Insider's Guide to Maximizing Your Exit Value with South Col | EP. #101
Whether you’re just starting to think about selling your business or actively searching for a buyer, understanding the exit process is an essential part of maximizing your value. On this 101st episode of The E-Comm Show, Andrew interviews Yoni Kozminski of South Col to learn more about the exit process, how to get the most out of your sale, and what buyers are looking for.
Yoni will also discuss what you need to do before embarking on your exit journey and how to make sure you’re ready to sell. Tune in for the insider's guide to marketing your business. Don't miss this episode if you're looking to sell your e-commerce business!
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Andrew Maff and Yoni Kozminski
Co-Founder & CEO of Escala, MultiplyMii, South Col, and several successful yet less noteworthy ventures.
Yoni Kozminski is an entrepreneur and business consultant with over two decades of experience in scaling businesses. Over the years, he has helped develop digital strategies for some of the world's biggest brands, including Mercedez-Benz, Mastercard, Sony, Medtronic Diabetes, Mondelez International, and more.
Yoni Kozminski 00:03
If anyone new to the business comes in within 15 seconds they should be able to find the exact step by step guided guidance they need to perform any task inside of the company.
Andrew Maff 00:12
Hey everyone this is Nezaar Akeel of Max Pro, Hi I'm Linda and I'm Paul, and we're Love and Pebbles. Hi, this is Lopa Van Der Merch from RASA and you're listening to and you're listening and
and you are listening to The E-Comm Show. Welcome to The E-Comm Show, presented by BlueTuskr, the number one place to hear the inside scoop from other ecommerce experts, when they share their secrets on how they scaled their business and are now living the dream. Now, here's your host, Andrew, Maff.
Andrew Maff 00:52
Hello everyone. Welcome to another episode of The E-Comm Show. As usual, I'm your host Andrew Maff. And today I am joined by the amazing Yoni Kozminski who is a founding partner over at South Col Yoni. How're you doing right for good show by
Yoni Kozminski 01:04
I am very ready. Thanks for having me.
Andrew Maff 01:06
Awesome. Super excited for this one. I know I say that for pretty much every show. But talking about like valuations and exits. Like it's like the sexy part of this industry. So this is going to be one of our sexier episodes. So I'm really looking forward to it. But not to not to set it up too high for you. But I would love to do the usual we'll pretend that no one knows who you are. And I'd love for you to give everyone a little bit introduction about yourself. Your background, obviously more about South Korea, we'll take it from there. Okay.
Yoni Kozminski 01:34
Let's do it. Let's do it. And the sexy part is the post exit when the money's in the bank. There's a lot of, you know, there's lots of things that happen between now and then. And obviously we're gonna get into that but but like you said, Before we dive into some of the value that we're trying to create here, you only Kozminski hopefully my Australian accent is still there. I grew up in Australia, I come from a digital marketing Creative Advertising background, I spent 10 years working with the likes of Sony, MasterCard, Mercedes Benz, Medtronic, across Australia, in the US and obviously, heavy in the E commerce space throughout that entire journey. Everything from media buying to strategy, content production, TV commercials, really the entire gamut in LA, we had a creative studio downstairs did live activations, I mean, really, the works as the largest Facebook media buyer in Australia for a couple of years for Mercedes Benz after launching their social channels. So I really grew up in that age where, you know, digital was really just coming up. And we were trying to figure it out, and honestly making up a lot of it as we went along. And then finally, all right, I think that's life, isn't it? Still faking it till I make it, mom. But it is a job. Yes, it is. It's online. It's the online thing. But anyway, fast forward. About six years ago, I moved to Israel. When I got here, I started an agency and while it was doing well, I just wasn't enjoying it. I realized I wasn't a solopreneur and ended up meeting a couple of guys that had an E commerce brand was doing about $2 million on Amazon was their prime focus. I came in there and looked at it in a weekend I said listen, like let's build a data see brand. But you know, Amazon's a great marketing tool, but let's build a real data see brand. And then I was looking at the PPC spend. I was looking at the conversion rates. And I was looking at just how much money they were doing. I said, Forget everything I've said with doubling down on Amazon and ended up business from two to 5 million in 12 months THRASS you ended up acquiring it. And on the back of that that sort of led me to where I sit today as a founding partner, co founder, owner of three businesses so the first is multiply me which is an executive search recruitment firm that finds Filipino talent for E commerce sellers. So that really was what I built inside of that Amazon business just on steroids. Now we've placed nearly 1000 people and you know, it's a team of nearly 100 people today and that business really sort of set me up into the next business which was a Scala which is our process improvement management consultancy. So we took a lot of X EY Accenture, Deloitte talent Philippines based and built our methodology around e commerce how to systemize businesses for scale and for sale and you know, we go in we build SOPs, training videos documentation, org strategy structure, we build the features day we optimize the business operation. And that led us to South Col, which is a joint venture between escala sellers five formerly sellers funding one of the largest non dilutive capital lenders in the space, and JW partners formerly GW a who are a premier investment bank in the space selling well over a billion dollars in transaction value over the last sort of seven years. So we came together to form South Col. And South Col is effectively an exit accelerator or a growth fund where we're injecting capital into the business a million to $5 million of a dev facility, we are coming in and rendering process improvement throughout the journey, building that exit roadmap, and effectively selling the business. And we take a minority stake to get involved in and come on this journey with you know, founders that are at a certain point where they're looking at it, but they might not know exactly how they can maximize their exit value, how to maximize, you know, the EBIT, da position, multiple expansion, all of that good stuff. So, really high level overview of what it is. But I've said a lot of things here, and I'm gonna give myself a second to pass it over to you.
Andrew Maff 05:56
So, okay, very interesting. So, so many questions. So interesting. Your comments about you were at a brand and you were telling him like, oh, let's go DTC. And then you were like, no, no, we're gonna stay on Amazon. Because when we were setting up this interview, I was super excited, because I always preach diversifying away from Amazon. And I was like, This guy is gonna get it. I'm gonna quote this this episode for months. And now, I don't know if that's gonna go in that direction. So I have a
Yoni Kozminski 06:26
Andrew Maff 06:28
You think okay, so then why didn't you guys
Yoni Kozminski 06:31
because this was this was back in 2018 2017 2018. Okay, and hey, there, it was, yeah, it was a very different time in the market. And my position back then, was right, but right, then at that moment in time to get to those levels with how hot the market was. And, you know, this whole asset class at the time that was created around FBA businesses, and the aggregators and $16 billion of venture capital brought it like, it made sense for where you could get it to, but but, you know, going back to it, I would never recommend, or, let's say, case by case basis, but it would be very rare that I would say, be 100%, concentrated on Amazon, and that's going to yield you your best result. Yeah,
Andrew Maff 07:20
my theory has always been, you know, it could be dependent on obviously, who's looking to acquire you. However, if you've able to leverage Amazon as more of a customer acquisition tool, and start to develop more of a DTC presence, there's other assets that you can build with that. So a large email list, you know, good amount of traffic coming to your website, social media, following that kind of stuff. I feel like that really opens up, who could potentially be acquiring you, let's say, if you owned a business, that was all hunting stuff, and there's a company out there who's in fishing, and they want to just get into all outdoor sports, like they would be interested like, is that? Does it really expand your multiple that much more? If you're kind of diversified on the multiple channels and have assets like that?
Yoni Kozminski 08:04
The short of it is yes, I would say, to give you a bit more of a long winded answer, it would also depend on what size you're actually at. So if we're talking about $100,000, a year, or even a month business in today's climate, diversification at that level is probably not going to yield you a much bigger return. But let's say that same business was doing a million dollars a month, then, you know, and at least 15% of the revenue was generated from off of Amazon, and then you start talking about a different game. And the larger you effectively grow, would also dictate, like you really intelligently pointed out, it's all about what is in the eye of the potential buyer. And if we're talking about P buyers and strategics, they might not have ecommerce presence, they might have brick and mortar retail, they're fantastic at what they're good at, but they don't have the capabilities to build an email list to be able to actually handle SEO and proper, you know, lead generation tofu move FUBU you know, they don't understand what media buying is they don't know any of the stuff that you need to be a digital marketer. So to be able to then take that that infrastructure. And when you talk about strategics and P buyers, then I then I like the aggregators where they're trying to buy the business and see you out of it within 30 days. They're buying the business with everything in it, and you're talking about, you know, potential two and three year earnouts where your performance is inside of the business still, and there's a proper handover period that they want the infrastructure and they want to be able to expand and get an ROI and it makes sense for you as well, but not to take it too far down this rabbit hole. You know, it gets very interesting.
Andrew Maff 09:54
Nice. So let's let's play that back obviously just sounds cool. So obviously it sounds like you're basically investing into these ecommerce brands that are ready to at least start the process of being acquired by someone else. So what does that look like? How long? Like obviously I know that's probably a very loaded answer as well. But like, What's that process look like? How long does that typically take? How do you know if a brand is ready for that? Like, what's that whole introductory section look like?
Yoni Kozminski 10:23
Yeah, it's actually not loaded at all, we have a very earthly Yeah, like, we have a very clear mandate and the way in which our finances are structured, there are terms whereby what we're looking to do is invest in the business, a million to $5 million is sort of the goal investment amount. And on the back of that, we're looking to turn it around in two years, because the way that the way that it works is it's two years interest only, it's coming through cielos. Fi, so we're able to get very favorable terms, because we're involved in this project and how we actually build it through. So what we're looking for, when you talk about, like what our criteria looks like is we're looking for businesses that are doing at least 4 million in revenue. So coming back to the point, or what I highlighted just before about $100,000 a month business, the amount of work that you're going to do from an exit perspective is the same on a business that size as a business is 10 times the size and maybe becomes a little bit more complicated 100 times the size, but it realistically, the amount of work that you need to do is about the same. And for it to make sense for us to take a minority position, it has to be large enough so that, you know, we're looking to not sell businesses under eight figures. That's like, that's sort of where it starts for us. Because remembering that we're taking a minority position, and you know, it's two years worth of work. So $4 million, it's got to be a growing business. So we're not in the distressed asset game, you know, that's a very different model, what we're looking to do is accelerate founders and effectively get them out of their own way. The model is really built so that once you know, once you've got capital, and we have the relationships and networks and resources to point you in the right direction, founders always making the decisions around where they put their money and who they partner with and how they operate. But we just have a very large network and a lot of pre vetted resources that are, you know, we're here to be smart money inside of this business opportunity and inside of this partnership. So effectively, you know, we're working with the founder for the next two years, and at the very start of that experience for us where we're going through, I said, before we go to the accelerate phase, and we're actually looking at, you know, what is the next two year roadmap look like? And how do we expand the multiple and go through that process, it's a really interesting thing, when you're going through a diligence process, and you're investing in a company as opposed to buying one, because we have this whole added layer of founded diligence, where we, you know, there's a lot, you know, we've looked at hundreds, you know, probably close to 300 brands, since we started this journey, less than a year ago, and we've only met a handful of investments. And we've seen a lot of great founders and a lot of great businesses, but for, for a whole multitude of reasons. We need to be strategically aligned with the founder, and you know, it's not going to be someone who's just looking for the money and go away and off you go. That's not to say that we're here to control the outcome. But you know, we're looking for people that sit here and say, you know, what, having some more experienced heads, thinking about your business, and getting on a weekly meeting and listening to all the challenges that you're going through and helping you find those resources, and work working with our management consultants every week. And, and really, you know, being an accountability partner, for lack of a better term, like we're looking for a collaborative relationship where were invested in and vice versa, into the relationship. So it's just an interesting, it's just an interesting thing. When I talk about, like, what we're looking for, we're looking for great founders. Like that's, that's like that criteria. Number one. Yeah.
Andrew Maff 14:16
It's interesting. So I had I had the CEO of Flippa on here, months ago. Yeah. And it's, it was it was a great episode. It's really interesting, the kind of different not the different thought process, but like, the different approach of obviously, they're more of like a kind of like a marketplace, if you will, of businesses that are for sale. And, you know, we're I obviously look into some stuff and you know, we're kind of exploring some of that those opportunities. And when I look at those sites, you know, sometimes you see things on there that it's just it's clearly some guy who's just like, I didn't want to do this business anymore. So they just kind of throw it up there and it's like, someone buy it from me. And I imagine you're severely hindering your elf of what your actual valuation your exit could be by doing something like that and not preparing so that that two year process? What happens in those two years to actually get someone prepared for that exit?
Yoni Kozminski 15:15
Yeah, great question. So Andrew, the first thing that we're doing, once we've gone through the founder diligence, we all like each other, we're happy with the terms off we go, we're off to the races, we're effectively assessing the business operationally, we're looking at any of the challenges, bottlenecks, weak, weak points, where is the founders and your leadership team, depending on the size of the business, where are they spending most of their time, and then where is the time gonna be most valuable for them and QPS personnel to invest their time into so we'll actually on the back of that assessment, build with the founder, this growth roadmap where we're really breaking down from an operations perspective, a marketing perspective, a management perspective, a process perspective, you know, these key areas inside of the business, we're actually looking at three month increments on things that we plan to achieve, that will align with the valuation that we want to see at the end of the two year period. And what needs to be true for us to actually achieve that. So we're building that growth roadmap. And then on the back of that, we're actually helping, like I said, be in ways and accountability partner inside of the business, in making sure that we're actually holding them accountable to what needs to be delivered and providing the support that is needed in order for for that founder to achieve it. So to go a little bit deeper. You know, what, what we do in Scala is we design SOPs, training, videos, documentation, we look at the current state of the operation, we build the future state, and we optimize the operation. And it's a different offering inside of South Col because we're not building necessarily to scale the company for the next five years, what we're looking to do is we're looking to maximize the profitability of the company in the in the short term. So that's done in the next first 12 months, in the first 12 months, we're trying to push growth and see what we can do. But as we're getting to, you know, the margins that we want to see, as we're as we're getting to the level of expansion or diversity that we want to say, and we can talk a little bit about some of the things that we're doing, can talk about the companies that we've invested in some of the things that we're actually doing with them that that is helping increase evaluation, their position and their ultimate exit value. But, but ultimately, we're, we're really hands on in that guidance, and we're making sure that they get all that support that they need and those resources.
Andrew Maff 17:42
Actually, that's a good segue, because I was gonna ask you that same thing, because I imagine when I looked at like, okay, all of the different, you know, businesses that you're working on right now, I could see the subtle overlaps in certain areas, and obviously a scholar being kind of more on like the SOP building out, like, you know, the processes and things like that, I know that from a valuation standpoint, that is also incredibly important. I know, you know, some people look at, you know, I'm profiting this, I've got x inventory on hand, I've got excise email list, and you can reach this audience, blah, blah, but you need to be able to hand the buyer instructions on how to run the business. And if you don't have those SOPs in place on how to do things, you're kind of kind of shut a look, in which case there are like, you're going to end up staying with that company for a long time. Whether they, you know, it's part of the deal, or whether they put you on a on salary or something for extended period, just to help you transition, in which case, some people I imagine, are looking there like their big payday and they hit their exit and then they're like, crap, I gotta stay on for like, a year because I didn't build out any of these things. Is that more or less in the right direction of probably what happens?
Yoni Kozminski 18:50
Absolutely, absolutely. That's that's, that's definitely spot on. I add to that as well, in saying that, not only does it allow the business owner to sell an asset, a brand, a company and not themselves attached to it, and fetch a higher multiple, it also massively opens up the prospective buyer pool. If if someone can come in from afar and actually see what's happening and have that high degree of confidence, you know, our litmus test is have we delivered or not, is if anyone new to the business comes in, within 15 seconds, they should be able to find the exact step by step guided guidance, they need to perform any task inside of the company. And that's, that's what you know, that's what we hold ourselves accountable to in our delivery. And, you know, to be frank here, this isn't like we do this in a couple of weeks and off you go, you know, typically a scholar project is, you know, at least three months, and typically, I would say, bordering on the five to six month, you know, period. And, you know, for larger companies, it can be really extended and you know, we've seen it actually happen. Anecdotally, with a scholar we've had aggregators buy brands that we built the processes for and then won those aggregators as clients because they're like, We want this for our business. So it's it's like proven itself and, and how we actually like how southco came to be, you know, talking to a lot of founders here today, I'll share a couple more anecdotal stories about South Col. The brand name behind it, South Col is the final. It's the final Basecamp before you summit Everest. And so the whole logic of what we're trying to do is help people you know, reach their ultimate peak and see, you know, the biggest possible success that they can see and I had another point of loss, Andrew, I know you got questions,
Andrew Maff 20:43
so Oh, come on, man. I was so ready for it. That was something else
Yoni Kozminski 20:47
that was something I think just just in your gut I think that was unbelievable.
Andrew Maff 20:51
Oh yeah, great line. Well, you will you just pretend that you said it and we edited it out. That's what happened.
Yoni Kozminski 20:59
Do you get that? Yeah.
Andrew Maff 21:03
Yeah, I did. Thank you so much for being on the show. I obviously really appreciate you doing this with us. I would love for you to let everyone know where they can obviously find out more about you and of course more about South cool.
Yoni Kozminski 21:12
Yeah, you can find me at LinkedIn, I'm pretty active Yoni Kozminski. Yoni at any of my company websites and multiplymii.com, we are a scholar.com Southcol.co there's also great free resources across each one of those websites you can get on an accountability chart on like build your own inside of a mirror board on a scholars website. You can do a free valuation on South Col's website if you're interested to see where you sit today in the current market. There's a great guide I was trying to remember what multiply may have is a great guide on multiplying the top 50 roles to hire in the Philippines and what they cost like the direct tangible breakdown of the cost so always trying to add value guys and you know give you guys a high degree of transparency to
Andrew Maff 22:00
beautiful Yeah, Yoni, thank you so much for being on the show. Obviously everyone who tuned in thank you as well please do the usual rate review subscribe, all that fun stuff. But as I always say thank you all for joining us and we will see you all next time.
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