or not it's worth doing an add back based upon the size of the business and the total number of add backs and if it should be done. Generally speaking, there are 3 different levels of add backs; the first 2 are pretty standard, it's the third one that we want to spend the most time on today because of the nuances of them. But let's run through that first and second level. Mark, if you want to start off with that first level why don't you address the owner's salaries in add back. Mark: Yeah, absolutely. Joe, I like the format you put together here. You created these 3 levels of add backs; the obvious, the one time expenses, and then the ones that require a bit more interpretation. So the very top of the list here are these a level one obvious add backs. We have things like charitable donations; obviously, that's purely discretionary nature. We have accounting expenses such as amortization and depreciation. And then we have one owner salary. And I know there are buyers out there that look at this and say well why are you adding back somebody's salary; like you need to pay yourself some money? But this is a standard add back that we always include and it's part of the standard definition for seller's discretionary earnings. The reason for this is how you pay yourself as an owner, how much you pay yourself, and the format you pay yourself is completely discretionary. You could in theory not pay yourself any salary and just take distributions from the company from the profits. Or you can pay yourself a very large salary and run all your payroll tax through that which will show up on the profit and loss statement. What we do for the owner's discretionary earnings we do add back one owner salary. But there is an exception to this and that's if there's multiple owners that are working full time on the business. Because we know that if there's multiple owners working on a business you can't add back all of their salary. You can only add back one. Did I explain that well Joe or does that need more? Joe: Let's go a little bit more. What happens; what do you do Mark if you have 2 owners that are working a combined 25 hours a week, one is doing customer service and logistics, and the other is doing sales and marketing. Do you add them both back? Mark: I would add both those back. Joe: Okay. Let's flip it up; let's say that one is doing sales, marketing, logistics, and the other is a developer. And the level of work that that developer does still only takes 15, 20 hours a week but it takes a different skill set than the average person has. Do you add them both back? Mark: No, I would not add both those back. Although we will discuss this in Level 3 add back. I might adjust that second owner salary depending on what they're getting. But the reason I wouldn't do it is because of the specialized nature of it. So what we're assuming here is that the buyer is a single person who is coming in and needs to run this business. I wouldn't expect most buyers to have developer skills to run a business. So maybe you do; if you do, that's great you're going to do really, really well. But most people can't be that sales and marketing plus developer role. I've done this for over a dozen years now. I've run across that skill set a handful of times. It's not very, very common. Joe: That's right. So those are the; even though these are just Level 1 add backs there are some complexities to it that require some attention to detail on the nuances of one business to the next. The only other things that are pretty obvious in there are personal meals and entertainment, travel, mobile home…mobile phones; everybody's got their own mobile phone that expense doesn't charge for. You've already got that expense. Things of that nature are pretty much Level 1 add backs. Jumping on the Level 2 add backs it's really focused on those one-time expenses; things like a trademark or a copyright, patents, things of that nature. And then there are some that are a little bit deeper like legal expenses and lawsuits and enforcement letters and things of that nature even the thing that we have to do often Mark which is referring potential clients; people that we do valuations for that are not using a kind of software. We'll refer them out to a bookkeeper. So in this situation Mark, tell me if we're on the same page. We will get a call somebody has got a great business but they've got 3 years of data in an Excel spreadsheet that is not using any accounting software. Or they might be using Fetcher and piecing different pieces together. I would refer them out to a bookkeeper like CapForge, MuseMinded, Stellar Accounting, Catching Clouds; one of those and get them on Quick Books or Xero. And generally, that's a one time expense for them to build that, put that data in the software in arrears maybe $1,500, $2,000. To me, that is without a doubt a one-time expense and an add back; would you agree with that? Mark: Yeah I would and I'm glad that we agreed because if we don't it's just going to be an absolute brawl on the podcast, right? Inaudible[00:11:27.2] here is fighting with the microphones. No, absolutely that would be a one time expense. It's something that does not carry forward. But we have a great example of that with somebody who's been a friend of Quiet Light Brokerage for a while; Scott Deetz from Northbound Group. He's a strategic advisor who helps clients in a lot of ways. He does a fantastic job with his clients. Specifically a lot of Amazon stores but he also works with other companies as well. He does forecasting and a lot of preparation for an exit. And his fees are all one time expenses. Even though that you can see a monthly fee during that preparation, the goal is to prepare for an exit. So those are fees that get added back in the bottom line. So recasting books going back and trying to recast those books either in accrual format or just cleaning them up I would totally consider that to be a one time expense. As with the other things that you mentioned; the trademarks and the logo design, you shouldn't be punished for the expenses that are really necessary to be able to run the business or only occur once or will occur in the future.   Joe: Yeah. And there is again always nuances; sometimes an owner is going to buy a new computer. But it's their new laptop that they use and they're going to keep that and it's not going to carry for you then that's a one time expense; things of that nature, a case by case basis from business. So again nuances, deep-diving into the business, no 2 are alike. Mark: I have been hearing you say this for a long time our own kind of sliding into this Level 3. But in Level 3 you always say math and logic Mark; it's for math and logic. What makes sense? How does the math work out? And look this actually works out for Level1 and Level 2 as well. You have to use math and logic. But Level 3 is where we start getting into the interpretation of different expenses, right? Because these are the grey area ones where maybe it's not as straightforward as saying amortization and depreciation; that's a pretty obvious add back. Charitable donations; pretty obvious add back. So let's go into this Level 3 and get some examples on a case by case basis. Here are things that we've seen in the past which; look at Quiet Light we've actually had some pretty big discussions with all of the advisors of Quiet Light that we have this large group chats and sometimes we've disagreed in trying to work out how we should actually treat these expenses. And I want to start out with one that Joe you and I have talked about a lot and that would be events, trade shows, and Mastermind fees; how do you handle those? Joe: I almost moved this to the bottom of the list so we didn't start off with one that is pretty tough and it was talked about a lot. This is a case by case basis. If somebody joins a Mastermind group in the trailing 12 months prior to selling their business and they pay $20,000 to join that group, it's a one time expense; absolutely an add back, it kind of moves up to Level 2. But let's say they also choose to go to an annual event that that Mastermind group has. And they do that at their own expense; let's say they go to Seattle, I was just at Blue Ribbon, those people that were in Blue Ribbon; I'm sorry at the Seattle event not all of them were at the Miami event just 6 months prior and so it's definitely a choice to go to the event or not. Some people never go. There are lots of people that are in eCommerceFuel that we've never met because they never go to any of the events. So the choice to go to an event, it's an expense that doesn't carry forward. It's one that I see as an add back. Our team has talked about it quite a bit; that's an add back. But there are other types of Masterminds and events; we'll call them events in this situation that are not add backs that you and I have talked about. So if you are an advertising agency or any kind of company that's going to these events to build your company brand and reputation even amongst the people that are part of the Mastermind it's integral to your business. Like us, we go and we sponsor. That's integral to our business; our business models. We are sponsoring, we're getting our own brand and our own name out there; that's not an add back. An ad agency does the same but might just be a member of the Mastermind or events and is doing training courses in free valuations or free testing things of that nature we would have to really dig down into that one and determine if it's an add back or not. And it's probably not an add back. But for the rest of the folks most likely an add back; the only adjustment you and I have talked about that is we'd have to look at and say logically does it make sense to add this back? Do we have 2 lines of add backs? Is it a business that's valued at 250,000 or 2.5 million? Sometimes you say you know what at this level it's not worth adding it back; let's just leave it alone it's only going to add you another $300 per month back to it and you can play with a multiple in that situation. Would you agree? Mark: Yeah I absolutely agree. You have to pick your battles on this and if you have to really fight to be able to justify an add back you should look at it and say is it really worth it? Like is it is a big enough expense where I'm going to gain enough potential value out of adding it back and making that argument. I want to throw a little wrinkle at you, Joe. We have not discussed this before and it's a question that I'd like to get your opinion on. The difference I see between these Mastermind fees, events, travel-related expenses would fall under this idea of is it a personal development or business development, right? I don't add back the business books I buy. The business books I buy are personal development and I consider that to be just for myself. Obviously, there's a business application for that. I want to become better at what I'm doing but I think that's more personal related. So the line I see is again this idea between is it development for business or is it personal development? So if I go to Pubcon without really putting Quiet Light name on it I'm just an attendee I would consider that to be a valid add back. Let's go into a scenario where you have an employee; let's say that you have somebody who works specifically as a content writer for you and is possibly doing SEO and you send them to MASCON because you want them to become better at SEO for the purpose of your business. How would you handle something like that? Joe: It's off the top my head not an add back. But then you've got to look at the history of the business because that's business development, right? You got to look at the history of it; is that something that they're going to do every year, are they're going to get new information every year and develop their skills, are they going to send different employees, have they done it for the last 2 or 3 years? You got to look at all those nuances again and determine whether or not it's an add back. But because it falls in that business development versus personal development I think you and I know everybody on the team would lean towards no that's not an add back. Mark: I would agree. So again this is where you have to kind of take a fine scalpel here and kind of slice this up and really understand what's going on behind this add back. And again as you went out with this Joe math and logic and I think reason as well. You have to be sort of reasonable with some of these so that it's not just you're going through; sometimes I see sellers come back with their own add back schedules and they're super aggressive and every last dime is trying to be added back. And it's a question at some point where you have to ask them what can we really say is a reasonable add back versus just being as aggressive as possible? Joe: Right. So let's take that scalpel and dig down into a P & L for instance; of course we're not doing it live here, but one of the things that that when you peel back the different layers that we always ask the question okay you're spending a lot of money on advertising here; what type of credit card are you using for that advertising? And then are you getting points back on that, what are you doing with those points? 9 times out of 10 people are doing cashback credit cards or converting them over to travel but they're pushing all that over on the personal side of that's an owner benefit. It's income, right? You're getting cash back, you spend $10,000 you get $400 back. If you spend $10,000 a month on advertising and you get that $400 back and you slide it over to your personal side and it never shows up on your profit and loss statement we need to look at it closely. It's an add back. You can multiply that times whatever number you want and then make the decision, right Mark whether it's worth it to add that back or not. Jason and I had a listing that we worked on last fall where there were about $24,000 in cashback points added up over the course of 12 months and it was very, very measurable; clear and distinct because that person spent a lot of money on advertising plus he bought used inventory that was going to be refurbished. And he bought them from different places on the web. And all of that was done with a credit card. All of that was converted to cashback points that moved over to his personal side; amounted to about $25,000 on an annual basis. It's a significant number. The business was listed at a 4 time multiple. It was cash in his pocket so we did add that back and it bumped the valuation by $100,000. If we're talking about a business that's $4M but that amounts to $3,000 then maybe you don't add it back. You just got to play around with those numbers a little bit and again use more math and logic there. Mark: Yeah and I think here that the key that I would look at would be the consistency of it. If you're advertising budget is over $100,000 a month for example and you're putting that on your Amex gold card and part of your strategy is look I'm getting some margin from the points I'm getting back; that's pretty obvious in that category of its part of your existing business model. But like you said if you have just kind of a small amount of points, it's probably not worth the effort to put that in there and try and justify that. So I think that's pretty reasonable. Joe one question that we hear a decent amount would be website redesigns and we can also throw in here product development or even in the SaaS world development on a SaaS product. Why don't we start to unpack some of these and we'll start with the website redesigns. Obviously, most people who have a web-based business unless you're purely Amazon have a website and part of that is you're going to have to redesign the website every now and then. I mean there are some sites out there that have look exactly the same since 2000 but most businesses do update that and those can be expensive. You can easily drop 10, 20, 30, $40,000 on that if not more. So how would you approach website redesigns or website redevelopments? Joe: I would look at the history in the P & L to get a clue of the way the business has been run because that's the way it's going to be operated in the future. And if there's never been a website redesign and it's on a good current up to date platform like Shopify and the business is trending in all the right directions then; obviously there's been a website redesign because that's the point of this add back so let's say that it's been done in the last 12 months but had never been done before and the business is 7 or 8 years old and it's just been put on a new platform and they spent $20,000 on it I would say that; and I have in the past done 100% add-back on that website redesign. But again it varies from business to business. If I'm looking at a business that's operated like Quiet Light Brokerage just by example you have a tendency to redesign the website often. I think there's been 3 or 4 versions of it in the last 7 years that I've been with Quiet Light. So, in that case, it's either simply not an add back or you do some math and let's say you're going to redesign a website every 3 years you might take that cost; $10,000 website redesign and add back 50% of it or a third of it and things of that nature. Because if it happened in the last 12 months it's not an expense that's going to happen in the next 12 months so there has to be some mathematical adjustment there. And again math and logic; look how often it's been redesigned, do the math on when in the future would you redesign again, and just do partial adjustment more often than not. Mark: Yeah, I would agree 100%. And the thing to look for here obviously if it's on the last 12 months it probably isn't going to get looked at too closely. But I think you have to look at why. Like the Quiet Light website gets redesigned a decent amount and that's simply because I get anxious about stuff like that. That's just kind of what I do. I'm always tweaking; always thinking that I should dust scraps and start it over again. And so I actually do think with Quiet Light it's mostly discretionary in nature but again this reasonableness needs to come in. Joe: Not always discretionary but it takes 12 months every time that you start. Mark: It's absolutely ridiculous. Joe: Why don't you touch on product development? It's interesting you bring that up. I've got a physical products e-commerce business and I'm developing new products; do I get to add that cost back? Mark: Yeah I think again we need to use math and logic here, a little bit of reasonableness, take a look at what type of business you are in. Here's the thing about e-commerce; Chad Reuben when he was on the podcast about a year ago mentioned this, product development is the lifeblood of most e-commerce businesses; you rarely, rarely run across a business that is truly evergreen with its product or you never have to iterate. Apple comes out with an iPhone every year. Android products are constantly coming out with a new phone every year. Car companies constantly come out with a new car every single year. Product development is the lifeblood of businesses. So on that note no I don't think that you can add back product development costs. I do think maybe if you're coming out with like a large truly one time sort of burst maybe I would look at it. Joe: Maybe if there's a mold, right? If you paid $5,000 for a mold of that product that mold is going to last 10, 20 years perhaps. That mold maybe partial add back but yeah I'm 100% on the same page; product development is the lifeblood of a business. The molds thing is so rare; 105 businesses I think I've sold in the last 7 years and I think maybe only Sean van der Wilt's business has actual molds that are part of it and that he owned. In other cases, it's generally the manufacturer that has the mold anyway. So yeah adding back product development expenses can't really do it. What about the SaaS development? We're not all e-commerce here; we're selling content and SaaS and things of that nature as well. You've got a developer that's been doing some certain projects within the last 12 months; are you adding that back? Is that black and white? Mark: It is not black and white but I do think that if you are looking at for example your initial build of the software that's going to be very intense, very cost-intensive. That I think could be added back. Regular maintenance, regular feature updates; absolutely not because a SaaS business needs to have updates, needs to have new features added. If you're going to redevelop the entire SaaS product from the ground up; maybe you're switching technology stacks, that's something where I would take a look at that and again reason and logic need to really…math and logic really need to reign with this. But generally speaking no; just as product development is the lifeblood of an e-commerce business, software development is the lifeblood of a SaaS business. Joe: We are 100% on the same page. There is no question about it. Mark: No fights here, thank goodness. Joe: Yeah. We've got 3 points left and really the last 2 points I think are ones that get missed most often and can add a tremendous amount of value to the business. But the first one of the 3 here is pretty obvious and maybe we could have we actually talked about moving this up into Level 1 but it's a repaid relative. I sold a business a couple of years ago where the owner of the business paid his brother to do customer service. They paid him $20 an hour for 20 hours a week worth of work. I talked to the brother. I talked about his job and what he did. He said yeah I really only put in about 5 hours a week. Most of what I do is automated; it's canned responses with customer service. And so we talked about the work and the level of detail there and just added some logic there and some math and said look you are grossly overpaid. Your brother loves you. I'm going to suggest that he fires you; and again this is just before Christmas, of course, he didn't. Mark: Oh my you told him to fire his brother. We've talked about this before. Joe: I know. It was a $10,000 add back or whatever the number was. So we just did some math, right? We said alright how much does it cost to get a really good high-quality virtual assistant; $4 or $5 an hour. Okay, let's double that. We know you're only working 5 hours a week but we're going to go with you 20 hours a week times whatever the number is and we're going to add it back. So instead of the $20 an hour times 20 hours we took $10 an hour on those 20 hours a week and we added back the adjustment there. It's in black in white in the add back section with an explanation of why. So math and logic applied to a situation like that; that overpaid relative and it absolutely works and is am add back. And it has to be a big enough number to be an add back. In this case, the total add back was a pretty sizable number. So pretty clear there in my view would you agree with that on Mark? Mark: Yeah I had a guy who had a really cool business. His mom was doing his bookkeeping and he was paying her $250,000 a year for her bookkeeping services. Joe: What? Mark: That's a pretty expensive bookkeeper. That's a pretty obvious case of look it's a relative; he's paying his mom good for him, what a great son; better son than I am to my mom, and pretty obvious add back. And look I'm going to tie in something that we had from Level 1 here and that is where you have 2 owners and you brought up the example one owner is business development and marketing, sales and marketing and the other one is a developer. And I said well we should take a look at that developer side probably and probably not add back his salary but you've got to take a look at how much is he getting paid. I'm dealing with a client who has that sort of set up and the developer side; they're both getting paid the same amount of money and it's basically the profits of the business. We're going to add back in a reasonable and a pretty generous salary for a replacement development. And that's kind of the way that we would look at that is what is a replacement cost? You don't want to be super aggressive on that. It's got to be reasonable. It might be a little bit generous to say here's what the replacement of this person would cost. So you can do that with relatives. It can get a little bit tricky. I had one company that I dealt with where literally the company was basically run by this guy's family which brought up some issues with the transferability of the business. Because there were so many people involved that were family related but they were all getting these big fat paychecks. And so if we had gone to market; we didn't go to market with that one but we would have had to go in and try to find reasonable replacement costs for most of these people which will be then a little tricky. Joe: Yeah. Look, I can assure all sellers out there; all business owners that are smart enough to do some thinking and planning in advance of a sale, your buyers are going to be intelligent people that are going to be thorough and diligent. And doing that logical adjustment that Mark just talked about for that developer who's your business partner that is a non-transferable skill you've got to hire that out. You're just going to have to do that and it's going to help build trust and help you achieve your goals in getting your business sold. If we have to push the multiple if it makes sense because there's other amazing trends in the business then we can push the multiple a little higher as long as it's still within a reasonable area. The next add back is one that I just did this year as an example with Mike Jackness when we sold Color It. And I'm going to go ahead and mention the podcast series that Mike and I did because I think it's invaluable for both buyers and sellers to listen to and Mark I'm going to just tell you right now I think that you and I did a decent job in doing the intro for the podcast and then me doing an interview with Mike on our podcast. Mike did a much better job on his podcast. So I'm going to point people… Mark: They're actually pros at this. They're very good at it. We're just kind of fly by the seat of their pants. Joe: Yeah. He did an amazing job. And he actually did a series of 4 in total; 2 of them were with me and the one at the beginning one at the end was with his staff, his staff down in the Philippines before and after the sale. So he went through the whole arc. But it's episode 247 of the EcomCrew Podcast and the first one was Preparing Your Business For Sale and the second one was What It Was Like Going Through Due Diligence And Actually Getting It Sold. Now one of the things that we focused on in Mike's add back schedule was cost of goods sold. Let me give some just general numbers here; broad examples, these aren't actually from his business but let's say that what he did do was he renegotiated the cost of goods sold on one particular ASIN. He could have done it on more if he had planned in advance of selling his business instead of deciding to sell his business because he was emotionally ready to move on. We could have waited another year and he would have had a much more valuable business. But we didn't do that because he was ready. So in this situation again it's magic and loss; math and logic; oh my goodness, see this is why Mike's podcast is better…math and logic. Mark: Well I'm sure a lot of buyers out there look at sleaze and say this doesn't look like magic; it doesn't make sense. Joe: I said magic and loss; oh man, oh man. We're not editing that out. Chris, don't touch that. Alright, so Mike renegotiated the cost of goods sold on 1 ASIN. The reduction in cost was it came down $1.60. It was already on the books. He already had product in Amazon FBA and it was shipping and it's been in FBA already for 2 months. What we did; it was a $1.60, so what we did was we looked at the sales per month of that ASIN for the other 10 months going back in the P & L took that dollar amount and multiplied it times $1.60. Let's just say for simple math it was 1,000 units a month, right? I say simple math but here I am looking to the other calculator. If you got 1,000 units a month times $1.60 we're looking at 1,600 dollars a month times 10 months it's a $16,000 mathematical and absolutely legitimate add back; math and logic there. That times the multiple applied to the business; let's just say if it's 3 times that's a sizable add back, it's $54,000, no, $48,000. How's my math? Mark: We'll 48,000. On this I want to go back to where we started this conversation; why do we do these add backs at all? Again it's the idea that we want to show a buyer they're expected return on investment and we want to show a set number standardized approach so that you can interject your own assumptions. And the reason that this is completely valid to do even though you can take a look and say well the actual expenses were not this is because this is the forward-looking numbers that we know are going; the way that the business is going to be run in the future. Joe: That 10 months of expenses there will not carry forward so we needed to make an adjustment for that. Mark: Exactly the only thing we would need to verify would be in due diligence the supplier is going to give the same or similar terms to the new buyer. That would be the only thing that we really need to confirm there. So I think this makes complete sense. Joe: 100%. Mark: Did you get any pushback from buyers on that? Joe: Not an ounce and the buyer that bought the business is; I mean he went to Harvard, he's a very smart guy, he's bought 4 other businesses from Quiet Light Brokerage, and he understands all of this. And he's got investors that review everything so no pushback at all. Mark: Yeah. Alright, next one on your list you have here reduced fees times units sold. Joe: Look, everyone listening that's considering a sale of their business this last one is why you cannot have one conversation with a business broker for 30 minutes and decide that that's the one you've got to go with because if they're incredibly good at sales they're going to talk you into something in 30 minutes. Now I shouldn't say that because; well, look you've done research on Quiet Light, you've listened to the podcast, you've listened to different examples so maybe you can but you got to dig deep. This happened to me recently in like the third conversation on having in a review of the profit and loss statement. This is why we review profit and loss statements. We learned that the owner of this particular business that I'm talking about repackaged; worked on repackaging all of his product SKUs and in doing so it changed the level of pick pack and ship at Amazon. So he was at let's say Level 5 and he came down at Level 4; now these are costs. They're not called that but his fees at Amazon went down. Let's call it a dollar. So instead of $5 pick pack and ship fee, it was $4 because it was a smaller package, lighter package, things of that nature. So he did that. Again let's go to the same thing we did here with Jackness's business. He did it in the last 2 months, it's on the books for the last 2 months, so we're going to the prior 12 months and went okay how many units did you sell during those prior 12 months or 10 months times a dollar per unit and we're doing an add back for that because that adjusted expense in the past went away and it does not carry forward; same thing, different scenario. Mark: Yup, absolutely. So I think there's 2 ways when we're looking at some of these kind of I don't want to creative add backs but the ones that require a little bit more explanation. The one thing that I would just encourage people to keep in mind is that when we see some of these add backs which go back and recast numbers there are some situations where it makes sense to rather than going back and doing that add back bake in some of the value into the multiple as opposed to the trailing 12 months. If we keep in mind that the basic approach to estimate in value in a basic valuation approach would be your trailing 12 months discretionary earnings times some multiple, it doesn't matter if you increase your discretionary earnings by 10% or increase your multiple by 10%; the result on your valuation is going to be the same. And so I think there is a little bit of discretion and strategy that needs be taken into account by both the broker and the seller when it comes to determining where do we want to get this value in. The thing you need to always keep in mind is are you actually offering real value to a potential buyer? Is this really going to be valuable for the forward-looking future for that; I don't know if there's a backward-looking future, for the future of the new owner of the business and where are they going to get that value? So you might be hearing this and thinking this is pretty complex I don't know if these things would be really a legitimate add back or not. Look if you find this difficult that's because some of it is and some of it does require discussion. And as I said at the beginning we have these discussions at Quiet Light all the time. We will share something with the entire team and say what do you guys think this? Here's what I'm thinking, I should have it added back. And sometimes we disagree but we always are able to figure out where that line should be. So I'm going to just throw this invite out; if you have a question on whether or not something would be an add back ask us. Hound us and say what do you think of this; do you think this would be a legitimate add back or not? And that would be on the buy-side or on the sell-side. If you're look at an opportunity and maybe with another broker or directly with the seller and they're adding something back and want to know what our thoughts are let us know. We'd love to weigh in on it. Joe: Let's route another invite there and let's find a way to do an actual valuation; we'll do video as well as audio. We'll remove the client's names. We'll just use first name and we won't use the business name. And we'll do it sort of Mike Jackness, Ecom Crew Under The Hood Valuation and record it so everybody can hear the process we go through. Man that being in a 2 or 3 part series because it's such a long in-depth, detailed process. The only thing I want to throw is that we are developing webinars here at Quiet Light that will be up on the new 48-month long redesign that Mark's been working on. Yes that's a little wise-ass comment there but the webinars will be up, they will be available in detail for you folks to dig deeper and see us go through some of this add back schedule in the process of doing one that is titled “What's a Legitimate Add Back?” and all of this will be in webinar format where you can see actual profit and loss statements and whatnot. Mark: Sounds great. I look forward to doing those. I don't have anything else on add backs. I think we've just covered the entire topic as deeply as you possibly could actually no we could probably talk for another couple of episodes in some of these things but I don't have anything else to add for this one. Do you have anything Joe? Joe: No, we're good. It was great having 2 very special guests on the podcast; one much more special. According to Andrew Youderian, you're special. Mark: I like that guy. He's such a good guy, isn't he? Joe: Andy Youderian. Has anybody reached out to him with my little Easter egg stuff that I did on the video? But we're not showing the video yet, right? Mark: I had and actually we are showing the video and that's something for you guys to know. Subscribe to us on YouTube at Quiet Light Academy. These podcasts are now up in video form so you can look at our pretty faces while you listen to us argue about add backs. I don't think anyone has reached out to him about the little Easter egg we had in that podcast episode. Because I talked to him recently and he didn't bring it up. Joe: So for those that have no idea what we're talking about and have stuck with us at the end of this podcast here's the deal. I was driving down the road listening to the Quiet Light Podcast where Mark had Andrew on with state of the e-commerce. Mark: One of the best episodes I think we ever did. Joe: Whatever you say Mark. I think this is the best episode we've ever done. Alright, so Andrew says yeah you guys have been doing a really good job. I got to tell you Mark I think you have a bit of an edge over Joe. Because Mark and I always competing with who's got the best episodes and the most downloads. And I swear I almost; I had to pull over I was laughing so out. It was so, so funny. He's a bit of a prankster. So I figured I'd get him back. And so I had an Incredible Exit Series on, we had somebody; actually it was an Incredible Acquisition, right? Karl Selle bought Smart And Fresh and so we had Karl on a podcast about that and during the podcast I pretended that our producer Chris interrupted us and handed me a sheet that it was kind of an emergency, he was looking to get in touch with somebody named Andy Youderian. I could not pronounce Andrew's name properly. But for those that go to the YouTube channel you'll see that I have an EcommerceFuel t- shirt on and that the EcommerceFuel podcast is in the background; a mouse pad is in the background. So clearly I know Andrew Youderian. I want to call him Youderainan from now on. Clearly I know Andrew. My kind would call those Easter eggs. I think that's what they're officially called in Marvel movies. So I just threw in a few Easter eggs there. It was kind of fun. We did get one person that sent an e-mail to me and he goes I think the person that your producer is looking for is Andrew Youderian for EcommerceFuel. And I said well that was kind of a joke. I had to send a note back. But it was kind of fun. Mark: Well he was right though. It is the person we're looking for. We have an Easter egg coming up in one of the movie quotes so you guys have to dig deep on these movie quotes. And I don't know which episode it's going to be live on. Listen to the different intros. There's going to be one that you're going to have a really hard time finding but I'll tell you what I want you to find this one whenever it airs. That's really, really difficult and I will get with our producer next week's podcast and make sure that we give you a little hint as to which podcast to listen to for this movie quote because it's just an absolute gem. Joe: Awesome. Let's wrap it up with that. Links and Resources: ECom Crew Episode Quiet Light Academy YouTube

We’re back for another info-packed episode of Keto Talk! In this episode, Jimmy and Dr. Will Cole answer your questions about Edema After Starting Keto, Upper Respiratory Infection, Pituitary Microadenoma, Swollen Ankles On Keto, Increased Blood Pressure And Racing Heart Eating Very Low-Carb , and more! “Saturated fats can handle a higher temperature as a general rule, and the benefits far outweigh the concerns.”  - Dr. Will Cole Will and Jimmy are featured speakers at the August 17, 2019 Toronto conference called Great Canadian Keto. HOT TOPICS: Is it possible to be making therapeutic blood ketone levels, but still experience higher blood sugar levels at the same time? Are you concerned about increased cancer risk because of heterocyclic amines (HCAs) and polycyclic aromatic hydrocarbons (PAHs) in meat? How should I handle eating keto when I work the night shift half the week and daytime the other half of the week? If heating fats make them more carcinogenic, then why would you ever consume cooked fats from even bone broth? How can someone without a gallbladder who has also had gastric bypass surgery do a ketogenic diet? Paid advertisement “Folks think that you can’t eat keto after having their gallbladder removed. Christine had hers removed in 2006 and she eats more fat than I do.” Jimmy Moore HEALTH HEADLINES: The Keto diet gets lots of attention for weight loss. This cardiologist says it’s still not good The keto diet could lead to this scary lifelong side effect, studies warn 11 reasons why you’re not losing weight on the keto die Is Aspartame Keto-Friendly? Missing pizza on the keto diet? This major chain now has a low-carb crust STUDY:  Striking study reveals how dietary fats enter the brain and cause depression Paid advertisement Your Questions: – Why did I develop edema in my lower extremities after I started eating a low-carb, high-fat, ketogenic diet? Hey Jimmy and Will, I am a natural bodybuilder and have been for over 40 years now. For the past decade, I’ve consume a 100% grass-fed and non-GMO organic diet. In fact I was Paleo before I even knew what that was. In 2017 I started on keto and it was an easy move over from Paleo. I got into a state of nutritional ketosis very quickly with blood sugar in the 80’s and blood ketones between 1-2. My blood pressure improved to 110/75 and fasting insulin down to 3.8. I felt great and had no medical issues whatsoever. But then I noticed something pop up out of nowhere last year where I developed edema in my calves, ankles, and feet. I tried upping my magnesium, drinking more water, taking in substantially more sodium, moderating my protein, and doing an 18/6 intermittent fasting schedule. None of it has worked. I weigh 150 pounds have have 9% body fat. Do you have any further suggestions I can do to help with this? What is it about going keto that perhaps let to this condition? Warmest regards,  Joe – Why have I developed several upper respiratory infections ever since I started keto when I’ve never been sick like this in my life? Hi Jimmy and Will. Thank you for what you guys do for everyone in the keto community. I only just found this podcast this year and have binged listened to almost all of them. I am a registered nurse and have taking care of the sickest of the sick in the city of Pittsburgh. I now work normal M-F hours with low stress.  I’m on Synthroid for Hashimoto’s hypothyroidism, but my immune system has been so stellar I’ve hardly ever gotten sick. But ever since starting on keto, I’ve had three upper respiratory infections eating this way. While I’ve lost 20 pounds, have great brain health, increased my energy, and spontaneously intermittent fast for 16 hours at a time while stabilizing my blood sugar and increasing my blood ketone levels, these respiratory issues are discouraging and throwing me for a loop. I’m assuming it’s a gut health thing that needs to be healed from years of neglect before starting keto. How do I provide a boost to my immune health to prevent another infection from developing?  Thanks for your help, Rosslyn  – How do I manage my cravings to consume way too many calories on keto because of my pituitary microadenoma condition? Hi Jimmy and Dr. Cole,  I’ve been on a weight loss journey for about a year, and went keto 6 months ago. Before keto, I lost over 15 pounds, then switched to keto to optimize my athletic performance and brain function while continuing to lose weight. I also wanted to try to heal my hormones with a low-carb, high-fat diet. I have a pituitary microadenoma which is essentially a small tumor on my pituitary gland that secretes high levels of prolactin. These high levels of prolactin suppress estrogen production. In short, it means I have high prolactin, low estrogen, and have not had a period in 2 years which ultimately is leading to infertility.  I am wondering if this hormone imbalance could be suppressing my weight loss and/or increasing my hunger and questioning whether keto would be a useful tool to balance my hormones. I haven’t lost any weight since beginning on keto and I still struggle with food addiction/binge eating. Unlike what other people report eating a ketogenic diet, I don’t really get full or reach satiety until I’ve consumed way too many calories. I know calories aren’t what they’ve been made out to be, but they do have to count because they’ll get stored as body fat if consumed in excess, right? Got any tips for me? Thanks guys and keto on! Kayla from Canada – What can I do about the swelling in my ankles and lower legs that started happening after I went keto? Hi guys,  I love your podcast! I’ve been keto for over a month and have been testing for blood ketones. I’m doing well but I have been retaining water in my ankles and lower legs. I get leg/shin cramps at night so I have been adding a magnesium/potassium supplement to help. They have eased up quite a bit but the swelling has increased. Ketones are still strong, but my weight loss stalled out after losing eight pounds. I had a total hysterectomy at 35 years old with no hormone replacement therapy and I’m 56 now. Any suggestions on what to try next?  Thank you for your help, Dede  Paid advertisement KETO TALK MAILBOX: – Why does my blood pressure and heart rate shoot way up when I am eating very low-carb keto and engaging in periods of fasting? Hey Jimmy and Dr. Cole, I’m listening to an older episode where a woman had asked about cortisol and low-carb. I haven’t taken a test for it yet, but when I fast, long-term or intermittent, and consume a very low-carb diet (under 20), my blood pressure shoots through the roof and I get major heart palpitations. When this happens, I purposely knock myself out of ketosis and my heart rate and blood pressure normalize again. I’ve been keto for four months and I’m not really losing any weight yet. I’ve felt pretty good eating this way, but I have noticed being a bit more tired than normal at times. I take all the recommended electrolyte supplements and plenty of water and salt. So what am I doing wrong? Thank you, Lisa

It seems that with certain Quiet Light Brokerage listings, there is just a mad rush of activity as soon as they come out. Most of the listings that we put out will receive at least 100 inquiries right away, but what does it look like when we put out a “hot listing” that garners two times that much interest? Today we are discussing the type of business that gets 9 offers. We go over how many inquiries those types of listings get, how much discussion and conference calls happen around these potential transactions in a short time frame, and just what it takes to get these listings under contract. We hope you enjoy this little case study of how to set up for a successful sale from the seller side and tips for how to act from the buyer side. Being thoroughly prepared and running a real, viable business are keys to success. Episode Highlights: The main characteristics that made this business so attractive. How the pricing decision played into the transaction. The process of selecting the 15 buyers we entertained. The conference call screening process between the seller and potential buyers, facilitated by the broker. How to choose a buyer and deal with disappointing those who lost out. The 4 pillars of success and how this business checked them all. The one intangible thing that took the business to the next level and attracted the buyers. How the packages that Quiet Light puts together tell a story about the listing and the journey of the brand and its seller. Transcription: Mark: It seems that with some Quiet Light Brokerage listings as soon as when they hit the marketplace there is just an absolute mad rush of buying activity towards those listings. Now to be clear most of the listings that we put out at Quiet Light Brokerage, the vast majority, in fact, it could be an exception to the rule is going to receive at least 100 inquiries from buyers and calls right away. So what does it look like when it we come across a “hot listing”? Well, it looks like a lot of conference calls scheduled very, very shortly and just a mad rush of inquiries probably upwards of 200 and 250 within the first 24 hours in some cases. What's the difference between a listing that is not as hot like that that gets on a 100, 150, which is still a lot and something that doubles that? Joe, I know you launched a listing 3 or 4 weeks ago from the time that we're recording this episode that we would definitely throw in that hot category. What were the top line statistics on that? Joe: It was a let's call it a 95 to 98% Amazon business. It was 30 months old. It was in the category of America's fastest growing recreational sports. It was run by a single owner operator that was a stay at home dad that was a CPA by training yet outsourced the bookkeeping to an e-commerce bookkeeper. $440,000 in discretionary earnings and we went out on a 3.3 which is lower than my recommendation. But in this case, the conservative CPA said no I don't want it to be listed for too long. I really like to get it sold let's … can we go out at a three. I suggested a 3.5. Rarely does somebody come back and say can you sell it for less and he did in this case and we ended up [inaudible 00:02:50.9]. Mark: The guy sounds like one of these unbelievably likable guys. How many inquiries did you get within that first 24 hours? Joe: You know I didn't count the first 24 but I know that you and I were … we were in Dallas and on the way to Houston for a meeting and I think we pulled it up and within the first 4 hours, we had something like 185. So within the first 24, I think it probably doubled to close to 400 would be my guess. Mark: That is insane. Now I do remember obviously these are all loaded questions so anyone listening like I know the answers to most of these questions— Joe: No, he doesn't. He forgot them all. He can— Mark: I actually— Joe: Yeah. Mark: I was introduced by the way this is completely outside; a complete diversion here. So sidebar I was introduced at a group of CEO's yesterday. And in front of the entire group of CEO's the guy that introduced me said “And Mark, by the way, took his son, they have seven kids or is it they're expecting their seventh kid. He's got so many kids he forgets their birthdays because he took his son to urgent care the other day and he got his birthday wrong.” I'm like thank you for that. I'm so glad to be known as the guy who forgets his kids' birthdays. Joe: You've got a lot of kids man. Mark: I got the month right. I didn't get the year or day right. I know the answer to this. We were in the car together and your phone was blowing up. We were at a conference. You were trying to schedule out all of these people wanting conference calls and you did this right over the conference itself which maybe we can talk about in just a little bit here. Within that first 24 hours if you would just guess how many conference call requests did you get? Joe: Well, let's keep in mind that that our process requires that the buyer either speak to me first before requesting a conference call or we've spoken in the past. So in this case in the first 24 hours, I had at least 10 requests for conference calls with buyers that I've already spoken to in the past that have looked at prior listings of ours and they wanted to make sure they were on a call with this one. We wound up with a total of 15 on this. As I said the owner of the business, Paul, is a stay at home dad. It's funny and I don't know if they loved this or just love making fun of Paul for this but he's a stay at home dad right? His son is a couple of years old but he takes his son to daycare at eight and picks him up at five. So I'm not sure how stay at home that is. Anyway so … but the beautiful thing is that he maybe … Paul if you're listening I'm sorry, maybe it's nine to four and you expanded it. Either way, you're a great guy and people love you and your business. I am not getting a Christmas card from Paul this year. Mark: I'm sure you are. Joe: Anyway, he was able to clear his calendar which was great. I was getting so inundated and I was at eCommerceFuel and I'm like I can't do these conference calls. And I had said to Paul on the way through eCommerceFuel look I want to bump this launch a week because it's going to get crazy and I'm not to be able to be on this conference calls. He says oh god really? Come on I really want to get it launched and it totally got my heartstrings so we launched it anyway. So I took the two days … it launched on a Wednesday I think and I took Thursday and Friday and all I did was talk to folks and schedule the calls for the following week. Paul cleared his calendar. We set up a link so that people could just grab a link and schedule them. We did a max of three a day separated by at least an hour a piece and we wound up I think by Monday closed the business. We had all 15 slots scheduled. We capped it at 15 which is really five too many. You just don't have to have that many conference calls. Normally we have three to five conference calls and we have at least one acceptable offer. Here we had 15 scheduled and we wound up with nine. Mark: These are 45 minute slots or are they an hour long slots? Joe: They were hour long slots. I go with an hour yeah. Mark: So just to put this in perspective for people that have not been on the sell side, I know I had this with a listing last year that I represented where it was just a really favorable price on the business and so we had that 15 conference call sort of scenario that we were doing in one week. For anyone on the receiving end of that our clients, the sellers, that's exhausting to go from one conference call to the next to the next; an hour where you're being asked the same questions and you're doing the majority of the talking during that time. This might be a little bit beside the fact but how did he hold up throughout all those calls? Joe: He did pretty well. They were spread out which was nice. He usually had … he had a minimum of an hour but usually, it was two or three hours in between. And we had one drop out so it ended up being 14. But he did pretty well. He had to keep moving around the house. That particular week his son was home because he got a fever a couple of days before and he was quite sick so he couldn't take him to daycare. And his mother flew up from Arizona to be with his son while he moved around the house to be in an appropriate place to do the conference calls. Most of the time he was actually in the nursery doing the conference calls from his laptop. Mark: Right. So I want to get into a couple of big topics here. I want to talk about what were the characteristics that made this business and you already talked a little bit about this but what were the characteristics that made this business so attractive? Because I also know that we suggested to Paul going out at a 3.5. He's the one that wanted 3.3 for the asking price on this. That's the multiple that we're asking on the earnings. So I want to go into what was it that made this such a hot listing where people just needed to look at the teaser that we gave and that alone generated 200 plus inquiries within the first 24 hours? So what's going on there and then second I want to go through a little bit more of the process that you went through in selecting the buyers that were going to get those conference calls. Because out of 250 finding 15 you know I know a lot of buyers out there would be like well how would I become one of those 15 if I'm going to be competing against this? And then last I mean this is kind of the darker side now or the bad side I guess of what we have to do when you have a hot listing like this is we have to disappoint a number of people that actually really want this business but lose out in a bid for it. So I want to go over those three categories with you and then obviously Joe you're better at this podcasting thing than I am so if there's something I'm missing let me know. Joe: Can you repeat that last part again, please? Mark: You are better at this podcasting thing than I am but I still have the number one episode thank you. Joe: And two and three, yes you've got them all, but you do the title so I think there's a little trickery going on it. Mark: And I used to do the promotion too so … your podcasts easy for me what with number one. Joe: I mean you talked about the four pillars; risk, growth, transfer ability, and documentation. And when you go through these things Paul's business just checks all of these off and all the subcategories within those checks them all off. He owned his own brand. He developed it himself. It's in a niche that is out there and there are other brands but he picked a … he specifically chose a niche within a larger niche to serve a certain segment of these people to start with. So there's a growth opportunity to go. He picked the sort of beginners in this sport. He didn't go with the top end of the product. He went with a middle of the road product that beginners … a price point that beginners would enjoy. So right away you could say okay well I'm learning this business and now I'm going to take this to the new level and go with the more professional people that play this sport. It's not quite professional but retired professionals can play. So he did a really nice job there in picking the category. It was just by happenstance. He happened to be on vacation visiting his folks in Arizona and saw this game that they are playing and said what the heck is that? Looked it up, studied it, researched it and it started growing like crazy and chose to go in that category. A registered trademark, beautiful brand, beautiful packaging, and again let the business age. We've been talking for probably nine months and it was getting close to the 24 month mark but we got through that Christmas holiday season. This particular business is not fourth quarter heavy seasonal. It's actually better in the spring and summer months. So we got prior to the spring and summer months so that a new one would have a great advantage with an upswing in the summer months. It was clean books, SBA eligible which helps cast a broader net to probably half the offers. I can't say half because they were nine. So four out of the nine offers, five out of the nine were SBA offers. The growth trends were fantastic; 80, 90, 100% year over year, month over month growth. It looked really good comparing month to month and from year to year. Transfer ability; super easy, he owned the brand. He wasn't reselling anything. He had a good relationship with his manufacturers. And the documentation, of course, good SOP's in place. He did it all himself so there weren't VA's that were combing [inaudible 00:11:42.3] anybody else or people that works on his house or anything like that needed to transfer. This sort of intangible thing that I think took this to the next level is the person behind the business. He's not transferring with the business but he is so, so likeable and so trustworthy; just the full story behind him. And I'm not suggesting that everybody goes and becomes a CPA, quits their job, and works from home and be a stay at home dad. But people want to invest in a business and buy something from somebody that they like and they trust. As Mike Jackness said on a call recently you have to be a good human being in order to get the deal done. It needs to work for both parties. And just describing who Paul is and then how he is in the video and how he came across, he's just a good person and people wanted to buy the business from him. Mark: Yeah, I'm looking at the teaser right now. It's cool if I read some of the teaser, right? Joe: Yeah of course. Mark: All right so again I'm just looking at this. I'm … this is selfish on my part, the next listing I put out I want to get 250 inquiries because that's awesome. I mean that's great for our clients. All right so I'm looking through this and look in through the prism of those four pillars of risk, growth, transfer ability, documentation. Risk; Amazon businesses, this is primarily Amazon. The biggest thing that I find and maybe you'd disagree is that it needs to be defensible against competition. In here I see towards the bottom there's a trademark and the brand is brand registered, there we go. There are over 2,000 reviews you are … these are getting harder and harder to fake. So you're speaking towards this … the main risk that people associate with Amazon. Right away people are thinking oh awesome that's great. Growth; this is rapidly growing. You leaved this but this is rapidly growing as one of America's fastest growing sports. So A. this business is growing, B. this niche is growing; two really good things, so growth is checked off pretty easily. You have some other stuff in here. Transfer ability; the owner, single owner, dedicates approximately 15 hours per week running the business. I could do that right? Who can't do 15 hours a week on something? And then lastly documentation; the owner is a former CPA. Do you need to say anything else? I think you checked each of those boxes with a giant red check mark to say everyone looking at this; this thing is going to check all of these boxes and become really valuable. It turned out surprisingly enough to be true. These four pillars work. Joe: Yeah, they do. They do. And one of the pillars is growth but within that is growth opportunities and growth trends. And the opportunities I'll dig into the package itself. I can't quite remember but he had launched new SKUs in 2018 and so we look at the revenue when did he launch those and the revenue by SKU during that time period. And it was clear that some of these SKUs had gained some traction in 2018 but they hadn't been available for the full 12 months. So that's a built in path to growth. So it's one other thing that buyers liked. And then when you … I mean that teaser it obviously checks all of those four pillars but then when you get into the package and we recorded a video, a video interview with him via Xoom like we're doing now. Obviously, people are listening to mostly audio but we do the video as well. And he's in his home you can see the kitchen in the background and he's got the packaging and he holds up the packaging and it's just beautiful. It's a really nice product and this is again hard for people to duplicate but this particular product it's just cool. It's just a cool niche and a cool place to be and he did a really nice job with the packaging. He did everything right as far as I'm concerned and obviously as far as buyers are concerned as well. Mark: Yeah, one thing I want to touch on here because we talked about this a lot for buyers that you want to be likable and come across well to the potential sellers. But it works both ways too right? I mean obviously, somebody who's selling who's a complete jerk probably isn't going to get too far with us because the process is just too difficult. So most of the … most of our clients are great people anyway but there are some people who have just magnetic personalities. And for this deal, you for I think one of the first times we experimented or you experimented by doing more video conferencing between buyers and sellers on that. How did that impact the deal and what should buyers take away from boy these guys want to do a video conference should I turn on my camera or should I, oh no, no I don't really have good lighting for this and a good set up for it. Joe: Do it. One of the best calls we had was with a guy named Noah. And he hadn't planned on doing video because he was on his dad's party boat. I know he's 35 years old but he's helping his father move this big boat from one port to another because it's being sold. And Paul and I are on video and we said the video is optional and said it's recommended but optional. And he said well both of you guys are there and he goes I'm kind of embarrassed. I'm on my dad's boat. I'm on a boat. I'm like we have to see it, turn it on. Mark: It's great. Joe: Yeah. His dad was in the background moving stuff around and he's shooing him out of the frame. It was fantastic. So Noah was like able and memorable and that stuck with Paul. Paul wanted to sell the business to Noah at the end of the call. So that makes a huge difference. Not everybody did it. There were two or three that were in the top three. Yeah, obviously three when the top three but two or three that stuck out. Two of them did a video one of them didn't do video. The very first person that we had a call with he chose not to do video. He made a great offer and he … we came close on having him but we ended up … Paul ended up choosing someone else. But I think you do the video. I'm doing it more and more and if you've got an opportunity as a buyer to do a video if your broker allows that then, by all means, do it. Mark: I think on the sell side this is something just to note. To people listening, we're going to be doing this more and more because it really makes a difference on the sell side as well. Sellers most likely will be doing video. And I love that he was able to just hold up some of the product on the video to be able to show it there directly. I mean how cool is that? Joe: People are … I mean they're buying a business potentially just based on the black and white information that we put in a package. It's worked for years but we moved to doing videos in the interviews and making it part of the full business summary. 24 months ago I remember doing the very first one. It was horrible. I just did audio actually. I recorded it on my phone and it was horrible but beneficial. And now we've moved beyond that to video. You get to look relatively in the likes of someone's eyes and gauge whether you trust them or not and if you're going to put your life savings on the line and buy their business. And I think it just makes a tremendous amount of information. Mark: Yeah, absolutely. That's really cool. And again this is coming from somebody like myself that does not like video … doing video personally. I tend to be one of those shut the camera off types of guys but I'm more and more warming up to it and definitely getting more accustomed to it as well. So that's pretty cool. And also the odd story, by the way, I know our content director Chris Moore and Chris I know you're listening to this you're going to hate this that I'm saying this but some of the most memorable conversations I've had with people have been in the oddest places. The podcast with Chad Annis where he was in his RV and I could see the pine trees out in the background or Andrew from ECF Live, eCommerceFuel, awesome forum, he was in his van holding up a microphone. I'm like this is great. It's this weird background that only entrepreneurs understand. Joe: Exactly it's classic entrepreneur stuff. You know people when I'm having calls with them and valuations and you hear the dog barking in the background oh I'm sorry, I'm sorry, I'm like you're an entrepreneur you're going to hear mine any minute. This is the life that we live. It's great. So back to the points, the last point I want to make in terms of what makes a difference … what made a difference for this particular business I think is the images. Paul provided me with great images for the package. And he had them because he had professional photography. And it helped. Obviously, everyone knows that runs an Amazon business what a difference good images make. But he had great images of packaging, of the product being used by human beings having fun and all that stuff. And I was able to litter them throughout the package and it just brought the whole thing to life. And I think it made a bit of a difference too. Mark: Yeah, you know something I've said over the years I've told you Joe and the others here at Quiet Light is that some of the packages that we put together are supposed to tell the story of the business. And I look for that with every business I represent. Like what is the thread that I want to tell you? What is the common thread throughout this? The data and everything else supports a story. And hey people love stories right? That's … we're all drawn to them. Joe: Right. And you said data, I just want to say one more thing I keep looking at the package and I'm like there's another thing. One more thing they gave me was data; data from the outside world that proved that this is one of America's fastest growing recreational sports. So I was able to link to outside magazine articles and newspaper articles and outside sources that backed up what he was saying and what I was saying in the package which is really, really helpful. Mark: Okay, I might regret this question because I don't want to go long on the episode here but you said more than once that he was just a really likable guy. Do you know what made him likeable? It's such a hard question to ask, right? How can somebody be more likable than another person? We've identified when Walker did an acquisition through Quiet Light Brokerage thanking the seller; taking the time to thank our client and saying thank you for agreeing to sell me your business and how much of a difference that made at that point. Was there anything that kind of stood out outside of the video that really made him stand apart? Joe: He was who we described him to be which was a CPA, a stay at home dad, and honest, and uncomfortable in front of the camera, and vulnerable, and real. He never watched the video that I did with him. I told him. He's like I might watch it because I hope that was okay. I was really conscious here and there. I'm like well let's not watch it because you were great. You were human. You were real. And I'm not editing anything out of it and I'm not redoing it because you were great. People are going to love you because you're just normal. And he never watched it. I don't know if he's … I ought to ask him if he's gone back and watched it since we've got it under contract. But he was just real. Just real and honest and he wasn't selling. He was just stating the facts and that's one of the things that we do … I get excited so maybe it feels like selling but stating the facts is what he did. He didn't try to pitch or sell. He was just being himself; likable. Mark: That's … I think I heard that somewhere recently about authenticity among like millennials and I would broaden that out and say among those within internet realm because we've seen so much stuff that it's so easy to colossal or make yourself look bigger or better or more polished than you are. I think people within the internet world we tend to value authenticity a bit more than people might think. And so that vulnerability I think is a key. I'm not saying that you put on a show like oh look at me I'm all vulnerable. Hey, look if you are really confident in what you're doing be confident. Be true to who you are. That comes through. You can tell that in people, right? You can tell when they're being real or when they're trying to make themselves sound better than they actually think they are. Joe: Absolutely, no doubt about it. You want to go on to process and what we do there? Mark: Yeah. I want to know. So 15 conference calls tell me … again mistake that you probably made in this and you told me this, I'm not accusing you of this; launching a listing during two conferences. You were sick that week. You were flying to two different cities, driving to one city with me as well. So how did you manage getting that many inquiries, that many requests for conference calls with everything else going on? Joe: Well, it actually worked out pretty well because I was not feeling well and I was at the conference and I said I am not doing this over the next two days we're going to push it all the next week. And it enabled me to communicate in writing with all the people that inquired, all the people that … look there were a couple of hundred in the first few hours of course but those that I've spoken to before that know the process they reached right out to me. They called me, they texted me, they e-mailed me and said, Joe, I want to talk to this guy. I want to get on a conference call. Because they know that's the process. And so those that have followed our process, looked at as many listings as possible so you know the right fit when it comes along and you can act quickly did just that and reached out to me. And so I just walked it all off and we scheduled the calls. For the process when we had the calls if anyone hasn't been on them, us the broker we talk as little as possible. We make introductions, hand the call over to the buyer to give a little bit of background on themselves and then go right into their calls. We put ourselves on mute and in this case, I took myself off camera as well and we listen and we jump in if we can help out but for the most part we stay quiet until the very end of the call and then we just wrap things up. At the end of each day, I had a quick wrap up call with Paul and I said okay you've had three today, its Monday, you've had three, who do you like the most? And then on Tuesday, I said all right you've had six who are your top two? And the same people kept rising to the surface. Although people near the end of the week very quickly got to the … Noah I think was probably on Wednesday or Thursday. So we ran through the process and I think one mistake I made Mark in hindsight when I look at it, I knew it was going to be a frenzy and as much as people think oh multiple offer situation you going over asking price etcetera. We did. Yes, we had them and yes we did go over asking price because we priced it right. We didn't price it too high or too low; we priced it right. And that gets more increase than anything else buyers know. We chose to go best and final. And I think in hindsight I probably would have had two rounds so that … you know what we did was we told everyone we're going to have a call with every buyer. You may submit offers prior to the following Monday at noon if you wish too but we will not be making a decision until close the business the following Tuesday. You've got to have it in my Monday at noon and we'll make a final decision close the business Tuesday. It gave us a little time to review. Everyone gave it to us in the same exact format that I provided so it was easy. We didn't have to interpret different offers. And most kept it simple which is what I knew Paul was looking for and what I suggested that they do. One made it a little complex but I know them and I know what their goals are. They're raising funds so they've got investors to satisfy. And then tell me what you did? We get a clear deadline of Monday at 12 pm Eastern Standard Time. I got one that came in maybe at 4 o'clock that day and one that came in at 9 o'clock that day, pm, with apologies and a text saying I thought it was midnight. Would you have allowed those offers to be presented or would you've been cold and said no? Mark: I don't … it depends on the situation. That's a tough one especially because of the [inaudible 00:27:08.9] when you said 12, and 12 is I mean you can interpret that both ways. Joe: 12 no we had a total of nine offers. We ended up with 14 conference calls because one fell out. We had nine offers. Mark: No I mean you put your deadline at 12. Joe: Why? I said 12 pm Eastern Daylight Time. Mark: Yeah but I mean you have to think like 12 pm, you think night and you know. Maybe I'm the only one that can read time but— Joe: I don't … I only speak Eastern as I tell everyone else in every other time zone. There's too many time zones and I just say Eastern. I try not to coordinate with their times anyway now we were accommodating. In hindsight I think we probably should've narrowed it down to the top two or three and gone back out to them. But the reality is that when you have a seller that has multiple offers it's hard on the seller. First is that they're on … in this case 14 conference calls that are lasting about an hour each. That's 14 hours. And then he's talking to me for 15 to 20 minutes at the end of each day as well. That's a lot of time in one week. More time than he spends running the business right? 15 hours a week of running it. More time selling it than running it. And then you've got to make a decision based upon we had one offer that was … let's see; it was $150,000 over asking price. Mark: Wow. Joe: A pretty big jump. Mark: Yeah. Joe: That one was an SBA offer. So the benefit there is that not only is it $150,000 over asking price but it's going to take upwards of 60 days longer to close than a cash buyer. So he's going to put another $50,000 in his pocket by waiting an extra two months. I mean just a cash windfall right? Mark: I want to disagree with you on something real quick before we get too far away from this point because it said that— Joe: Is it back to me being the better podcaster or something else? Mark: I'm going to say that to the end after this because I think I'm doing such a stellar job at this interview. Joe: You're doing great. Mark: It's easy when you know the person you're interviewing and you know the story as well. But I'm going to disagree with you on is should you have gone a second round with the offers. Okay, that would be the standard process when you're not expecting multiple offers and when maybe … like if I have a listing that's been sitting around for a month and we narrowed down and we happen to have three buyers that kind of called us around the same time then it makes sense. Because the buyers don't know that they're in a competitive situation but … and I might sound a little harsh here but hey if you're a buyer and you're in a situation where you know it is competitive, and the buyers, in this case, knew it was competitive, that there was a lot of stuff going on. Joe: Yeah. Mark: My guidance has been the same like put in your best and final. There's two sides of that coin; the first … one side is don't try and necessarily get a discount because the market is going to speak. It is going to push that price up necessarily. And two don't over bid what you're comfortable bidding. Find out if I get it at this price I'm going to be happy or satisfied at least? If I go above I'm always going to wonder if I paid too much. Find that, make the offer, and get it done. So I actually think that you did the right thing by doing one round instead of two rounds. I would recommend the two round again if it was kind of a surprise multiple offer situation. Joe: Well, I think … you know I had one person tell me they wish there was a second round. But it was crystal clear in writing in black and white that it was best and final. And so I took his suggestion and constructive criticism in a way that I thought maybe was worthwhile and we could do a second round next time possibly. But when you're in a multiple offer situation it's emotional for the seller. Mark: Yeah. Joe: Believe it or not people it's hard. It's hard for the broker as well. So I just want to reemphasize one thing that you said and that is you don't want people to get … the buyers to get emotional in their offer. We want them to make an offer that they're going to be happy with after they're under letter of intent because we want two happy individuals at closing; the buyer and the seller. It has to be a good transaction for both of them so we don't want them to overbid and so we work really hard to make sure that they're making an offer that they're comfortable with that assuming everything's good in due diligence that we'll get all the way through the closing with. Mark: Yeah and I think if you're a seller out there you're thinking why wouldn't you want to get something above what they're comfortable with? The reason is simple; the offer is the beginning of a longer journey, right? You've got to go through that due diligence, you've got to go through transition, planning, there's a lot of time in there for those cold feet to really, really freeze up a little bit. And for the buyer to say I made a mistake I got caught up in the heat of passion and now yeah. And I want to emphasize one other thing that you said here and that is we think multiple offers is a really good situation and it is but for anyone that hasn't been in that situation before where you have multiple buyers all of whom are very qualified to buy your business and given you good offers. It's really tough to choose because you can't choose five offers. You've got to choose one. Joe: Yeah. Mark: And in your head, you're going to be thinking I've got to get this right because I don't want to go through this again or I don't want to go through this due diligence process and then have to go back and what are people going to think I have to go back. So it's actually really stressful and one of those good problems to have but still a problem. Joe: And that's where I think the video … the folks that did video you know a better connection with Paul little bit although one of the top three didn't do the video but just a super nice guy. I mean I just wanted … we both, Paul wanted him to be able to buy the business. He travels all over the country all the time and has two teenagers that he just doesn't see enough and he wants to work from home. Mark: So there was that personal connection. Joe: Well, it's that personal connection tugging at Paul's emotional heartstrings, at mine. I think he's a great guy. I would love to help him find an amazing business so he spends more time with his family and becomes an entrepreneur which he's not now. He's in the corporate world. Mark: All right we're getting close to the end so let's wrap. I want to get to the end here and talk about— Joe: Sad news. I'm sorry. Sad news having to tell eight people they didn't get it. Mark: Then also I want to know the metrics. Because I know you had recommended to him go out, we should go out at a 3.5 multiple. We covered that the beginning and he said I don't know if we need that you know as … being and Paul sounded like a great guy 3.3 is what it went out at. I'd like to know where the highest and lowest came in and then also the sad news portion having to tell so many people that wanted this business sorry we're going to keep you in mind, we'll keep looking for you. Joe: Yeah, again I wanted it to go at a 3.5. I thought it was worth a push and I let him know it's a bit of a risk. We haven't sold one at 3.5 that's 100% Amazon business with discretionary earnings this “low”. It's still 440,000. We wound up with the highest one being at 3.6, 150,000 over asking and the one that he chose was 50,000 over asking at 3.4, 3.41. And it was an all cash buyer and had the funds on hand. Had had the funds and had the experience and has bought Amazon business before so he looked at the full package. Cash buyer, close in 30 days, hiring Centurica for due diligence but understands Amazon really well and that training and transition was going to be a breeze. It's the full package and that's why he chose that particular buyer. Mark: Yeah, again we've talked before about people winning with lower bids. Not necessarily being the top bidder but still being able to win. And we've also talked about the idea that financial motivation isn't always the sole motivation right? People sell for a variety of reasons and so being able to understand, as a buyer understand some of those secondary goals can really help you out quite a bit. Joe: Let me just jump in, it's not always a cash buyer that wins as well. If everybody remembers the story I've had Syed Balkhi on the podcast and he chose a buyer that was an SBA buyer at full price on his business versus a cash buyer because he just really bonded with that SBA buyer. And he carried a 10% seller note on that particular listing too. So he chose an SBA buyer and a seller note over an all cash buyer. So SBA wasn't necessarily the problem it was just a combination of a number of things and Paul really wanted to get the business sold. And he is kind of a nervous guy a little bit so he didn't want to have to wait upwards of 90 days; 30 was comfortable. Mark: All right what final thing should people know about this particular deal? Because this is a fascinating little case study of just a listing that's going crazy, how to act on the buy side, and also how to set your business up from the sell side. So what final things should we probably round this episode with? Joe: Well I hate to finish it with … you know just because this one sold a 3.4 doesn't mean yours is worth 3.4. This one has all of these little points and metrics to it. I launched one this week Monday at 3.3 and some of those same buyers, those eight buyers a few of them have looked at it and said no. Others are comfortable with the niche and like it and see the upside to it so I think we'll get at or close to asking. But just being prepared running a real business, think about it from a buyer's point of view. They're going to be investing their life savings and if you were them what type of business and what type of person would they want to buy that business from? We want them to succeed. You want them to succeed. And that's really what you need to focus on. Mark: That's fantastic. Hey, thanks for sharing all of this. I know that you always have the best case studies mainly been because you do the most deals at Quiet Light. So thanks for sharing this one. The next one I'm going to write a better teaser than yours and I'm going to try and get like 251 inquiries in the first 24 hours. Joe: You taught me how to do it so I know you can do it. Mark: Well, then I'll make sure that I'll let you know in every podcast. All right cool, hey thanks, Joe. I appreciate all of it. Joe: You bet.     Links and Resources: https://www.quietlightbrokerage.com/ Listen and subscribe on Itunes  

Gary Myers: Hi, my name is Gary Myers. Joe Fontenot: And I am Joe Fontenot. Gary: And we're the host of Answering The Call podcast. Joe: And this is the podcast where we talk to people are answering God's call. Today, I talk with Shaun Grunblatt. Gary: He discusses a process of overcoming shame in the past. Joe: And, here it is. Joe: Shaun, you have an unusual past, but today you are doing your PhD. What are you doing your PhD in? Shaun Grunblatt:New Testament in Greek. Joe: Okay. So, what does that mean? Shaun: Well, I'm studying many of the critical issues in New Testament foundationally, including the languages, language that it's written in, and preparing for a future of hopefully teaching, or continuing to teach because I have been teaching ever since I finished my Master's degree. Joe: Okay, and so a lot of people here at the seminary, this is not an unusual story, right? We have a lot of people, they're doing this exact thing. A lot of people come from a pretty normal background, but not you. So, you did a podcast interview with Davy Aiken whose podcast we will put in the show notes. People can listen to your full story there. I listened to it and I thought it was pretty amazing because you were a drug dealer, like for real-real. You had a very big tragedy where your first wife was actually murdered, and you seriously considered taking active revenge on her death. That is not a normal pre-PhD story. And so how did you get here? Shaun: That's a- Joe: I mean I know that's a big question, but like ... you know ... Let me back up. How did you realize that maybe that was not the life for you? Shaun: Well, that's an interesting story. It really kind of develops over a great deal of time. A lot of that comes in to my understanding about my relationship with God. Throughout my life I grew up really kind of believing I had a relationship with God because of my Catholic upbringing. Went to Catholic school, nominally associated. You know I prayed and read scripture, and was what I like to refer to as sympathetic towards God. I wouldn't oppose God to his face and I had positive warm feelings about him, I just wasn't submitted to his Lordship. Shaun: But in the midst of the tragedies that you can hear about in my testimony which you referenced, they sound impactful when I hear someone else reading them back to me- Joe: That's very impactful, let me just let you know. Shaun: When I hear it told back to me, I'm like, "Wow, that sounds pretty intense." But in the midst of all of that, there are periods where I began to seek God and I really felt God working in my life long before I had fully submitted to him, and long before I believed that my relationship became what it is now. But in the midst of, really in my brokenness and seeking the Lord, trying to reestablish my family, get back custody of my children, the difficulties that I was facing in that, facing criminal charges, I finally reached a point of complete brokenness, utter hopelessness to where really I had considered ending my life. Shaun: My stepfather, Tony Vespo, had been to a place called The Home of Grace, and it really changed his life. It was a faith based treatment center out of Vancleave, Mississippi. I went to the Home of Grace. Joe: How old were you then? Shaun: How old was I then? I believe I was 27. Joe: Had your wife already passed away? Shaun: Yeah, this is after she has died. This is after, I picked up, I wanna say my fifth felony charge. Joe: Fifth felony. Shaun: I was facing a mandatory minimum sentence of 30 years in prison. Joe: And you're only 27? Shaun: Mm-hmm (affirmative). And so I'd lost my wife, I had lost my children, and I was looking at losing my freedom. I really didn't have a whole lot of reasons left to live. Really, my children were the thing that kept me going because they had lost their mother, and I felt like any way in which I might give up on them ... by killing myself, or doing anything else, leaving the country, that was my other thought or option ... would be abandoning them and that was just unacceptable. Shaun: Really in all of that brokenness, I went to the Home of Grace and heard the Gospel in a way that I had never heard it before. It was revealed to me that God had purpose for my life, and that all the shameful things that I had embraced, the darkness of my life, no longer had to be a shame, it could be a glory to God because he could forgive and use even someone like me, and turn all of that around so that my life could be a reflection of his grace and love and glory. Shaun: So I began to live with that purpose. I heard the Gospel in a new way there. I confessed my sin and just asked the Lord to save me. Joe: Do you think that's the point when you became a believer? Shaun: I believe that that's the point when God changed my life, transformed my life. You know the word believer could probably be applied in a lot of different ways, it's kind of generic. But it's the point at which my life changed, and it changed the way I saw the world. Joe: So what happened from there? What was year 28 like? Shaun: I got out of the Home of Grace and every temptation was there. One of my very good friends, who I'd actually been arrested with on that last event, he died about three days I got out of the Home of Grace. His name was Michael Turner, Tomato, as we called him, and he was very, very close to me. He had spent the week with me, among several other of my close friends, searching for my wife when she was missing, and really someone who had been there for me quite a bit. When he died, many of my friends got together and we spent time together. And so I'd just come out of rehab, and I'm around my friends who are still heavily involved in drugs and that lifestyle, and really I'm at a crossroads of do I share Christ with my friends and continue in the life that he's prepared for me, or do I, in my pain, just slink back into my old lifestyle? I know my mother for one was very concerned about that time period. Joe: Was she a believer or was she a- Shaun: Yeah she had become a believer before I had. Not originally when ... My parents were divorced when I was young and subsequent to that I lived with my father for many years. Subsequent to that she became a believer. Anyway, as I got out of the Home of Grace and really began to face the world and the struggles, and come to the realization that even though God has forgiven me, maybe not everyone else has. In hindsight, my observation for a long time has been that it took me, I wanna say almost five years, to get back to zero. Many people, you know just a normal person who hasn't destroyed their life, they can build upon their life and make progress. But what I had to do was number one, assure myself of my freedom, or get to a position where I knew that I could be free. I had to get my children back. I had thousands of dollars- Joe: Free like legally or free like spiritually? Shaun: Free legally. That's something that I believe the Lord helped to provide for me while I was in the Home of Grace, he set me free. But I had other freedom issues that I was facing. So while other people may have been able to make many progresses in their life, I had to climb uphill to get to zero. I had to climb uphill to get to a point where I didn't owe thousands of dollars in court fines, where I wasn't expecting to go to prion, possibly for the best part of my life, where I could spend time with my children, and where I could work towards a career. Do any of the normal basic things: to be able to pay bills, provide for yourself, and have the basic necessities of life. That was a tremendous struggle for someone who was in a position that I was in. Joe: Did you ... you said that took like five years, did you ever- Shaun: At least. Joe: At least think about quitting? I mean what was that like? Shaun: Well, for someone like myself, I was a teenager when I started selling drugs- Joe: How old? Shaun: I guess 16 or 17. I think 16. To go to a point of ... to go from, at one point I had made such an amount of money that I had a money counting machine ... to working for minimum wage- Joe: You were like Scarface. Shaun: Not quite. But I made ... The point I'm trying to illustrate is that I made a huge amount of money. More money than I've made since then, working, I would make in a month. And so the challenge of transitioning from that kind of a lifestyle into a lifestyle where someone else gets to tell me what to do for minimum wage, or anything near minimum wage, was severely humbling and a much slower rate of progress. When I knew that the thousands of dollars of debt that I had, the issues that I had, there is another way to try to accomplish those goals that is a much shorter track. That's a small illustration of so many spiritual temptations and struggles that you'd face climbing out of something like that. Shaun: The relational hurdles converting from a lifestyle in which you are preserving your sex life for marriage, and the kind of investment that goes into something like that. The financial issues, the social friends ... I'm gonna be honest with you, it's hard to build intimate close relationships with people in the church world in the same way than- Joe: Why do you think- Shaun: -Than it was in the world that I came from. And the reason why, is because people don't have anything to lose relationally. You know, some of the challenges- Joe: That's very interesting. Shaun: -That we face in the church is people have to keep up a certain appearance. But they also have jobs and families, and time constraints and responsibilities. I lived in a world where most of the people had very few responsibilities that were in my circle. A lot of free time to be together, and we had to have a really high level of trust for one another to be able to engage in the activities that we're involved in. So it was a hard circle of friends to get into, but once you were in it, there was a deep level of intimacy. Joe: Do you ever miss it? Shaun: Do I ever miss what? Joe: Any of it? Shaun: The world? I miss the closeness. Joe: You made more in a month than you've ever made dollars wise since then. Shaun: I don't miss the friends. Joe: You had the money ... Shaun: I don't miss the money. I still have relationships with many of the people, the ones who are still alive. I've lost many of my friends. Heroin has killed several, drugs, other drug related complicated things have led many of my friends to die. But no, I mean the money, the anxiety, the struggles, the looking over your shoulder ... that world I don't miss. You don't need a lot of money to be happy. It doesn't hurt to be able to do things, but no, I don't miss any of that. I mean the people I miss them. Often many drug addicts can be, besides what the drugs do to their lives, can be amazing and really wonderful special people. Joe: You said something earlier, you were talking about just kind of the depth and the level to which you were in that life. And then we kind of live in this world today where there's this perfect expectation. Shaun: You mean in the church? Joe: In the church, right or wrong, it's what it is. Do you ever get kind of afraid talking about what you used to do, in front of this church world? Shaun: Only initially for me. I had family problems growing up and always wanted approval from my dad, or male approval, that kind of thing, insecurities. When I felt the call to ministry, which was fairly in the Home of Grace basically, I knew that God had a purpose for me to serve him in a lot of different ways. Really a big challenge for me was to speak publicly. I mean many people are afraid of public speaking. They say statistically more people are afraid of dying ... public speaking more than dying ... not afraid of dying. And that was a big challenge for me, but mainly because I was afraid of saying something stupid or not gaining approval of the men of the church or the people of the church. Joe: Did any of that ever happen? Did you ever get up in front of people and say something stupid? Shaun: Oh I'm sure I've said many things that are stupid. I probably still do. But that's okay, there's nothing wrong with ... I realize now that I don't have to be perfect and there's nothing wrong with making mistakes. We all do, and if we don't, then maybe we should look into something about what's going on with that person. No, but what I really wanted to say about that was this, that one of the biggest challenges for me was when my pastor asked me to share my testimony. I spent a lot of time illustrating and trying to condense what I'd been through, and what God's done in my life, and it was a huge hurdle and I was just obsessing over it. Shaun: But it was such a powerful and a freeing thing, because as I shared what I had been through and what God had done in my life, how he'd taken my shame and used it for his glory, so many people afterwards and people that I had not expected, and especially some of the people that I was afraid that ... Basically this was a disarming of the devil, because he had told me the voices that I was hearing that were telling me not to share was because of shame. It was because it's this kind of voice where, "Oh they're gonna know." But that was something that haunted me because I was very different. In the little church I was at during the time I was in Ponchatoula, I had been a big drug dealer in the city, and I traveled around a lot, and my lifestyle was very different than a small southern Baptist church kind of a lifestyle. Shaun: You know, fitting in is a little bit different anyway, and wondering what people thought about me, what they knew about my background, if they found out about it how would they treat me, how would they look at me, would I continue to be accepted. And I was working in youth ministry at the time as an interim, or with the youth minister later on and became the interim there. So you're always wondering sometimes in that environment what people think about you, and you know, the things people say about gossip and all of those things that go along with that, that we know sometimes does go on. Being able to share what God had done in my life, and who I had been but God saved me anyway, completely disarmed the devil of all the power to shut me down and to fear what people thought about me, because when I revealed those things not only did it take away his ability to say, "What if they find out," because I told them, they don't have to hear rumors about it or be uncertain about some of those things. Shaun: It glorified God and so many people came to me afterwards that I never would have expected who had been through, not exactly what I had been through, but they struggled with addiction. You know, their brother died from addiction, or close family members. Every part of our society is being touched by addiction right now. I mean it doesn't observe class, or any other kind of boundary that we'd like to place around it. It doesn't matter what neighborhood you're from, or what family you're from, or any of those things. So many people were encouraged and were touched by what I shared, and came, so it was such a blessing to do what I was so afraid to do, and what I felt so bound to do. And it was exactly what I felt called to do. Joe: Tell your story. Shaun: To tell my story, to reveal the love of God even in my shame. And it's my shame that was trying to stop me from sharing that. Joe: Does the shame ever come back? Shaun: No. I wouldn't say that. You know there are different factors I think that may come into play. Sometimes when you overcome one test, there are others around the corner that you may face. For me I think after that it was ... Well, coming here to the seminary. I remember my first day at orientation when I was at Leavell College, really sitting in the chapel before orientation and just feeling like I didn't belong. Feeling like ... and it was similar feelings that I felt into the church, but I wasn't like all these people. Shaun: Kind of like some of the things that you said when you introduced me, you know my story was different so I felt that. I felt like I was not like anyone else, and I felt like I didn't belong, and I felt like well they're gonna find out that I don't belong. I'm not like them. I haven't been ... I wasn't churched, is one of the words that I've learned that we like to use now. And you see that. You see people who are unchurched and they come from a different culture. And sometimes we don't understand them that. Shaun: I had come from a different culture and it made me afraid because I didn't think I would be accepted, and maybe there was fears that although I had a very strong sense of calling, I was under attack. I really truly believe I was under attack and I wanted to flee, but I didn't, and it's been great. A lot of my experiences through Leavell College really affirmed what I was here and doing. Dr. Strong is the dean of Leavell College and he was a mentor of mine, and still is in many ways. We don't get to spend as much time together, but I remember after taking class on Acts with him and really, really working hard on it, and running into him in the bookstore. And really never knowing, this is a couple ... a year or two in my time here ... still wondering about whether or not I belong, is my work good enough, am I at the bottom. Kind of just insecurities or however you might define that. Shaun: I remember him seeing me in the bookstore, and just giving me a word of encouragement. He's got a true Barnabas soul. And he thanked me for the hard work that I'd done and how well I'd done on the final. That was just meaningful and it was the right word at the right time. Joe: Kind of like a father figure stepping in and validating you in a lot of ways. Shaun: Absolutely. All that I had feared that I would never receive in a complete and different culture and environment, and something I really always wanted, you know, as a child. Joe: One last question Shaun. In some sense we all come from where you came from. Yours is much more extreme. But we are all enemies of God. We're all on a path of being reconciled to God. What would you give the advice to a person who is a younger you coming into an active life of following Jesus, but they're dealing with shame. They're dealing with a background that they're not proud of. What would you tell them? Shaun: Well first I'd tell you, you're not alone. As you come and as you share your story, which you should, because God has done something great. Not different than what he does. Just like you said, every one of our testimonies is a miracle, whether or not you were facing prison and had done horrendous things, or you grew up in the church with a great family. I believe that your coming to faith is miraculous and an important story. But if you come from a background that's like mine, share your story. You'll find that there are a lot of other people who are like you, and you'll find that even the shameful things that you did and your differences can be your strengths. Can be the things that will be of value to your ministry, an asset to what you can do in the kingdom of God, and really bring value to the church. Shaun: Because you'll have a perspective and experiences and the ability to reach people who others can't. We can all love people who are very different than ourselves, but we can't always connect in the same ways that other people can in a more deep way, and a way that says, "I know that struggle." Each of us, it doesn't matter whether it's something strange, but for other people, there's other people that maybe come from a completely better opposite background than mine, other people can connect with them better than I can. Some things are easier to relate to if you've been through them. Shaun: So I just wanna encourage you if that's been your ... if your background is anything at all like mine, drugs, brokenness, loss, death, a different kind of a culture than the church ... outside of the church wondering, "I'm not like these people. They're all special, they're all holy." All those kinds of things and insecurities. Those are not things that should inhibit you from fulfilling what God has you called for. In fact, they may be the keys to helping you do that well. Joe: Thanks Shaun. Thanks for coming on the podcast with us today. Thanks for telling us your story. Shaun: Thank you for having me. Gary Myers: Hey, it's Gary and Joe here again. Would you do us a favor? If you liked this podcast, go to iTunes and leave us a review. This would mean the world to us. Thanks.

Alex Lyon from Avask Tax Advisors works with over 2,000 eCommerce and FBA clients. Her role is to help them understand, register for, manage and comply with VAT registrations and payments. Did you know that when selling online in Europe the taxes (VAT) are included in the purchase price? Did you know if you don't increase your list price your margins shrink by the VAT amount? Did you know that if you have a UK company there is a minimum total revenue threshold amount you can reach before you have to collect VAT? Did you know the biggest mistake made by US companies is not registering for VAT, but that you can sell on Amazon prior to having the registration number? If you answered “no” to at least one of the above questions…and plan to expand to Europe, hearing Alex's explanation of the VAT process could be critical to your expansion success.   Episode Highlights: The biggest mistake Alex sees is not registering for VAT, and it is costly! You can sell before being registered, but it'll cost you if you don't increase your prices to account for VAT. You do not have to set up a foreign corporation to sell in Europe, regardless of your overseas location: i.e. US, Singapore, etc. You only collect in countries you are shipping from (there is a caveat). Amazon does not show VAT charges separately in your seller account. The PanEU program makes sense for some, most only register in the UK and Germany. If you don't pay VAT…your Amazon account will be suspended and/or closed (eventually). “Import VAT” is charged on the inventory shipped into the country and paid immediately. “Sales VAT” is charged on the retail price of your goods, and paid quarterly. The UK and Germany are the two largest markets for selling online in the EU. The UK is the easiest to expand to from the US because of language and the challenges of shipping to Germany. Wiring VAT payments can take 4-5 days and a currency account in Europe shortens the wire times. Using an intermediary bank, or currency account, can save 1-3% in exchange rate fees. With Avask, the costs to register for VAT in the UK is about $200 USD, and then about $1200 USD per year. Caveat to costs: “Distance Selling Thresholds”, if met, require more than $1200 per year because VAT is required in countries you do not store inventory in. Transcription: Mark: Good morning Joe. How are you? Joe: I'm good Mark. How are you? Mark: I'm hanging in there. I'm enjoying the weather lately and getting outdoors a little bit not working as hard but we're still recording podcasts. And you recorded one on an interesting topic and something that I think more and more people are having to face that have Amazon businesses and that's some of the tax implications going overseas. Joe: Yes. Actually, anybody who has a physical products business that wants to sell in Europe and it's on value added taxes, oh my God not exciting at all. But did you know real quickly that you know obviously here in the States you buy something and then the tax is added? When you buy something online, or in Europe, UK, Germany, France, Italy, etcetera the price is built into…I'm sorry the taxes are built into the price. So if it's 120$ the item might be 100 but the taxes are 20. And a lot of buyers that ex…by sellers that expand overseas don't quite understand that concept initially and they could immediately start losing margin by not increasing the prices for the value added taxes. A great conversation it was with Alex Lyon from AVASK Tax Advisors they have over 2,000 FBA clients and e-commerce clients throughout the world that sell and need value added tax compliance so really informative stuff. And anybody that's considering expanding overseas should absolutely listen to this because it's not that complicated once you listen to what she says. Mark: What are the consequences if somebody is not taking care of the value added tax? Do you know by any chance? Joe: Yeah absolutely. So they're very-very compliant over there. It's not gray like it is here in the States, its black and white. So the problem is that if you sell in let's say the UK and you're not registered, you're going to be determined. Amazon has to share the information with I think it's the HMRC. They have to by law; they share the details of everybody that sells on Amazon. So the HMRC has access to your sales information and therefore can force you to pay the value added taxes that you should have collected. If you didn't collect it you're going to pay for that out of your pocket simple as that. So you've got two choices: pay for it out of your pocket and lose that 15 to 20% margin and probably make no money at all or walk away and be banned from selling in in Europe on Amazon. Mark: That's significant. I think moving across the ocean to selling in different countries is a huge opportunity for anyone. Buying an e-commerce business that wants to ship overseas that you need to start taking advantage of that opportunity but you also have to go through some of the understanding of what sort of regulations are in play. I think this you know isn't…this is not exactly an exciting topic but you know and I think it's a really important topic for anyone to listen to, to possibly unlock an opportunity that your competitors are not taking advantage of. Joe: Yeah and before we say let's jump into it let me just say this that I've seen explosive growth with people moving and expanding their products to the EEO, explosive growth in particular France. I mean the UK and Germany. And the cost associated with it using someone like AVASK and they're not the only ones who do it, it's not all that expensive. You're looking at maybe 1500 $ to get the ball rolling and get it done right. And you can you can start selling immediately as long as you're registering and then you pay from the date you started selling. It's really not that complicated. There's a lot to it but it's really-really important that if you're going to sell overseas which I think everybody should if they have real growth plans that they listen to the whole podcast. Mark: All right with that I will say let's jump into it. Joe: Hey folks it's Joe from Quiet Light Brokerage and today I've got to Alex Lyon from AVASK Tax Advisors with me. She's an expert on VAT which I believe is value added tax. Something a lot of folks trying to expand their e-commerce businesses over to the UK and beyond really need some help on. So Alex welcome to the Quiet Light Podcast. Alex: Thank you. Thank you, Joe. Hi everyone. Yeah as Joe has mentioned my name is Alex. I am Indirect Tax Client Manager of AVASK. So I've been working here for three years now just helping e-commerce sellers expand over into Europe. So we've got over 2,000 Amazon sellers that we work with. UK companies also companies based all over the world as well. So yeah that's been us. Joe: That's fantastic. Are they all FBA clients (Fulfilled By Amazon) or do they you know sell off FBA as well (off Amazon) with their own e-commerce businesses? Alex: It varies so a high majority of people are FBA sellers just because it's a lot easier to hand everything over to Amazon and kind of let them do fulfillment. But there are quite a large number of Amazon Sellers as well such as shipment from your own country which obviously makes a lot of things easier in terms of the VAT because you don't have to actually declare the sales in Europe because you're not fulfilling from his countries. So yeah it's kind of a majority FBA but we do have MFM sellers as well. Joe: Okay, good. Good. Good. So let's talk about the basics, get things straight here for our listeners because a lot of people here in the states are expanding their Amazon.com accounts beyond Amazon into the European countries and seeing explosive growth. But the big mystery is how to set up the VAT's and how to find an agency like yours to handle it most of the costs associated with it are. So you can start am I getting it right is it Value Added Tax and tell us how it works? Alex: Correct. Yes, it's value added tax. It's the same principle across the European countries but they have different rights and different filing frequencies. The easiest way to explain it would be that it's similar to the sales tax you have in the US. But the main difference would be the way which you include it within the price of your product. So this is kind of the biggest hurdle where people fall over on where they don't actually include the VAT amount within the price of the product which means that you're not actually collecting the VAT from your customer but you still have to pay it to the revenue. So you're essentially paying it out from your pocket if you don't include it. So in the US for someone like myself when I come over I don't realize it works like this when I go to the checkout in sell sites because I didn't know and I'm kind of how…where is this amount coming from. Whereas in the UK you don't know that it's already there in the price of the product so yes its essentially the same as the sales tax but it's more hidden. Joe: So Amazon is collecting that 20% for units built into the purchase price of the product. So if it's 100 $ if the VAT is 20% for instance, 20% is something set aside to pay your VAT…your taxes? Alex: Yes. Joe: Okay. Alex: So you need to list in on Amazon for the straight 120. Amazon won't do that for you. Joe: Okay and do a lot of people make that mistake where they just list their business without bumping it for the value added tax? Alex: Yeah there's a large number of that do. Without getting kind of proper advice on how VAT actually works. So it is…see it's hard enough to in taxes in your own country let alone I'm kind of working out how to do it in a foreign country. So yeah that's a big hurdle where quite a lot of people fall over on. Joe: Okay. So you're located in the UK. AVASK is located in the UK. But I think I saw offices around in different parts of the world, is that right? Alex: Yes that's right. So we've got an office in London and I'm on based on in Winchester which is about an hour south of London. And then we've also got offices in Shenzhen and LA. We try to come over to the US as much as possible as well just because oversea it's kind of US sellers that we've [inaudible 00:08:19.0] work with. So yeah we try and get over to the events as much as possible as well and get that travelling. Joe: So the vast majority of clients as you said are US based clients and they start selling and Amazon.com and then expanded to the European countries? Alex: Yeah, definitely. Amazon is oversea, it's huge in America and it's just kind of been taking off here in Europe as well. So it's a massive market in Europe and I think if you're product is successful and you've been able to make it successive there in the US then there's absolutely no reason why you shouldn't also be able to do in Europe. Joe: Okay. So let's say I own an Amazon.com account, I want to reach out to you what…and I want to sell in the European countries, step one two three can you walk us through that? Alex: Yup sure. So step one is to work out where you're going to be shipping your products from. So most people go with the UK or Germany just because they're the biggest markets, UK is obviously a lot easier because you don't have to translate any of your products. So whichever country you decide you're going to fulfill from you then have to get a VAT number in that country and also an EORI number for all of your shipments. So those two numbers you have to have those before you make a shipment. If you make a shipment without those numbers you're going to get charged import VAT and then you won't necessarily be able to reclaim that back whereas you would if you have the numbers. So that's very important. In terms of the registration process, engaging a UK agent is really helpful because you've got someone who can communicate with tax authorities on your behalf. And that also means that we know exactly what documents are needed for each of the registration. We'll process all of that for you. Once the application has been submitted and you're waiting for the numbers to come through at that point you should start getting your listings up. Working out some shipping quotes and kind of working out all the details on actually how you're going to get your product there and what the listings are going to look like. Joe: Okay. And I just had a conversation with someone that is buying an Amazon business and they were confused about when the VAT was going to be applied. Is it to the amount of products being shipped into the country or is it the amount that's sold? Alex: It's both. So if you're doing FBA you're making a box shipment to an Amazon warehouse. That box shipment you're going to have to declare at customs. So any shipment that's out into a warehouse is going to have import VAT at UK customs charged on it that's assuming of course that your shipment has come from outside of Europe, so most people ship from China or from the US. So import VAT is going to be charged on the cost of your goods. When you put together a commercial invoice of that shipment, that's the amount of the import fees then we charge on also with freight charges and things. Joe: And then what time do they pay that import VAT, when it arrives? Alex: Yeah correct so usually depending on what shipping company you'll go for usually they'll pay it for you and invoice it back to you. But they still have to do your kind of clearance number to create a shipment. Joe: And then do they have to…then they collect that VAT when it sells and they keep it or is it a different…are we talking about two different things? The import VAT versus the VAT that's charged to the customer on the Amazon account is that two different things or it's the same? Alex: It's the same tax but it's computed in different ways. So import VAT is non-cost whereas VAT on your sales is on the retail price of your goods. And they're also kind of declared differently so with the VAT when you [inaudible 00:11:35.18] you pay that in your VAT within each quarter. You don't pay that immediately when you make the sale. Whereas the import VAT, you pay it immediately at customs. And the way that those kind of…they tie in together although they're separately you…it's within your VAT return. So you do your VAT filing every quarter. So every three months you declare the amount of sales you made and then obviously you're declaring the VAT that's due on your sales and then any import VAT that you pay you can get that refunded and it's used as a credit within your VAT return. Joe: And how easy is it within the Amazon seller account to see that money that you've collected and have it match up against what you're going to owe? Or is it not as black and white as I think it would be or is it really relatively easy? Alex: It's gotten a lot better, to be honest. And so Amazon have got a specific VAT report that you can now download so you can see the breakdown. But in terms of the actual…when your customer purchases an item they won't be able to see the breakdown of VAT and the amount that's going to the amount that's going to the revenue. Another kind of stumbling block where a few Amazon sellers fall over where they don't get the kind of proper…do the proper research before is that's that although Amazon take their fees from the money you receive in terms of your sales, the VAT is [inaudible 00:12:49.6] on the total sales price. You can't deduct Amazon fees and then the amount that you actually receive from Amazon is what you pay VAT on it's the total amount that you're costumer is paying you pay VAT on. Joe: Why is there any calculation at all that the seller does? Doesn't Amazon calculate it for you it seems like they would since they know the exact sales? Alex: Yes so, unfortunately, it doesn't work like that. You have to include it. You have to price your product you have to do your pricing matrix. If you're expecting to move due your pricing and then Amazon add the VAT on it…that's not going to happen. You have to make sure you're including them. Joe: Well then I was thinking in terms of Amazon that in your pricing you would say this is my price and then this is my VAT amount it's not done that way you just simply mark it up to 120$ if it's a 100$ item. Alex: Yeah, exactly. Mark out straight away. And you can tell Amazon with the VAT calculation service you can let them know if you've got any kind of reduce rated or zero rated items which will reflect on the actual sales report. But it's not going to affect what your actual retail price is on Amazon and what it's listed as. Joe: Okay. Let's talk about volume. Here in the States, there's a lot of question about when should I start collecting sales taxes and [inaudible 00:13:58.6] and all these different [inaudible 00:13:59.8] unfortunately not black and white yet. It's still very-very gray. I had a situation where I listed a business for sale and asked about collecting VAT and he said well I'm not…I haven't hit that threshold yet in the UK. And I think it was a UK corporation as well, can you talk about thresholds and when and if you have to collect. In different [inaudible 00:14:21.4] what if you're a UK corporation or a Hong Kong Corporation if you're someone at the LOC or corporation here in the States? Alex: Okay, so if you have a company that's incorporated anywhere apart from the UK then you have to register for VAT immediately so that's sale number one whether it's going to have 1$, 10$, or 100$ it's straight away so no threshold whatsoever, you have to be registered. If however, you have a UK company there's a threshold of 85,000 Pounds and that's in terms of a turnover over a 12 month loaning period. So if you hit that within three months you have to be registered if you hit that in 11 months you have to be registered but that's just for a UK company. So if you've got an overseas entity you have to register straight to it there's no threshold. Joe: As far as buyers go, when you and I talked about this and have conversations with buyers when they buy an Amazon account that has a European component to it there's always questions about TMI not going to be collecting during a certain period of time, how do we sign up, how do we get that registered, what kind of danger I'm going to be in. I think you said the other day in a call separately in preparation for this that you can start pricing your products right away while you register and you're not going to…you're not going to lose any grounds or sales while you're registering and then paying VAT down the road a bit. Can you talk about that again a little bit so that…and talk about it from a buyer for perspective. If say someone is buying an Amazon account and taking it over and would reach out to you to register how do they ensure that they're collecting from day one of ownership and that they're not going to…not get themselves in a little bit of trouble? Alex: Well, first of all, I want to make sure, well check whether the Amazon account has already previously been charging VAT. So what we've discussed in terms of the pricing, obviously if you're taking over an Amazon account you're buying that account. And if they haven't been including VAT in the prices, you obviously then need to…the first kind of goal is to straight away go ahead and increase everything by that 20%. Joe: Let me just jump in here for a sec. So that's a consideration when someone…this is for the buyers that are listening, correct me here Alex if I'm wrong but when someone's buying an account and the owner has UK corporation, if they're below that annual threshold of 85,000 Pounds in revenue they're not charging VAT. But if I buy it and I'm not a UK corporation I immediately have to increase the prices in order to collect VAT or leave it alone and I'm going to lose 20% of my sales to the VAT. Is that correct? Alex: That's correct. Yes, so you because you're an overseas company you have to charge VAT on your sales even though they haven't been charged previously. Joe: Okay really critical for buyers to understand that when it's a UK corporation. Okay sorry to interrupt please continue. Alex: Okay so once you have then kind of taken over the company you can actually back date a registration. So say I'm talking over…I'm buying an Amazon account under my US company from a UK company we'll stick to that example. From the 1st of May you know going through the whole process it's taken a couple weeks to actually get everything set up. When if it got to the 1st of June and you still hadn't registered you can then back date that to the 1st of May. So as soon as you know that you're going to be buying the Amazon Seller Central, I would make sure that you're charging VAT to your customers because although you may not be registered you can backdate the registration. And it means that you have to pay VAT in all sales you make previous even though at that actual moment in time you weren't registered but you're back dating registration. Joe: Okay just to summarize. Don't change a thing in terms of prices assuming it's a…let's go with back to the it's a non UK entity so that they're a US entity buying a US entity but they have a UK account to it. If they're charging 120$ now and they're collecting VAT you don't have to change prices at all. Alex: Correct. Joe: You're going to register with a firm like yours and then when it's time to pay for the first time you're already collecting those and you'll go back dating and calculate what's due. Alex: Yes, exactly. Yeah. Joe: And how often do you pay? I think you said was it quarterly? Alex: Yes quarterly so every three months yeah. Joe: And is it the same every three months? Is it the beginning of the 15th of the next quarter is when you have to pay the taxes or is it depends upon when you register? Alex: So you got one month and seven days to actually do the filing and make the payment. As you can fall into different stagger groups in VAT quarters so it's not necessarily you are January to March you can be February to April or March to May. So there's three kind of different groups of VAT filings you could fall into. Your VAT advisor should obviously let you know and would be contacting you when everything's due. In terms of the frequency yeah it is quarterly. Joe: Listen, Alex, as you can see I'm an old guy, got some gray hair here. I fell asleep in accounting class in college. I honest to God I did fell asleep, the next class came in and I think I've told the story again so I won't go to much detail. I don't like this stuff. I don't like this level of detail because of what I do for a living it's absolutely critical as an entrepreneur and know how important it is. Do I have to really…if I'm the guy that's buying an FBA business and it's got European components to it, how much do I have to really know or can I just rely on you guys to do the work for me? Alex: You can definitely rely on us to kind of advice you and let you know. But it is…I do think it's good to know kind of the basics of what you're doing. In terms of Amazon, you've got two different programs so European Fulfillment Network or Pan-European Program. Pan-European Program is great you get to move your stock around to seven different countries [inaudible 00:20:03.1] you're stock is close that your costumers time are positive reasons to do that. But if you just kind of turn that on on your Amazon Seller Central and you'd haven't done any prior research, you won't know that you then actually have to get [inaudible 00:20:17.6] registered in seven countries. You have to do filings maybe month in more than half of these countries. So everything that you do in terms of where your stock is located, where your sales are going will have an impact on your VAT registration, your VAT applications within Europe. So yes it's good you should have [inaudible 00:20:36.6] in there. We'd let you know but don't be completely ignorant to what you're doing and where your stock is going. Joe: Hey it sounds like you just touched on being able to shift from seven different countries in a penny you…there's a lot of potential savings in terms of the shipping costs and fulfillment costs that you're closer to the customer. But you talked earlier I think that if you've got your inventory in the UK or Germany in the two biggest centers that you register for VAT in those countries what if your inventory is spread around seven different countries so you're closer to the customers do you then have to register in all of those countries? Alex: You do. Yeah, as soon as your stock is in that country and you can sell in from there you have to be VAT registered in that country. So VAT is basically payable to the country and is being done close at supply. So if your stock is in a Czech Republic warehouse the place of supply VAT sale when it's going from the Czech Republic to the customer in Italy is going to be in Czech Republic. So being VAT registered in the UK is completely useless. Joe: Okay. Alex: So yeah- Joe: Very much like nexus here in the States if there's 15 Amazon centers theory is that if you have 15 different locations of inventory you have nexus in those states and that's where you collect sales taxes. Not as formal as where you are. Tell us about the biggest hurdles and biggest mistakes that you've seen people make…well that you have in been bringing people to the European countries and selling an FBA. What things are really obvious? What mistakes are really common that people can avoid? Alex: So first one is to not get registered at all. So with that threshold, quite a few people get confused that the 85,000 threshold is applicable to them; sounds really appealing and really lovely so they just don't register full stop. And then when you do get registered you just do it from today's date because [inaudible 00:22:27.3] realize but now I know that I'm going to do it from today. There's a huge amount of compliant checks going on with the revenue in the UK. They are hurdling through every single Amazon account and doing tax investigations. You know we've had to help clients where we're going all the way back to 2012 when the legislation came in that they have to register. So that's kind of six years of taxes you're going to have to go back and pay and if you don't your Amazon can get shut down. So the first kind of hurdle is actually getting registered. It's kind of what you'd think is the most simplest part just to do the application. Joe: Six years of VAT taxes you've had people in that situation? Alex: Yeah. Joe: I would think that in some situations people will just throw their hands up in the air, close the account, and walk away, and not pay the taxes. Alex: Yeah. Joe: Is that something where if you're a US resident where you're going to be found and have to pay those taxes in some way shape or form? Alex: Well you spent a nice six years building up your Amazon account. You've got all of your reviews you know you've built up that kind of brand in the UK so to kind of just throw your hands up and walk away is a big thing to do in the first place. Because even if you opened up a new Amazon account you're not going to have all of those reviews and obviously the name of you as a director of that company when you do a VAT application in the UK you have to state that information and you have to kind of give all of those details of yourself anyway and yeah so you'll have- Joe: So if you're going to walk away there walk in away forever. Alex: Yeah. Joe: Unless they cheat and get around the system somewhere. Alex: Exactly and unfortunately like in the US…so as not like in the US there's now amnesty in the UK so if you think that you're going to be negotiating and kind of say that oh I'll make sure to pay everything going forward so I'll pay a percentage you wouldn't get that and you also have to pay mass penalty as well so it do not kind of sound all that great if you haven't done the right thing to start with. Joe: Okay. So I've talked to a lot of Amazon sellers. I've seen their financials. Some people tell me you know I've done the analysis Joe and it's just not worth the effort for me to sell in Germany and Italy in France and in the UK. It's just not worth it. And I think they're completely and utterly wrong because I've seen the explosive growth. You've got 2,000 FBA clients. What country are you seeing people get the most bang for their buck? What's growing rapidly over there and what country should they pay attention to the most? Alex: UK and Germany definitely. They're just the two biggest markets. France is…does follow very closely but yeah 100% they're the biggest. Joe: Okay. And the easiest of those two might be the UK because you don't have to do translation? Alex: Yeah, exactly. And I'm shipping direct into the UK is a lot easier than it is shipping to Germany. Joe: Okay. Okay. There are a lot of concerns about money laundering. I've heard people talk about this and how complicated it is and on the German side and German FBA accounts. Am I just hearing people with sort of the chicken little mentality that the sky is falling and being really paranoid or is there something to that? Alex: I think sales in Germany in terms of my money laundering and everything is all going through Amazon. So amazon are collecting the funds and sending it to you. You don't need for some representation in Germany so payments go directly to the tax authorities whereas in France you've got to pay to your French advisor and then it goes to the tax authorities so yeah I'm not sure of what grounds. Joe: Do you even know who Chicken Little is or what that theory…okay, I see you just- Alex: No sorry. Joe: Okay. It's a cartoon character here in the States disguised- Alex: Okay [crosstalk 00:25:55.9] Joe: I used that terminology when there's so many people online talking about all the horrible things that can happen when you're own an Amazon seller account as opposed to the reality of how many great things are happening and it's changing people's lives. Alex: I think that's like when you go to a restaurant or you go anywhere, you're more likely to leave a bad review if you've had a bad experience whereas if you've had agood review you probably leave any review at all. I do notice that happen. Joe: A hundred percent, you're absolutely right. One of the things that I see often and I know you guys are AVASK tax advisor so I want to talk about that advisory part and the tax part. But one of the things that I see happen is that sometimes when sellers expand overseas they just take the easy route and they'd let Amazon handle making deposits directly to their US bank account. Whereas other people that take a little bit of time, do some research, still use World's First Bank or somebody else to be that intermediary and the money will go there at a lower exchange rate saving them tens in…tens of thousands of dollars annually. Do you find that to be the case, do you would advise folks to do that and if so what world banks do you suggest they use or look at or is that a service that you provide as well? Alex: Yeah, definitely. So if you kind of first of all from a VAT paying perspective there's…most people have to pay via wire transfer. And if you're getting kind of close to the payment deadline it can take for to five working days for that payment to clear with HMRC. They then if any payment is received late they will give you a surcharge with subtentiative liability and that can go up to 15 cents. So if you've got a currency account located here in Europe the time that it takes for the funds to actually clear and consider the payment to be made is a lot quicker. So that is a big benefit of getting a bank account over here even just a currency account. Joe: Can you define what a currency account is and how it differentiates from a bank account, please? Alex: So it has kind of all the benefits of a bank account and they're very similar but I don't think I mean don't 100% take my word for this. Obviously, it's better to speak to a currency account provider. But you can't hold large amounts of funds in that account. It's kind of like an intermediary way. You're basically doing a transfer and a transfer to your local account. You can't also do things like direct debits and buy out checks and things like that. Joe: Okay. And as I understand it just for people listening that currency account I think Amazon, for instance, may charge you if you are a…may charge you 4% currency exchange. Whereas the currency account you may only be charged 2%. And so you might be…and these are ballpark numbers so you're saving 2% on whatever amount of money is flowing through that. And if it's a million dollars, you do the math on that. If it's 10,000 $ you do the math on that. So I see a lot of people do that as well. That's what a currency account is right? Alex: Yeah. And especially with kind of making payments in Europe in terms of VAT you're going to be transferring your money from Amazon to the US and then back so the UK again so you're kind of transferring it a couple of times and to make that payment. So if you want to incorporate a UK company [inaudible 00:29:08.3] you could have get an actual high street UK bank account which is obviously a benefit of that UK company. You could just kind of grow the funds and leave it in a high street bank account in UK. Joe: Well, let's talk about that for a minute. Maybe I should have asked this at the very beginning and listeners I apologize because this is a question I get offset. You know I'm expanding to the UK, I'm expanding to Germany do I have to set up a UK business with a UK address or German company? Do I have to set those up or can I simply be a US based company selling products overseas? Can you explain, you've got 2,000 clients what are they doing? What do you recommend? Alex: You do not have to incorporate a UK company. It's the majority of people use their overseas company just because it is a lot easier and has less administration in terms of the accounts that you are drawing up each year. It's all just falling onto one company. You've got your CPA in the US. He's doing everything for you. You don't have to hire a CPA equivalent in the UK so ask accountants to do your [inaudible 00:30:03.9] paying your kind of all those tax due filings. In terms of what's actually best is really hard for me to say because it is on a case by case basis. It's you know do you want to build a brand, do you want a UK bank account, do you want to take advantage of the VAT threshold, there's so many factors. It's not one, it's one size fits all, unfortunately. Joe: Okay but the simple answer is for anybody listening if you're US based with a US bank account a US corporation, you do not have to set up a European company a UK company or in Germany that's misinformation. You don't have to do that. You can register for VAT and start collecting and paying and still have your one CPA here in the US. Is that correct? Alex: Yes. Joe: Good. Of your 2,000 plus or minus clients, what are their sizes? I mean you have you got people that are doing you know a million, two million dollars a month in revenue and those that are just doing five or 10,000 $ a month? How does it range and how does it flash out [inaudible 00:31:01.5] so we just know more about you guys. Alex: Yeah, exactly that range I don't [inaudible 00:31:05.4] information but- Joe: Maybe I should have said a half a million a month. Alex: Yeah there's a huge range there is. And that's for the UK companies and also overseas companies. You know we've got a lot of Chinese clients as well. We've got kind of a whole Chinese department [inaudible 00:31:20.6]. So yeah the range is massive. We can help you whatever size. Joe: Okay. Let's say that I'm doing a quarter of a million dollars a month here in the States and I decide I want to expand overseas and I'm going to start with UK and Germany. Aside from my inventory costs and getting the product there, what are my costs for someone like you in setting up VAT and getting registered and compliant and all that stuff? Alex: Well it depends which country you're going for. If it's just one if it's selling- Joe: Say I'm gonna start with two. I'm going to start with the UK, actually I'm just gonna go with one. Let's go with UK. Alex: Okay 150 Pound registration one up fee and then 870 Pounds a year annual compliance and that doesn't depend on turnover. So whatever your turnover is it's the same. Joe: That's pretty cheap, if I'm doing a quarter million a month, 150 Euros a couple of hundred bucks tops and then maybe a thousand US dollars a year simple as that. Who calculates what my VAT is owed each month? Is it me and my CPA or is that part of your 870 5,000- Alex: Yeah we do that. We calculate everything. And you can give us limited access to your seller central we'll go in and download all the reports directly. You don't have to be a part of that process. Your sole responsibility is to make the payment. Joe: Can I just have you make the payment for me if you have access to funds or you just tell me what to pay and I pay it? Alex: No we don't do that. We will tell you what to pay and then you have to make the payment yeah. Joe: This is…okay I'm a little [inaudible 00:32:47.2] I haven't talked to anybody about pricing but to me, this is so incredibly fair and reasonable. Are you guys…is this the standard fees? I mean this is normal cost or you're really expensive or really cheap? What's the situation? Alex: I think that's about average. We pride ourselves over the service that we give kind of in comparison to the actual fees to other providers and things. We don't get too hung up on what the actual charges are in terms of that. What I would say though, I don't want to be [inaudible 00:33:16.2] in terms of that 870. Because if your turnover was in the millions you will be breaching distance selling thresholds to all of the European countries. Joe: You'll be what? Say that again. Alex: Breaching distance selling thresholds, we haven't spoken about that so- Joe: Distance selling threshold. Alex: We'll go into that really quickly. So if you've got all of your stock in a UK company…country sorry company the UK country, UK warehouse and is going to customers in Germany. So UK from a warehouse going to a customer in Germany, if their sales go over a certain threshold to Germany you then have to register to VAT in Germany even though you're not fulfilling from that country. Joe: Okay. Alex: Makes sense? Joe: Yeah, all right. This is the part where Joe doesn't love this level of detail but thank you for that. Alex: It's just that I don't want to be misleading in terms of 870 Pounds you know whatever your turnover is because that's all UK fee. If your turnover is massive you will have an obligation to register in other countries as well. Joe: And if the turnover is massive to probably going to be shipping from those countries to save that fulfillment cost anyway. Alex: Yeah, yeah. Joe: And that's something that they would do the math on and you guys may help them with. Alex: Yeah. Joe: Okay we're running out of time. We're about 30 minutes in which is actually a bit long but this is a fascinating subject, a critical one, and I'm sure some people just they fell asleep because it's also not their favorite which is a shame. Because the number one thing people can do to make their business more valuable is get the books right. Get the details like this absolutely correct. It's going to help with the transition of the business as well as well as the value. Alex thank you so much. Any last thoughts that you can share with people listening? Whether they're buying and selling in terms of what they should do and how they should do it other than just do it and do it right. Alex: I honestly I would just say to speak to someone you know we do free consultations [inaudible 00:35:07.0] if you just give us a call then we can just run through everything with you. There's you know all though we've covered a lot in half an hour it's a lot of information, there are still some things that haven't been mentioned so yeah I would just speak so when I mention we've got all the information for before you completely just jump start in. Joe: Okay. Well, we'll make sure that all of your contact information is in the show notes. Alex: All right. Joe: But for those listening that can't see them there it's AVASK tax advisors that's A-V-A-S-K tax advisors and they do free consultations. I think it's really important as a buyer or seller if you're planning on selling over in the UK. Alex thanks so much for your time today I really appreciate it. Alex: Okay thanks. Thanks, everyone. Links: Alexandra Lyon Indirect Tax Client Manager Skype: alex.avask Email: alex@avaskgroup.com T: +1.213.330.4904; +1.213.256.0537 https://www.linkedin.com/in/alexandragrant4/ https://www.avaskaccounting.co.uk/   James Shayler International VAT Technical Officer Skype: james.shayler16 Email: james@avasktax.com T: +1.213.330.4904; +1.213.256.053

Analyse the following debate and identify how well the debate unfolds — are there any fallacies involved, and what are they? Letty: Spiritual beliefs are irrelevant when it comes to philosophy. You can’t observe Santa Claus, and you can’t run a test for faith. I’ve never heard of a reasonable hypothesis test for faith, as it has to be investigated and evaluated. Philosophy is about testing and evaluating, so beliefs are not a part of philosophy. You either do Philosophy or you do navel gazing faith nonsense. Joe: Why not? I’m happy to debate the ethics of believing in Santa Claus! Just because faith isn’t the same as science doesn’t mean we cannot observe certain things about it. You don’t have to use sight to observe. Therefore, using rational reflection is a method of observation. Letty: But measuring a concept isn’t the same as measuring a real thing — an observation in terms of concept isn’t the same as that which is truly real in the world. For those reasons, scientific method applied to faith is just a mistake. If you start thinking faith and other unreasonable things are Philosophy, you’ll start thinking ghosts and fairytales are Philosophy and we might as well put Plato in the fiction section. Joe: What about the social sciences? It’s a combination of methods, not just science, to investigate different parts, changes and the sources of change. Philosophy is often found in the social science departments of universities. I therefore don’t see how investigating concepts such as faith, something outside of empirical testing, can’t be a part of philosophy. 

Joe Martinez is an editorial and portrait photographer living and working in New York City.  His clients include: •Adidas •The Navy Wounded Warrior Project •The Brooklyn Nets •Ronald McDonald House New York •Yahoo! Music •Memorial Sloan-Kettering Cancer Center Joe also sings with the a cappella group The Lost Keys, was an American Idol contestant, and has been the featured vocalist on Motivational Millennial co-host, Blake Brandes's, hip-hop albums for the last decade. Check out Joe's work at www.joemartinezphoto.com.   Listen to the episode as Joe shares:   Joe’s favorite jam The habit Joe employs to make sure he gets his day started right The Maya Angelou quote that speaks deeply to Joe Why self doubt hasn’t stopped him from sharing his work Why everyone doesn’t have to like your work The pivotal point where Joe almost moved back home to get back on his feet How Joe was self-sabotaging with his thoughts Ways building a community is important to Joe and how he does it through photography. How the recession positively impacted millennials You can read the full show notes and access all the resources at www.motivationalmillennial.com

This week Max and Corinne learn to embrace the suck - and what Tai’s O sounds like. Randy Bailey weighs in with his feedback on the #SurvivorATF premier and Corinne shares more stories about other times she was thrown out of summer camp. Is Shambo Debbie’s type? Does Neal see a little bit of his Uncle Larry in Joe? Why was Caleb wearing his jeans in the water? Is it possible to tell if someone is poor with the naked eye? All these questions and more will be answered in this week’s thrilling episode. In addition, Max and Corinne announce the official launch of their Survivor Crashers contest. For a chance to win a visit from Max and Corinne to your Survivor viewing party tweet a video of 60 seconds or less showing off where you watch and explaining why you should host the hosts of Survivor With All The Fixins. Make sure to use the hashtag #SurvivorATF and to tag @fymaxwell and @CORINSANITY. More details can be found on the Survivor With All The Fixins Facebook page!

- We find out why Joe had disappeared for two weeks- Joe lost his microphone - Snowballing - angrycanadiandecepticon.blogspot.ca - Joe goes to Toys R Us- Joe buys/sells Tf’s - Transformers :Age of Extinction is a good movie?? - Another TF arrived for Joe - Why so secretive Joe? - Joe’s PVR is filling up again - Bill tries to convince Joe not to finish watching Extant - Bills plays some video games and we find out he has to play on the “old man setting” - What is a recticle?? - Joe returns his wall mount - Playstation 4 vs X-Box - Joe can’t sell his CRT TV - Bill plays Call of Duty: Black Ops but wants to be a lone wolf - Joe and Bill make a date to go see Interstellar --- Send in a voice message: https://anchor.fm/stcpod/message

- We find out why Joe had disappeared for two weeks - Joe lost his microphone - Snowballing - angrycanadiandecepticon.blogspot.ca - Joe goes to Toys R Us - Joe buys/sells Tf’s - Transformers :Age of Extinction is a good movie?? - Another TF arrived for Joe - Why so secretive Joe? - Joe’s PVR is filling up again - Bill tries to convince Joe not to finish watching Extant - Bills plays some video games and we find out he has to play on the “old man setting” - What is a recticle?? - Joe returns his wall mount - Playstation 4 vs X-Box - Joe can’t sell his CRT TV - Bill plays Call of Duty: Black Ops but wants to be a lone wolf - Joe and Bill make a date to go see Interstellar