Starting and Exiting Private Labels on Amazon with Ben Leonard.mp4
Interview with Ben Leonard
Tomer [00:00:04] Hey, guys. Welcome to another episode, and today I have Ben Leonard, best known as the founder of beast gear, Ben Leonard is the classic millennium entrepreneur. He built a business on a laptop in cardboard in his spare time. The difference is Ben grew in an international seven-figure business and successfully exited after three years.
I’m sure we’re going to have a lot of questions about this, so the business is our holy grail. Now Ben is doing it all over again and helping others do the same with his e-commerce brokerage company that he started. Welcome, Ben, how are you today?
Ben Leonard [00:00:42] I’m great. It’s good to be here. Thanks so much for having me.
Tomer [00:00:45] Yeah, cause then it’s a pleasure for me, and I’m sure a lot of the viewers will learn some valuable information from someone that started an FBA business and was able to exit. And we all want to learn more about yourself and about your journey. So how did you get into Amazon FBA in general?
Ben Leonard [00:01:07] Yeah, It was an accident. It happened in 2016, early 2016. I was working in my day job. My background is in science. I was working as an environmental scientist and I got sick and I had to stop work for a while and stop all my fitness hobbies. I was at the time I did a lot of boxing, CrossFit, running, lifting heavyweights. I had to stop whilst I recovered from the heart problem, and I’m totally fine now.
So, I needed something to do. I needed a hobby. My wife, who was my girlfriend at the time. She was busy studying, so she encouraged me to do something with my time. And I had this idea to create a brand of fitness equipment because that was my passion and I did, and it turned out I was quite good.
So, I quit my job. And over the next three, three and a half years, I scaled this business up, and in late 2019 we were doing about $6 million sales per year and I sold. It was right before the explosion in mergers and acquisitions that we’ve seen in the e-commerce space. And yeah, that’s how I got into it. That’s how I got into e-commerce, and now my journey has taken a different turn.
When I sold it back then, I sold it through a broker, and being an entrepreneur, I spotted a gap for a better experience than with the broker that I used. So I created e-com brokers with my co-founder, Alison. And here we are. And that’s what I’m doing now. I’m still building brands now because I love it and I enjoy it. And it means that I can relate to our clients and I understand what it’s like to be a commerce business owner. And yeah, it was. It was a bit of a ride that journey, but it was fun.
Tomer [00:02:53] That’s cool. You mentioned that you were a scientist before. Like, that was your job. What exactly did with that day? What was the job and why you decide to quit? I guess it took you a few years just for a start is right and you just let it?
Ben Leonard [00:03:10] Yeah, You know, a lot of people that quit their job and become an entrepreneur because they don’t like their job. I liked my job. I did. So I was working in the oil industry. I was the token, the token tree hugger in the room. Telling me, telling the engineers that they weren’t allowed to throw chemicals in the sea. I studied zoology and I specialized in dolphins, and then I studied ecology, and I did like my job.
But when I started this, this hobby, this business as a hobby, I discovered an entrepreneurial spark inside me that I didn’t know I had. And after it became clear that this was more than a hobby, this was going somewhere. I went to see my boss. And I said to her. I need to quit because this is going so well. I need to give this a try, I have to try this. I have this spark in me that I need to test. She was amazing, she said, This is so cool. I totally support you. Here’s a better idea. Don’t quit. I’m going to give you a year’s sabbatical. So, if it goes well, then goodbye. We’ll never see you again. And if the business doesn’t go well, you get your job back after a year.
So that was amazing. So they gave me a real safety net to go and give it a try, so I will always be grateful for that. So, yeah, I did like my job, but I discovered an entrepreneurial spark inside me that I needed to burn through. And I think I’ll probably be an entrepreneur of some kind, probably for about the next 10 years. And then I have this, this idea that I’ll probably get back into environmental stuff properly into conservation, where I think they could probably use a little bit more entrepreneurial spirit and business know-how to get stuff done.
Tomer [00:05:02] And then there, you know, you mentioned about this is really, you know, nice story through here that she supported you like that and gave you that opportunity because it’s amazing. But I was in a similar situation. I didn’t really need that. The money that I got from, you know, from Amazon to really the cash-out or get the seller or something like that. So I reinvested everything back into the business. And I think this is something that is super important that people have a plan in case a product not just fails, but if it’s becoming a success, you also need to have a plan.
Are we all going to support the inventory and really think about all the steps that come and you can learn from people like Ben and myself, like with our experience? You don’t have to really invent the wheel. It’s all over the internet and you can really listen to other people that were in the same situation and don’t just, you know, just learn from their experience.
That’s really you know nice to hear. But how did you get into Amazon? Like why you decided on Amazon? I know that you had the idea of creating this brand. Why don’t land it on your own Shopify store? Or, you know, we’re curious to hear why Amazon?
Ben Leonard [00:06:10] Yeah. So the business did sell products on our own website as well, but we did start on Amazon, and after I decided that I would develop this brand, I knew I needed somewhere to sell it. And I discovered I can’t remember how just through Googling that third party selling on Amazon was a thing. You know, previously I didn’t know I was one of those ignorant people who thought that when you buy something on Amazon, you’re buying it from Amazon. I didn’t even know third-party selling was a thing.
And so I discovered the deal was I did a bit more research and it seemed like a pretty simple business model to me, right? I ship the stuff to Amazon. They take care of the fulfillment and the returns. I pay them a commission for doing so. That sounds pretty good because at the time, of course, I was living in an apartment. I had nowhere to store inventory, so they seemed like a really good business model to me.
But I also knew that I needed to build assets for my own brand, right? You can’t just rely on one sales channel. So that’s why I also started to sell on my own website. You know, and I knew from the start that I had to turn this business into a legitimate brand and not just a collection of random stuff being sold on Amazon.
Tomer [00:07:24] That’s cool. That’s cool. And when you and a lot of people ask me, should they start, try to find out who they are at what stage after I started to sell on Amazon because I’m curious to hear from you. What was the percentage of revenue if we compare it to Amazon? of course, it depends on the nature of that, but.
Ben Leonard [00:07:41] yeah, so across the whole business, the percentage of Amazon to own website was about ninety-eight percent Amazon. But the website only fulfilled orders to customers in the UK, and Amazon was in the UK, the rest of Europe. And then right before I sold, we were selling on Amazon Australia and Amazon Middle East.
So I think if I had, my plan had been to expand my website to fill across Europe, but I didn’t do that because I sold before I had the chance to do that. If I’d done that probably would have been more like maybe a 90, 92, 94 percent Amazon, something like that. But still, the vast majority was Amazon.
But what I would say is because I had developed this brand into a legitimate brand, people were googling and searching for it. If something terrible had happened on my Amazon account, Google suspended or whatever a significant proportion of people I think then would have come and bought from me on my own website. And so they would have it would not have been good to have got suspended or to have gone down on Amazon, but at least I would have had a safety net.
Tomer [00:08:50] And I said, well, OK, so you know, we have so many questions for you, but maybe you can answer real quick before I jump into the next question. When you started you, the first product was a success. Or did you fail? How? Why was with, you know, dealing with failure and with things that didn’t work the way that you wanted it to work?
Ben Leonard [00:09:10] Yeah. So I was fortunate the first product was a success. I remember waiting for the inventory to arrive from China and worrying and thinking, Oh no, I think I’ve picked the wrong product. I don’t think this is going to go well and it did go well. And I knew with hindsight that it went well because I trusted my gut because I did what you should do, which is you should create a brand that’s selling products that you are interested in, right?
So I was my customer and I knew that my customers wanted this product. So the first product was the jump rope and it was an improvement and what was already available.
So I knew that I had a great opportunity there to make a success of it. And I did. So, you know, I got off to a great start. But you mentioned there, what about when things go wrong? Yeah, I had some setbacks in particular. I developed the product. I designed a product myself. I came up with the concept and then I worked with a product designer to develop it. It was a thick pirate bar adapter for dumbbells and barbells, and I had it patented, which was a really smart thing to do.
And there was a competitor on the market, which had existed for probably 10 20 years, with no one challenging it significantly. And so I came on the market and I was selling my product at a much fairer price. The other brand was basically ripping off the consumer and my product was becoming the leader in the space. And this other brand got upset, obviously, and they were owned by an enormous corporation and they tried to sue me.
And because they alleged that I was infringing on their patent. And so my product was suspended on Amazon for about a month whilst my lawyers figured out what was going on. And to cut a long story short, after about a month, we were able to demonstrate to Amazon that my product was not infringing on their patent, and in actual fact, their own patent was so poorly put together. The drawings on their own patent were so poor that it didn’t actually protect their own product.
So after about a month, I got my product reinstated, but it cost me like fifteen thousand pounds. So whatever that is in dollars, like $20000 to fix the issue, not to mention all the lost sales, then I never, you know, because I was down for a month, I never got those back. I tried to recover that from the other side and get them to pay. My legal fees were never able to succeed in that.
So that really sucked. But I did win in the end and my product did go on to continue to become the leader in that space. But it was tough at the time, you know, because you get these letters from these big organizations telling you to stop selling, we’re going to sue you out of existence. You know, I was just a guy selling stuff off of my laptop in my spare room. You know, it was really scary, but I got through it, and that’s what you’ve got to do. You just got to keep going and always get advice from experts, right? So I spoke to, you know, the best intellectual property lawyers that I could find. And I think when it comes to something like intellectual property, you don’t mess around.
Tomer [00:12:23] Yeah, yeah. A lot of people would just give up and wouldn’t want to even deal with it. So, you know, that’s an experience, you can definitely you know, have this experience behind you. And I’m sure that in the future, it will help you with some other stuff that you do. That’s really great. And I wanted to ask if you paid lawyers and I guess the fifteen thousand just for the legal fees, right?
Ben Leonard [00:12:48] Yeah, pretty much. That was legal fees. It was a drawn-out process. And I see people all the time on Facebook and Twitter saying, Oh, what can I do to get a trademark or get a patent and somebody replacing? Or you could do it yourself for not very much money and always think, No, don’t do yourself always. I’m a great fan of saving money, right? I’m from a part of Scotland where we’re all known for saving money. But when it comes to intellectual property, you don’t mess around and you really want to make sure that you’ve got everything in order because one day it might come back to bite you if you don’t.
Tomer [00:13:25] and it’s present. So you were having like six billion in sales, meet seven figures, close to eight figures who didn’t really. Why you decided to sell? Why, like, it didn’t really add this age to get to eight figures and just run it for a little longer.
Ben Leonard [00:13:43] Yeah, so it was I made the decision in early 2019 to sell. I’d heard these whispers on the grapevine that eCommerce businesses were becoming a little bit more acceptable to buy and sell, and that there was some money pouring in to acquire e-commerce business. And I realized that I could take significant money off the table.
My wife was pregnant. We wanted to move house. I was just about to turn. I just turned 30 and I just felt like it was a good time to create a safety net for me and my family. I still love the brand. I still do love the brand and Perhaps if it wasn’t my first business, if I’d already had an exit under my belt and I already had that safety net, then maybe I would have stuck around to take it to the next level. True.
But it was the right thing for us at the time and I learned. Somebody told me an important lesson when I was thinking about selling it was my dad. And he said to me, sell the business and the point of peak romance. And what that means is this you. The business is going well and you’ve reached a point where you believe Boy this can be something big. But at the same time, it might not be something big. So you’re at the point of peak romance. It could be huge, but it might not. So if you sell now, there’s a lot of potential upside in the business, which will attract a buyer. And B, which you can experience as well if you negotiate the deal, right?
For instance, in earn or some sort of consultancy agreement, whatever it might be. So you can still experience some of that upside, but it’s not set in stone and the business is going to go somewhere huge. You know, it might not. And so it’s still a great time to get out. Because then you’re getting out when it’s at that point of maximum, almost potential energy. But you have no guarantees that that’s going to be fulfilled. So if it’s not fulfilled, then you got over the right time. So yeah, that’s why I sold.
Tomer [00:15:48] Yeah, that’s exactly like the situation that I’m facing right now. Business-wise, it’s not really smart to sell, but they feel that at this point in my life, where the majority of the income is attributed to Amazon, I can just take that risk. You know, I have family and two girls, so I have to really make sure that they have that safety net as you mentioned. And that’s really part of what I do.
And you mentioned at the beginning that because of the experience that you had while selling your brand, you decided after to open the econ brokerage. Yeah, why? What was the issues that you dealt with and how you were willing, if you can share how this deal was like, how long it took if you had any issues, I know I know who you sold to? I said, OK, to mention in theory.
Ben Leonard [00:16:39] Say you can. You mentioned what I sold to you? Absolutely.
Tomer [00:16:41] Yeah. So you mentioned you sold it to D’Orazio and that’s the first acquisition in Europe. So that’s pretty good. So I believe in one of the first ones it was.
Ben Leonard [00:16:51] I think it might win the second European acquisition and probably the first British acquisition. And they were great. No complaints there. But it was when I sold it through the broker. I approached them in early 2019. I think late February or early March. The deal wasn’t done until Halloween, so it took a long time.
Tomer [00:17:12] Approximately, how many months we’re talking.
Ben Leonard [00:17:14] Uh, March, April, May, June, July. Like, like eight months. Yeah, it took ages. And right now the silver lining is the good news is that during that whole time, the business was growing like crazy. So the value of the business was going up. But the problem with the broker and you got to remember that this time mergers and acquisitions and e-commerce were very new, so there were limited options in terms of the broker. And I had had a recommendation from a friend who did have a good experience with that broker. So that influenced why I went with them in the first place.
Unfortunately, my experience wasn’t as good. The person handling the deal or crunching the numbers wasn’t an accountant. They had completely different backgrounds. I think they had a degree in art or something, but they’ve been trained by this brokerage in how to pull down reports from Amazon and Shopify and slapped him in a Google Sheet and then just slap a random value on the business based on what they’ve been selling recently. Businesses for when they came back with this valuation to me, which took them far too long to come up with.
I knew immediately that it didn’t look right, so I got my accountant, my own accountant, to look into it, and we discovered an error in their calculations. Something akin to like a decimal point in the wrong place, it wasn’t that, but, you know, that type of error, it was very poor and it would have undervalued the business by about 30 percent and they didn’t catch it. Nobody there caught it, but we did.
And so after my accounting fix, everything I said to them Look, I’m negotiating down your commission because we’ve done your job for you, which we were able to agree. So that was a silver lining. I paid them less and they still find me the buyer, which was fine.
But at the end of the experience, my accountant Alison and I put our heads together and said, there’s clearly a gap in the market here for a better experience for sellers, a brokerage who actually has the experience on all sides, me on the e-commerce side, understanding what it takes to run an eCommerce brand, to bring products to market, to develop a brand that consumers are excited about and what it’s like on the day to day running an e-commerce business. And then Alison’s got like 20 years of mergers and acquisitions experience and more than twenty-five years of experience as a chartered accountant.
So combining those skill sets, we felt like we were able to offer more and give a better experience. And so we did. It’s the classic entrepreneurial thing, isn’t it? You see you scratch your own itch, right? You experience a problem, so you solve it. And so here we are with econ brokers.
Tomer [00:19:37] And now for how long you guys operating?
Ben Leonard [00:19:40] Econ brokers has existed for around about a year. Alison’s been doing deals for like 20 years, but you know, you can’t. Econ Brokers is a brand has existed for about a year.
Tomer [00:19:52] So you’re able to make some deals and things going on.
Ben Leonard [00:19:56] Yes. So as of now, we’ve done about 20 to 23 deals. So started slow because of course, nobody heard all this, obviously, and we’re up against all the aggregators and all they’re there. They’ve gotten huge amounts of money and they’re able to do some pretty smart marketing.
But over time, sellers are getting smarter. They’re beginning to understand it. Actually, the best thing for them is to do what they do in every other industry. When you want to sell is work with an expert to plan your exit and then execute the exit. And that’s the best way to sell. And that’s how you’re going to get the best possible price and deal structure that’s fair and suits you. And so, people are starting to understand now that that’s the right thing to do.
Tomer [00:20:42] OK, I just want to make things a little more clear to myself and the viewers or listeners that are going to listen to this. I work, for example, with fortune and this is a brokerage firm so that basically the fees are being taken from the seller, not from the buyer. But you are basically a book about brokers that you get your fees from the buyers, right?
Ben Leonard [00:21:07] No seller from the seller yet from the seller, we would never take a kickback from a buyer. So we represent the seller and our job is to maximize the value of their business through the appropriate analysis and adjustments, market the business to a pool of the right buyers and then work with them under a mergers and acquisitions attorney to negotiate the best possible deal.
And so, yeah, we charge the seller and there are some buyers out there who say to us, Hey, if you can show us these deals first, you know, we can pay you an extra referral fee or whatever. We would never take it because that compromises our integrity. Our position is that we are representing the seller.
Tomer [00:21:52] OK, so yeah, that’s good to hear because your interest is the seller, not the buyer, and sometimes people don’t. I almost sold my business, my MBA business, in February 2021, but we were presented to the buyers. It’s a broker and they’re, you know, their interest. The word was, is, you know, it was first. So it’s important to understand how it works before you actually sign up or deal with someone you want to go with brokerage firms like Bain or like Gail, I am fortunate those types of people that will protect you first. Their main interest is to really get you the best number because it will influence their fees as well.
And also, of course, you know, they check things that are that we as people that never did this kind of deals are not aware of. So I definitely agree with you that it’s important to hire experts to do that for you.
Ben Leonard [00:22:50] Yeah, it’s a strange mindset that the sellers some sellers have, you know, some really smart people create a fantastic business. And whilst they’re running it, they work with experts. They get experts to do their photography, they get experts to do the translations, they can, experts to do their PBC, and they get experts to do their trademarks. And then one day they wake up and decide to sell and do it by themselves and not these experts. It’s kind of crazy.
So, but more and more people like us and you mentioned Gail is kind of banging the drum for taking your business. Through the right process, like happens in every other industry.
Tomer [00:23:29] Now, you know, we hear this a lot that, you know, the aggregate was raised so much money and multiples are going up due to there is more demand and supply, I guess. But I hear it from someone you know in the industry is a small aggregator and you agree to small the relatively to address you and the bigger players that you know. It’s not that there are not enough deals.
Actually, there are a lot of deals. But the criteria that each aggregator work on basically limits what they actually digging in and seeing. Is it something that you see as well? They work with a growth year like we do product research, and if it doesn’t fall within the bracket, they just don’t even look at it.
Ben Leonard [00:24:12] That’s pretty much it. Yeah. So every aggregator has a particular set of criteria, whether that’s category geography, skill level, revenue level, all this type of stuff. And so that that does that limits the size of the pond that they’re fishing in if you like. Yeah, it’s important to mention, though, that a good sales process will not just market your business to aggregators, but will cast a wide net to find other potential buyers, which could be competitors could be other private equity.
More traditional private equity could be family offices could be private. Individuals could be a competitor who was offline, who wants to get offline, or online. All sorts of potential buyers for your business and the more buyers you have who are not aggregators at the table, the higher the price is going to be pushed because typically they’re willing to pay higher multiple.
Tomer [00:25:08] That’s nice if you have like two tips or two things sellers should focus on before they’re selling. As far as metrics, I don’t like margin or tacos or those kinds of metrics that aggregators looking at that would be really valuable, I think.
Ben Leonard [00:25:24] Yeah. You know, margin north of 15 percent, really. Some will look at lower because they actually might spot an opportunity there, and they believe they back themselves to improve that margin once they bring it into their portfolio and then they can realize efficiency improvements, but yet keep your margin reasonably high as well as you can. And then once you’re at a stable high enough margin on, you’re starting to ramp up for an exit.
Then the top line is really important. Start ramping up the top line as well as you can obviously keep your policy under control. Those are really important things. And then aside from, you know, the number-crunching side of it, make sure that you have everything in order from an intellectual property point of view. All your documentation, your tax filings, make sure everything’s neat and tidy, that the T’s are crossed and the i’s are dotted.
And if you have ever been involved in any Black Hat stuff or you were in any kind of risky areas in that way. Stop, just stop. Because nobody wants to buy a business that’s involved in anything like that.
Tomer [00:26:31] Yeah, yeah. But they still buy.
Ben Leonard [00:26:34] Well, yeah, that does. That does happen. That does happen. That is true.
Tomer [00:26:39] Yeah. Yeah. I personally would never want to, you know, sell someone a business that is at risk that you know, two more they could, you know, have it suspended or the listing of issues. I with myself, I wouldn’t really feel good, but I think everyone should do that. You know, in general, like doing Black Hat stuff, it’s not really sustainable. It’s not, it’s absolutely not.
Ben Leonard [00:27:01] And if you have sold a business without disclosing something during due diligence that later becomes apparent, then you can be in quite a lot of trouble. So it is important that if you have engaged in any of the gray area, that you disclose it during the due diligence process because it won’t necessarily kill the deal if it’s only in the gray area and if you’ve stopped and if you don’t disclose it, that could cause problems later. Yeah.
Tomer [00:27:28] OK, I guess that would be all I wanted to keep all these interviews, as you know, not as short as possible, but they’re on the 30 minutes mark. Do you have anything else to add? For people interested to sell or about yourself before we wrap it up?
Ben Leonard [00:27:46] Sure. Yeah. If you want to hear more about us, we’re overly ecombrokers.co.uk on that. On that site, you can get a free e-book about how to prepare your business for sale. I love to help and talk with people. No hard sell.
So if you want to chat with me, you can get me on LinkedIn. You can email me [email protected], and I’m on all the little main social media channels. My handle is @BenLeonardPro and appreciate people taking the time to tune into our conversation today. And I’m here to help. So, give me a shot-out.
Tomer [00:28:17] Yeah, yeah. Thank you for sharing your story, your journey, and what you’re up to these days. I really appreciate it and hopefully, you can be here against in the future.
Ben Leonard [00:28:25] Yeah, I’d love to. Thanks, man.
Tomer [00:28:27] Thank you very much.
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