3 Reasons Nate Ginsburg's Centurica Deal Was a MASTERSTROKE
Summary
In this conversation, Nate Ginsberg shares his entrepreneurial journey, starting from his early days as a digital nomad to his recent acquisition of Centurica. He discusses the evolution of his business, SellerPlex, and his interest in M&A, particularly in the context of due diligence services. Nate emphasizes the importance of scaling service-based businesses and the stability they offer compared to other business models. In this conversation, Jon Stoddard discusses the advantages of service businesses, insights into acquisition processes, and the importance of due diligence. He shares his experiences with financing deals through SBA loans, the transition of ownership, and the challenges faced in service delivery. Stoddard emphasizes Centurica's unique approach to diligence, focusing on financial, operational, and commercial aspects, and highlights the importance of transparency in financial reporting. He also touches on market trends in online M&A and expresses excitement for future growth opportunities in the industry.
Takeaways
Nate's entrepreneurial journey began while backpacking in Thailand.
He was inspired by a digital nomad he met during his travels.
Nate's first successful business was selling products on Amazon.
He sold his FBA business to a Chinese buyer in 2017.
Nate founded SellerPlex to provide services for e-commerce sellers.
He became interested in M&A after his exit from the FBA business.
Nate acquired a content website and invested in other businesses.
He recognized the potential of Centurica as a strategic acquisition.
Nate emphasizes the importance of scaling service-based businesses.
He believes service businesses offer stability compared to other models. Service businesses offer better cash flow and scalability.
Valuation discussions should be fair and rational.
SBA financing can cover a significant portion of acquisitions.
Transitioning ownership requires careful planning and support.
Complexity in service delivery can be underestimated.
Due diligence involves financial, operational, and commercial assessments.
Transparency in financial reporting builds trust with clients.
Understanding niche markets like Amazon is crucial for diligence.
The M&A landscape is evolving with more professional interest.
Future growth in online M&A presents significant opportunities.
Watch the Interview:
Transcript
Jon Stoddard (00:03.542)
Welcome to the top &A entrepreneurs today. My guest is Nate Ginsberg. Nate is in the &A community. So welcome to the show, Nate. Yeah. Thanks for having me. Yeah. So Nate, let's talk about where you started from. And then we're going to get into that recent acquisition you did because all of it has this origin story. So how did you start? Yeah. Well, all, yeah. I think what, you know,
Like I know we've discussed before recently acquired Centurica, which is the leading due diligence provider specifically focused on online acquisition. So e-comm content website, you know, also do some SaaS and service. And that deal for me closed, we're right about at my three month anniversary, three months in. yeah, you know, I mean, there's been a 10 year journey, you know, getting to this point, which I'll
you know, now go back and, you know, provide a little more context. And so, yeah, I started my journey as an entrepreneur, yeah, 10 years ago, was backpacking in the North of Thailand in 2011 and met some guy working on his computer. And at the time I had just finished teaching English in South Korea for a year and was trying to think, you know, what I wanted to do with my life. I'm, you 23, three years old.
and met this guy who was doing the digital nomad thing, which was pretty early days for that whole scene. And basically got super inspired by what he was doing and really decided that that's what I wanted to pursue with my career, my life. I it's very intertwined and anyway, so basically got home.
you know, had some ideas of business models from him and he introduced me to like internet marketing and, and outsourcing and hiring people from all over the world, which just totally like blew my mind that that, that this was even possible. And yeah, fast forward, you know, was trying different business models, ideas, didn't go so well at first, spent all my money, moved back home with my parents. And, that's when I started, just like freelancing internet marketing. mean, in my.
Jon Stoddard (02:26.935)
some of these business attempts, learn some things and as a, I don't know, mean, especially 10 years ago at like a little bit of SEO experience, compared to most, all of a sudden you're an expert. You're way ahead of the most people. Yeah. Yeah. So after I moved back home, I was focused more around just picking up like some freelance internet marketing clients, mean, fast forward a couple of months and I did, and look, I wasn't making like,
by now current standards, it wasn't a ton of money, but it was enough to at least cover my expenses, enough to take off and kind of start my journey traveling and as a location independent entrepreneur, digital nomad. And so I took off from my parents' basement, this was in the beginning of 2013. And yeah, fast forward, basically...
linked up and joined with this online entrepreneur community called the DC. Basically, the theme is online entrepreneurs. had their big event in Bangkok in October of that year that I attended. And attending that event just really opened my eyes again to just like, I mean, met, there was maybe 200 people at that event and these are all
online business entrepreneurs, services, e-commerce, SaaS. And I mean, this like blew my mind that these are all people that, you know, a lot of this community, was like read the four-hour work week and kinda did it, you know, one way or the other. And, you know, I was still at the very beginning of my journey and, you know, was super inspired and, you know, met these incredible successful people that had, you know, been in their businesses longer than I had and built, you know, by my standards at that time, you know, much,
bigger, significant kind of stuff. And yeah, so this was huge for me, just being around this community. I basically, Asia was home base fast forward for a number of years. And I was living in Ho Chi Minh city and it was while I was living there, surrounded by these other online entrepreneurs that I was still at that phase of my career, I was trying a bunch of stuff, some of this, some of that.
Jon Stoddard (04:52.725)
Some things worked a little bit, other things, yes, no. mean, throwing a lot of stuff at the wall and you know, what hit for me, the first thing that yeah, like hit more than a little bit was selling products on Amazon. And so that became the first business that I really built. And this was in, man, I got into that in maybe 2014, 15 and fast forward, sold that business, had an exit.
in 2017. And so got into FBA. did you sell that? What site did you sell that through? Or was it a private? Yeah, so it was a private deal to a big Chinese buyer that was actually like, they were kind of rolling up and aggregating deals or attempting to before this whole wave. And yeah, I mean, was living in Vietnam at the time. So I literally like, you know, this all happened very quickly. And I was on a call with my business partner and he and
So there was this character, Jerry, who was buying up businesses. Some other people in my community, he bought a much larger business of my business partner and other people. anyway, was just like, I was catching up with my business partner. I was in Ho Chi Minh City, Vietnam. was like, Jerry might be interested in buying the business. What do you think? I ran a little napkin math and I was like, well. What's it worth first?
What can we make? Yeah. was like, but you know, like long story short was interested and basically two days later I was literally on a plane to China to meet with this guy, you know, went to their offices, had tea. They have, you know, like 200 Chinese people in their office there, you know, running a large Amazon operation. What were you selling online? yeah. I was selling, it was a mix of products like
some glass wine accessories. like wine decanters, wine glasses, champagne flutes, as well as like activated charcoal related products was the majority of, but it was kind of a random mix of, know, it was a product you were interested like yoga kind of products or what was it just to, mean, the Amazon games more about like working backwards, finding an opportunity. And so, you know, saw an opportunity in this category.
Jon Stoddard (07:16.141)
You know, sourced, imported, launched, know, rinse, repeat. All right. So sorry. Get back to your Jerry in China. The FBA game and so on. So yeah. So no. So I fly to China to make a deal with Jerry. And, you know, long story short, come to an agreement for him to buy our FBA business. And, you know, fast forward that close maybe, you know, 60 days later or something.
And this was the first of, the first next kind of existential, all right, what's important? What do I do? What am I good at? What do I focus my time? And some of the things that I knew and further realized was like, one, like I've always loved teams, remote teams, leadership, hiring, like those have all been areas that I have been strong in. And so,
when I sold my FBA business, I kept the team and it was a small team, maybe six or seven or something people, but they were running a lot of the business for me and they were good. They had experience. so from there started offering services. while I had good success with the FBA model, candidly, cashflow is challenging. was like,
The product categories that I was in was sort of a race to the bottom. And, you know, I just wanted income. so like, okay, services, like it's not gonna, it's not gonna like 10 X over the course of, you know, a couple of months or less, less likely, but kind of more steady, stable. And again, you know, cashflow profitable. I'm not dumping in all my savings and maxing out credit cards to buy inventory, which I did with my previous business. Anyway, so that, so that
So this was, I think we started offering services the end of 2017 or into 2018. that became my other business, which is Sellarplex. And so Sellarplex provides a number of services for FBA e-com sellers. It's grown a lot over the years. It's a team of, I think it's around 70 people globally. We've got a big Philippines office or big Philippines team. have like
Jon Stoddard (09:39.629)
20 in our supply chain department in Pakistan. We've got, you know, another five or six or something in our finance team in India. We've got people in Europe, our recruiting team. We've got like, you know, it's a very global team and, and yeah, seller plexes, I mean, has been doing well, has been growing, you know, over the last years. I want to, I want to ask you about this because I'm just curious back to the Jerry thing. Did you recognize what he was doing, which was five years ahead of thoracio?
Yeah, mean, that will yes. And there were a few others actually pre-Thrasio that like, you know, I was in the FBA space, you know, for a while and pretty well connected, you know, when I was selling in this and so yeah, so was aware there was, I mean, I can think of at least another like, you know, fairly big, you know, attempt at the Thrassio business model that didn't go well. I mean, it didn't go well for Jerry, my understanding.
as well as this other pre-Thrasio attempt. yeah, I mean, we can talk about what's been going on in the whole FBA aggregator ecosystem these days. But yeah, mean, like on one hand, it's a fairly simple model. On the other hand, executing it correctly, you gotta do a lot of things right. And I think some of the challenges that a lot of the aggregators these days and the...
Thrasio included and posts in, you know, other ones post Thrasio that that yeah, you know, running into similar challenges. I think that some of these earlier ones that didn't, you know, didn't get the headlines and weren't as publicly. yeah, there wasn't, you know, as much publicity around, but, but yes, to your point, was similar model, but, but earlier. Yeah. So sellerplex is, is basically a service organization. You're helping SAS.
You're helping FBA content websites, e-commerce websites, all of them just to execute better. So to clarify, SellerPlex focuses on e-commerce businesses. So SellerPlex, it's mostly FBA sellers, but we do Amazon account management, Amazon marketing, supply chain management. We have like a bookkeeping department as well.
Jon Stoddard (11:59.039)
And these are services, know, overwhelmingly for e-commerce sellers. We work with some agencies, but you e-commerce is that business, you know, expertise. And so, and so also when I, after my exit, in addition to starting SellerPlex, I mean, I've always just been interested in &A and think it's cool buying and selling businesses. It's exciting, it's cool. You know, I had my exit, which was, you know,
super significant for me at the time. yeah, like was wanting to do more and be more involved in &A. it's just like, I mean, I'm sure you and many of your listeners, like it's just, it's cool. It's exciting. And so, so yeah, I also like did some smaller deals, acquired a content website, invested in a few other- How big was the content website that you acquired and kind of the traffic size?
Yeah, I mean, it was like a low mid six figure acquisition.
I was in the crypto space. Traffic, mean, yeah, I don't know, like a thousand, it fluctuated between a thousand and 2,000 and 500 visitors a day or I don't know, something like that. We actually sold that business now earlier this year. So got in, got out. That was, I mean, a positive outcome. And as well as, invested in some of these other businesses and, you know, all while like, you know, Sellerplex was still, you know, kind of growing and
And with with sellerplex, we about a year ago started to get into doing some due diligence projects because, you know, there's this whole aggregator boom and buying all these businesses and, yeah, we actually were working with a broker friend of mine doing some exit prep for, know, working with him on some of his clients and, you know, due diligence, a lot of ways it's just, you know, the other side of the coin of exit prep. so we sort of, you know, modified the scope
Jon Stoddard (14:05.005)
did some outreach and all of a sudden, landed and started doing some due diligence projects. And so with that, things Was that on the buy side or the sell side? Buy side. we were working with, initially we had some projects with a broker friend and that was on the sell side. But then when we started offering as a service was buy side. And so,
So yeah, then coming into a couple of months later, we were getting some traction around this new service line of due diligence and it just got me thinking more seriously about due diligence as a service category. And if this was an area that I really wanted to like double down on and pursue and yeah, for a lot of reasons, I thought it was attractive. I mean, and a big thing just because it's in the &A space, which I think we...
we both share an interest and excitement around. And so it was like, okay, cool. And I've friends with a lot of brokers and just like, yeah, had been interested in &A for a while. And so like, okay, I thought it could be a cool opportunity to really like get even more involved in the ecosystem. so also at the same time, I was aware of this other business, Sancherica that
You know, it was really like the category leader. mean, yeah, they've been around for a while. Yeah. 2013. 2013. Yeah. Like, you know, the the dinosaur days in terms of online business, you know, I mean, man, like I'm like connected to a lot of the online brokers in this and, know, and a lot of them, we like lived in Asia together like the empire flippers. I remember when they
they actually like Empire Flippers was a pivot from their previous business. And like, I remember I was, know, it was actually that same event in Bangkok when they kind of, this was a couple of years, not my first year, but when they announced their sort of like pivot onto building a marketplace and Empire Flippers was launched from, you know, what was before. And anyway, I mean- I know Joe McNotty. I sold my side through to Empire Flippers. Yeah. Cool, nice. Yeah. Had actually Justin.
Jon Stoddard (16:25.645)
Joe's partner was in Austin last week and we caught up. They're in Thailand. Yes. Yeah. Well, they were, yeah, spent a lot of time. I've hung out with those guys a lot in Asia, but anyway, you know, this was, you know, they launched Empire Flippers. This must've been, I don't know, 2014, 15 at the latest. And Sinturbo started 2013. I mean, some of these other ones too, I mean, like Quiet Light, you know, website closers, I think like.
started around those years. This was really like the genesis of the online &A industry. In 2010, I don't think any of them existed. Fast forward a couple of years, these businesses are just launching. And fast forward to today, it's a thriving ecosystem. mean, the category basically didn't exist 10 years ago or was very, very, very early days.
in terms of online specific &A. yeah, fast, and so, so Sanchirico was a part of this like, industry genesis and Sanchirico was founded by like original founders and then was bought by these other guys, Chris and Brian. And so this is so catching up back to our story and my story.
You know, knew Chris, we were friends online and we, you know, connected a little bit. And yeah, you know, was very aware of Sanchirica and I kind of got this idea in my, you my head like, wow, maybe Sanchirica would be like the dream acquisition for me. And just kind of like started thinking about this and, you know, I thought that it was a good, you know, combination of like,
my skill sets that could be added to this business to grow it and take it to the next level and all this kind of things. And so I was thinking about this for a while until finally one day, you know, shot Chris an email, you know, the email that kind of changed everything and kicked off this whole chain of events. And basically reached out. It was just like, Hey, we're doing more due diligence. I know, you know, let's hop on a call and see if there's any way to collaborate or, whatever.
Jon Stoddard (18:43.213)
And were they receptive to that or did it take a little while? No, they responded very quickly. like, this was something, it's so funny looking back, but like I had some nerves around this, and I was thinking about sending this email and finally one day I just freaking sent it. What were you afraid about sending the email? What was that? Like they'd say no or didn't want to talk to you or not say, just not respond? Yeah.
that basically, I mean, because it's like, you know, so I'm also I'm really into just like, mindfulness and you know, lot of this, like, you know, personal development and working on myself is like, a big, yeah, a big part of part of me. And anyway, I think about this stuff. And yeah, with that, I mean, I think what it was is there was this like, you know, before before you like, take the action, it's all potential. And so if I never sent that email,
then it's like, it remains this dream, but like, the dream is there, you know, it's never gonna happen unless you do something, but like, but yeah, there's this fear, cause you know, when you take that action, you know, yeah, it can have a good outcome and look like it was a good outcome, you know, I fast forward, you know, spoiler alert, it's now my business. like, you know, it all worked out, but yeah, but it's like, if you don't,
there also was the chance that they could have said no. like, you know, think that's sort Why were you afraid of that no? Why do you think? Yeah, because it's like, if they don't say no, then the dream's still alive. You know, it's never gonna go anywhere. see. It's like, it's never gonna go anywhere, obviously, if you don't actually take that action, but like, you're not gonna get a no either. So like, the dream is still there. Anyway, I mean, I'm a very like action-oriented person and look, like it wasn't-
I wasn't like deliberating, do I send this email? know, I'm probably like looking back at, know, I don't know. It wasn't like this whole thing. was more like, I just kind of had in the background, I'm like, yeah, I should email them. I should email them. And then, you know, one day finally did. I wasn't like, you know, hovering over and anyway. I know, I think we all have that. I mean, I sent an offer to somebody say, look, I,
Jon Stoddard (20:59.693)
I like your business. I love your business. It's very profitable, but I have some puzzle pieces that are not together again. And I didn't want to create the perfect email. So I just outlined three of the puzzle pieces that I'm unaware of. I'm sure of. I don't have answers for. So I can't really make you an offer until I have this, but I can. I'm interested in your business.
Right, exactly, similar thing. so anyway, reached out, got a response back quite quickly. And so I thought that was encouraging. We got on a call a couple of days later and again, it kind of started off like, we're doing some due diligence and maybe there's, if you're a capacity and you could send us deals or if we're a capacity or out of scope, we can refer to you. And then, like,
In the back of my mind, my hope was to, wanted to explore the possibility of an acquisition. so fast forward in the call, we're kind of like, well, yeah, at some point maybe it makes sense for one of us to buy the other one. And then Chris actually responded and was like, well, if that's the case, I think it'd make more sense for you to buy us.
And like, this like my, you you know, why, yeah. Why you going off and why did he say that? Yeah. Why do think he said it? mean, like there's, there's the, the, what you imagine he thinks he said, and then what the story he actually told, like what's going on in the business. Yeah. Yeah. I mean, I think if we look at, like if we look at kind of skill sets, like it really, you know, it.
Me taking over Sanchurka really is a good match for like my experience to build on the foundations that Chris and Brian, you know, where they, and they did amazing with the business. mean, I don't know it, you know, significant revenue growth over the last, you know, since they took it over the business, yeah, grew a ton, but you know, with them, they were coming up against, you know, kind of like a bottleneck in capacity issues and a lot around fulfillment. And so they were basically like,
Jon Stoddard (23:16.117)
always at capacity and didn't really have that experience around like building a scalable ops team infrastructure to be able to scale deliverables. so that is my, mean, I do have lot of experience with exactly that, remote teams, scaling remote teams, scaling deliverables. And so...
So yeah, think that's why, and Chris knew that I have this, he knew about Cellarplex and knew that we were doing due diligence, but also it was a large team and doing all kinds of other stuff. so I think that's why, mean, that was part of why I thought it was a good fit. And I think, yeah, that's why Chris thought it would be, make more sense for us to buy them because of our,
strength around the team and infrastructure and scaling deliverables that I have experience with. So let me ask you about that. let's say, assuming somebody watches this and they go, okay, due diligence seems like it's a service-based job. How do you scale a due diligence team with deliverables? do you do that? I mean, one, yes, it is 100 % a service-based job.
And yeah, services scale with more people. so, mean, happy to get into as much kind of depth around this. And this has actually been a big part of my first three months, or I guess, man, I think I maybe just crossed my first hundred days as CEO, or right about to CEO at Sancharica. Yeah, thank you. It's been a ride. But yeah, mean, like,
The short answer is service businesses scale with more people to deliver the service. The longer answer is, and if you'd like, can kind of walk through, there's been already within three months, a number of different variations of the scalable delivery model that I've been building with Centurica. And candidly, there've been speed bumps, challenges. mean, especially at first, the first
Jon Stoddard (25:31.511)
plans or models did not work like I was originally thinking or hoping. And so, you know, the ops, you know, is currently on like version three, but at version three is man, I mean, we are like so much ahead of where we were at version one. And, and yeah, I mean, you know, happy to break down our kind of like how we're, you know, how we're structured in a way that, you know,
will allow us to keep scaling and do more volume. Yeah, no, I think I got it. was just, we made an offer for a custom development company and he thought it was worth $5 billion. And then by the time we showed him the EBITDA, which is averaged out to $300,000 over a three year period. And we said,
This is not scalable. It's only scalable. I mean, if we remove the revenue up like this, our employees are going up like this. It's not going to be going up like this. And then add a difference of opinion on the offer. so, right. Well, I mean, how you value that type of a business is a whole other discussion. But on the scaling side, and this is something that like I've
You know, I very intentionally, so I'm involved with a lot of service business. I mean, my main businesses are service businesses. I'm an investor advisor in a number of other service businesses. And like, this is intentional. Like, and the reason is because, well, there's a few reasons. you know, service businesses rely on people. And if you can solve people problems, then that, you know, that really goes a long way with
resolving bottlenecks and solving problems for service businesses. And like I mentioned, know, recruiting and hiring and, remote teams has always been like a strength of mine. And so like, I have a really strong recruiting department that actually services, you know, maybe at this point, maybe four, five, five different businesses and like, you know, knowing that I have and that I'm confident in this, you know, recruiting department, it just gives me confidence to go into service businesses and know that I can,
Jon Stoddard (27:44.525)
you know, overcome people problems and resolve people problems. So that's one, I mean, and yes, they do involve a lot of people, but if you can solve for people, then I think you're, you know, it goes a long way with this type of business. But then the other one, to your point about how it scales, you know, every business model has different advantages and disadvantages. I think with the service business, you know, you're right, it's more of a linear growth curve. It's not gonna, you know,
it's not scalable in the sense like, if a SaaS goes viral and all of a sudden you pick up 10X customers overnight and yeah, like the SaaS can handle, maybe your customer service needs to be adjusted, like, yeah, the business can scale easier that way. Or e-commerce, all of a sudden you get some ad campaign that just like hits and you have great return and you just scale ad spend and all of sudden, boom, the business like takes off. I think that's...
that's less likely to happen with a service business because as the projects and deliverables grow, you need more people to handle that. so my experience with service businesses is like, it's less exponential, but is linear. And honestly, in a big thing that I like about service businesses is, I think they're generally quite stable. And so,
You know, it's linear, meaning it's, you know, fairly slow and steady, but what you're not going to have is like, growth and all of sudden one month, drops 80%. You know, it's like less volatile. So e-commerce, you know, you have an ad campaign that's crushing it. Then all of a sudden, you know, the next day, the next week ad costs go up. This campaign's not profitable. Now you're sitting on all this inventory. You're not able to sell it profitably. Like.
You know, that you're less likely to run into those kinds of, you know, those kinds of issues with a service business. I mean, look, everything again, pluses and minuses. But yeah, and also with service business, I like the free cash flow, you know, they're less capital intensive, whether it's investing in inventory, investing in development, it's really like, look, we only need to pay people when people pay us. So it's like,
Jon Stoddard (30:05.421)
You know, it's less likely that you're gonna all of a sudden, you know, be underwater when, you know, if sales go down, you can scale back on your expenses. And if sales go up, you can, you know, increase your team and expenses. so, yeah, it's generally a good, you know, good for, you know, cashflow, which was, I mean, I like cashflow. So, I like services. Let's go back to the Centurica.
Chris decides to, you should buy us. Where were they at, at that point? They were just max capacity. They were growing, but just max capacity, but healthy cashflow wise. Yeah. Super healthy cashflow, very profitable business. And yeah, at capacity. Yeah. And then you came in with what kind of offer that said, okay, this guy can 10X us or, or this guy can do a better job than us or whatever that story.
Yeah, mean, was, you know, the business was valued on a multiple of, mean, technically the metric we use was we called it owner benefit because we took basically profit that didn't include salaries for the two owners. And then I built in a deduction around what I thought it would cost me to replace their roles because both of them were
I mean, one was very much working in the business. The other was doing some things, but one was like really heavily involved and we can talk about the challenges around transitioning this person out. But yeah, so we had like the total profit number and then deducted an amount of what I thought would be reasonable in order to hire my own team or replace these roles. that- But they weren't taking a-
a salary, a line item salary in the GNA. They were taking it out of SDE or profits. Yeah. Yeah. So, you know, so I, you know, built in a line item to deduce what I thought it would cost me to replace them. And, know, and then we applied a multiple to, know, to that, you know, SDE number or whatever. And, you know, we agreed and that became. So who proposed that? You proposed it first.
Jon Stoddard (32:25.663)
Or did the seller say we're worth, we think it's two X, three X or something? We sort of danced around it for a little bit at first. And it was like, what kind of a range are you thinking? And like they kind of threw out a ballpark number of what they thought it was worth. know, and then it was like, you know, ultimately the ball was in my court to, you know, present an actual like, you know, LOI offer. And so, yeah, like, you know, but.
when I presented the offer, was in line with all the, you know, we, mean, we, we, we were pretty aligned the whole process in terms of how we value the business, what we thought it was worth, you know, da, da, da. So it really, I mean, yeah, I think like we both were just, yeah, had similar ideas or expectations around what the business, you know, how to value it and what it was worth. so came to lot of the time. they bought that business, but a lot of the times, you know, you buy these SaaS companies or e-commerce or
and they're first time sellers, they don't have any experience around selling a business. So they think it's always think it's more than it's actually worth. Right. Well, these guys were running a due diligence business. so looking at a lot of businesses and so very familiar with the process and reasonable, you know, we, both were coming at this from like, I'd say, you know, fair, rational points of view. Yeah. Right. And so, and like I said, you know, we pretty much were aligned throughout the process in terms of, you know,
yeah, how much it would be worth and what was a market rate. And there was none of this like, this business is worth 10 X revenue, you know, kinda stuff. yeah, we both like, and look like they, you know, there were definitely a number of challenges for them in terms of like finding the right home. And, know, I candidly, you know, I was a good fit. And so it was like,
We both, know, it was a good fit for both of us. I think we both wanted to make it work. We both were reasonable and look like I didn't wanna pay too much. And they also, you know, we all just wanted like a fair and appropriate deal. I wasn't trying to like, you know, undercut them. They weren't trying to overcharge me. And so, you know, what we agreed on, I still think is like a pretty fair, you know, fair price given the circumstance and yeah.
Jon Stoddard (34:45.901)
Well, so what did that look like? mean, was it creative financing? Was the cash out of the pocket? 100 %? Mostly SBA. So SBA, well, so yeah, used SBA for, you know, a big chunk of it. And then, you know, my own down payment. Was that SBA 90 % of the? SBA was 70.
capital injection was 20 and seller note was 10 or is 10. Okay. Yeah. How long did that take to get approved for qualified and, and, executed? I mean, I think we, we like, we got serious about pursuing, you know, this, this acquisition, at the beginning of this year. And so we, you know, waited for the, the,
know, 2021 numbers to finalize in this. so, yeah, kind of got serious about the process in January. And yeah, we closed like the right around like, either like right at the end of April or right at the beginning of May. And so, you know, the whole SBA process was maybe four months or something. Yeah. And what bank did you use for that? Called
First Business Bank. First Business Bank, was it a local bank or it's like a regional live Oak type? No, they're local. so used a lender. So Steven Spears, don't know, you might know him. Yeah, mean, does a lot of these, he's like a SBA coordinator or broker. And so I knew Steven and reached out to him and then went through the pre-qualification process. And then he connected us.
me with, you know, he shopped it around to some different SBA banks and found the one that was interested that then, you know, like software or didn't mind software, didn't mind services. Yeah, just, you know, like each bank has different interests in terms of what they'll lend for. And, this one, yeah, you know, was interested or comfortable with this business model. And, and, you know, it worked.
Jon Stoddard (37:06.591)
Yeah. So you executed on the deal. It's now yours. Did they leave? They have to leave with SBA, right? So they're, mean, they're not actively in, they're not day to day, but they are both still involved as advisors. And I mean, there's been a transition period and you know, it wasn't just like, you know, they are still involved. You know, my team has taken over the like, you know, we're running the business, but they both, you know, have been incredibly
just accommodating in terms of supporting our team and training our team and answering, and still are available answering questions. And so, yeah, they're more advisors, but not like day-to-day active. Yeah. So when you own the business and you're underneath that really underneath the hood, was there any thing that showed up that you didn't see before? Yeah, good question. So, I mean,
Yes, and I mean, there wasn't anything that showed up that, you know, I wasn't, there wasn't a due diligence business. So yeah, well, I'll tell you, mean, I, so I greatly underestimated the complexity around the service delivery. And so that wasn't like, it wasn't a surprise in the sense of like, like I knew this was,
an important item, but I, again, I underestimated what it would take in order to, you know, build the scalable deliverables. And that's, like I mentioned, I mean, man, we've had, you know, challenges the first few months and first thing didn't work and had to go to the second thing and that worked, but then had problems. then, you know, like I said, we're kind of on V3 of the whole org chart and design and like, and yeah, like that's been a big learning curve around just like what, you know,
Yeah, I underestimated what it would take to successfully build our own deliverables. so, yeah, that was, I mean, I'd say, I don't know if surprising is the right word, but I underestimated and that's on me. mean, the whole thing I've learned more in the last three months, taking over and running this business than I have in the last like...
Jon Stoddard (39:21.857)
you know, years. so, so that's good. Learning and growth is good. Is there, when you say scalable, is there software you can write that creates coming out of dashboard to help you with your due diligence?
I mean, maybe, but like, you know, the bulk of the deliverable relies on people. so, and so, yeah, maybe I can share, think it'd be useful. Like the way that we look at diligence, there's three buckets, right? We've got the financial diligence, you know, which is with the primary of that is gonna be, you know, verifying the PN, the seller PNL versus our rebuilt PNL. If you wanna get more in depth on the financials, you can get into quality of earnings reports.
Then you've got operational diligence, which is gonna be like, you know, red flags, skeletons in the closet, as well as like the start of like value creation of like, well, like I can optimize this, you know, I can, can sub in, you know, I can save costs here. And so that's on the operation. And then there's the commercial or like market diligence, which is more, you know, forward facing growth, like.
Yeah, there is like market analysis, competitor analysis, as well as just kind of like forward looking opportunities of like, well, like, what if we added a sales team or what if we, you know, explore this marketing channel? And so anyway, the three buckets, we got financial, operational, commercial, and you know, any due diligence is going, and one thing I'll say that's kind of, that's unique about Centurica is our
So we're a mixture of like accounting and finance as well as like actual, you know, online business operators. And so that makes us unique in the sense that we can provide both the financial diligence as well as this operational and commercial diligence when it comes to an e-commerce business or a content website or, you know, we're getting better with SaaS and everything because, know, stuff that I've learned getting into the due diligence, you know, industry.
Jon Stoddard (41:31.773)
Most due diligence companies are very siloed. So it's like you have a financial diligence accounting firm, you have a legal diligence law firm, you have an HR diligence service provider, you have an operations diligence consultant, and it's very fragmented. And that's one of the opportunities that I see is to really, we already do offer multiple significant scopes under one house. So we have the financial, operational, commercial.
And we're able to do that because, yeah, we have a finance department, I have a deep, my experience, I personally have experience with all these business models. I'm very connected to e-commerce, content sites, as well as, I mean, service businesses, I've been running. so, so that a lot, we're not just an accounting function, although we have that and that's certainly a necessary piece.
But yeah, but that's one of the things that makes us unique is that we can like touch multiple areas of diligence, which is not common. So anyway, onto the deliverables, whether or not you want the operational diligence, whether or not you want the commercial diligence, really like you're, I mean, I've yet.
Every acquisition, you're going to want the financial diligence, which is, know, verifying the numbers are what the seller says they are matching the P and L's where the differences. me, let me ask you about that. So somebody's running with QuickBooks or zero or some other, application, financial application. How deep do you go into verifying their Stripe accounts or PayPal accounts or Amazon accounts, and then go into the taxes?
So, I mean, we, so what we look at is basically we wanna get eyeballs on money in, money out. And so, you know, let's say we're kicking off a project, you know, call, you know, we have the kickoff call and really the, you know, the goal or the outcome of that is to get really clarity on like the document and access request list because we need like eyeballs on everything. And so, you know, let's say it's a, you're.
Jon Stoddard (43:48.671)
a simple FBA business, you're selling on one Amazon marketplace, you've got a bank that you use, you've got a credit card, and you use zero. So in this case, we're gonna want eyeballs and access to all of those parts. So we'll want direct Amazon account access, so we pull our own data in the reports. We'll want bank statements, credit card statements, month by month for the accounts that they're using.
We'll want QuickBooks, Axe or Xero or whatever their accounting software access to be able to like go in. And I mean, really that's just kind of pulling the general ledger. And some of these things we actually verify like there's more than one way to verify. But yeah, to your point, we want to verify and eyeballs on all the money in all the money out. And we take that to then reconstruct the P &L to match against the seller P &L.
And you know, and then back to your original question, like this takes accountants, you know, like this is, it's a very manual process. And so, so yeah, you know, we have an accounting team. There's, know, currently five accountants where it's like each one can work on two projects at a time, you know, the main deliverables, the P and L rebuild and, know, identifying the deltas and Hey, you know, the seller reported a million dollars in earnings and you know, our rebuild was
you know, 900,000 and so, that's a Delta of 10 % and where did that come from? And, you know, it's like, it's a very manual process is what I'm getting at. Is there potential to automate parts of the process via software? Sure. I'm sure there are, like, I wasn't really thinking about that. was thinking about just the information you can get from Amazon, but I do want to ask you about how often do you see somebody
you have the Amazon site or one product, then they have three other, three or four other products started or selling on Amazon, but they just want to sell one line or one company, but their expenses and sometimes our revenue is co-mingled with another one and you try to extricate that. Yeah, these things can get tricky. I mean, it's really, it's all a range and all the above, you know.
Jon Stoddard (46:14.337)
The best for us is like, look, it's a single sales channel, single accounts, like, boom, that is, you know, that is one degree of difficulty. And then, you know, we just finished a project or wrapping up a project where like, there's, you know, they have one parent Amazon account and they were selling, you know, then they opened up a new account for, you know, that they were actually selling.
and they're transitioning the SKUs from the old account to the new account. there's like, you know, and we're talking like close to 500 SKUs of what they're selling. The parent account has like thousands of SKUs. like it's, I mean, yeah, it gets tricky. That's maybe the trickiest one that we've actually worked on where it's like, you know, we're pulling a portion of SKUs from one account that actually is like.
selling out of inventory, that's selling into the next account. like, I mean, yeah, and look, this is also where, you know, we, you know, really like a differentiator because like we, you know, we understand Amazon accounts and businesses, you know, we have a lot of that experience more than just like some random accounting firm. And so like, when you get into these complexities and look like this was a challenging project for our team, I'm really proud of how we, you know,
Yeah, we're able to deliver it. But yeah, but like it does get tricky. And that's also where we're, you know, we have a lot of experience with these specific niche models that allow us to deliver on stuff like that, you know, more than just like an accounting firm that doesn't understand Amazon as well. I pick out a phone booth. So what is the final report? If you're doing a buy side assignment, what does the final report look like? Are you making a score?
Are you making an evaluation or what are you doing? Yeah. the final report, so the deliverables for most projects, so there's going to be the P &L rebuild and that's like one of the core pieces. so it's literally, we have, and this is something I'm actually like, so I'm not an accountant. I'm learning a lot about accounting now as the CEO of a due diligence company.
Jon Stoddard (48:30.401)
But yeah, so we have the PNL rebuild that's like delivered, that's a separate file, Excel file of the PNL. like, this is something I actually recently learned that I think is super cool, but we utilize like a method or a process called like audit trails or audit trailing, which basically means we're not just plugging in numbers into spreadsheets like.
all the data is on the sheets and dynamically synced and formulated. so when you look at any one column, it's not just the number, you can actually dive in and be like, well, like this number. Here's the history of the number. That's kind of a blockchain thing, isn't it? mean, sort of, yeah. I mean, it's all about transparency and being able to, you know, and so.
This is something that, one of the, I think this is a significant improvement that we've implemented where, as a buyer, there's just more transparency and you can look through the sheet and see, like, okay, like, this number, you you can follow where the numbers came from. It's not just like an input. And this is something that's like, this is standard practice with like big accounting firms and consulting firms. But again, this is like, you know,
The vision for Centurica is to really bring like, you know, a high level of professional service delivery to these online business assets. And I think that's a big opportunity because a few macro trends. we've got on the sell side, the online business assets themselves are professionalizing, you know, the businesses are, you know, it's not just a guy in his basement, refreshing affiliate earnings. know, people are building
you know, seven, eight, nine figure e-commerce, SaaS, you know, some super big content websites. They have teams, they're the CEO, you know, it's like the businesses themselves are professionalizing. And then on the buy side, there's becoming a lot more professional interest. And so what do I mean by that? You know, private equity that five, 10 years ago wouldn't touch a mid seven or eight figure e-commerce brand. Now, you know, they are interested and you know,
Jon Stoddard (50:51.053)
a private equity buyer has a different level of requirements of things they're looking for than if you're an inexperienced individual buying a $50,000 website versus a private equity firm buying a $10 million e-commerce store. There's expectations as well as opportunity to kind of meet that higher end client, which we are.
that's one path that I'm really committed to of continuing to professionalize so that we can really act as like a bridge between the gap of these more professional buyers, private equity, the roll-up funds and aggregators, family offices that are interested in these online assets. so we wanna deliver a high professional level service. Anyway, this whole audit tracing or audit trails,
is a part of that. so basically our P &L deliverable is fairly robust. You get the P &L, the rebuild versus the seller, the deltas, it's all organized and categorized. we deliver that to the buyer and they have questions and like, why is your cost of goods 3 % higher or lower? why are you missing? There's a 10 % gap in
insurance fees, why do you have like, you know, and we need to be able to, you know, explain these things. And also in having that, that like, you know, trail, it, it, answers a lot of questions because, you know, a savvy, you know, finance person can look at that sheet and like seal that answers a lot of questions preemptively because we're like showing our work basically. Yeah. Who, what's the makeup of your customers right now? That is funds, PE, family office, independence. What, what does that look like?
Yeah, so we work with a good amount of, you know, one kind of client base is going to be FBA aggregators. And we do a lot with FBA aggregators and like, you know, we love repeat clients. You know, those are, yeah, that's great. So yeah, we do have a number of, you know, aggregator or private equity firms that are, you know, multiple, multiple buyers. We also get a lot of, of individuals. And so, you know,
Jon Stoddard (53:13.165)
someone maybe they're doing an SBA deal, know, more, mean, we're, really, we're going more up market because, they pay more. Right. mean, you know, well, like if you're buying, a $5 million business or a $10 million business, you know, a 10, 15, $20,000 diligence bill on a $10 million acquisition is like, you know, point for itself. I mean, I think it's, it's, know, it's yeah, worth it. And from insurance, but just like,
If we charge, and let's say it's a $20 million, a $10 million business, a $20,000 project, that's, what is that? 0.2 % of the overall price versus if it's a $800,000 business and we're charging $8,000, this is like 1%. And so the smaller deals- To avoid a landmine?
Of course you're gonna pay that bill. Yeah. Right. mean, look, I think it's worth it, but like, it's, you know, we can provide a lot more value for bigger deals. And yeah, you know, we can charge more and like, the direction we wanna be going is more up market. And like, you know, I'm really committed to continuing to improve our services, continuing to improve our deliverables, continuing to add more value. And so I wanna go more up the value chain and...
And yeah, and we still want to be able to service sub million dollar deals. The lowest that we do is, so we have like a minimum fee of 6K or 8K or seven, kind of depends on our capacity. like, if you're buying a $50,000 website, you're not going to spend $7,000 on diligence. So the smallest deals that we usually touch, I think we've done 600K, 700K, some in the 800, 900, a million range.
But then yeah, know, more in the, you know, one to 10 is going to be a lot. And we have some bigger ones too. We're wrapping up a $30 million deal. Yeah. You know, 12 million, 11 million. Cool. Where, so I got to tell you, man, an hour went by real fast. So I only don't have a lot of time. So where do you want to go with this? Are you just digesting this or is there some other kind of growth? Did you want to go after this? I mean, I see this as,
Jon Stoddard (55:40.021)
like, you know, this is a long-term play and journey for me. mean, I'm really excited to be, you know, in the online &A ecosystem. I think that, you know, like we talked about earlier, 10 years ago, there was no online &A ecosystem. Now it's, I mean, it's a thriving industry. I still think these are early days, you know, there's a lot more professional capital that is in, you know, like,
The seal's been broken. have, know, real money has been jumping in. I think it's still early days though. There's still a lot of money on the sidelines that's interested in these assets that hasn't yet gotten involved. And so, I mean, I think the industry has a lot of room to grow and I wanna, you know, be a part of that and a contributing factor. And I think there's a lot of opportunity for us to add value for our clients and just, you know, have a really differentiated deliverable, which,
you know, to have a professional deliverable, you know, offer things that, you know, our competitors aren't. And, you know, that's what I'm excited about. And really just building this long-term, you know, this is like a long-term project for me. And I'm excited to be in the industry and grow with the industry. And yeah, I mean, it's been a crazy three months so far. I feel a lot better about the next three months, you know, after all of our, you know,
how much we've grown and improved already. Like, yeah, I'm really excited to see where we are in a couple of months. I mean, look, we are not yet where like at the vision for the deliverables and the breadth and depth of scope that I wanna be able to cover, but we've made, I mean, significant progress since day zero.
And I'm excited to keep building on that. like, you know, I love service businesses. love, you know, solving problems, creating value for others. And like, I think Centurica is a huge opportunity to, you know, do that. And I'm excited to be, you know, like be on, along for the ride. Well, congratulations, Nate. I want to appreciate or just thank you for being on the show. Thank you so much. Congratulations on that and your acquisition.
Jon Stoddard (58:00.897)
Yeah, thank you. And yeah, for any of the audience that's interested can just check us out at centurica.com. You wanna connect with me, Nate at Centurica. Check out any of my social media. We were talking earlier. Also, I'm very into yoga and health and fitness as well as &A. And so if you wanna connect on Facebook, Instagram, Nate Ginsburg, LinkedIn, one thing that your audience also might be interested in, we're finalizing an updated.
We have some proprietary data around online acquisitions from, it's our, we have like a MarketWatch web app that, you know, pulls listing and sales data from a number of, you know, brokers that list online assets. And what they sold for? Multiples? Yeah, yeah. Okay. And so, so yeah, we're finalizing this report. It'll probably be, I don't know when this will be published, but you know, it'll be out soon. And yeah, there's, mean, there's some really cool insight that I'm excited to share around
you know, volume of listings over time per category, multiples over time. That's beautiful. That's what people want to see. Yeah. Well, I'll certainly, I'll ping you when it's ready. And yeah, I mean, look forward to sharing that and, and, know, happy to connect with anyone that is interested in, you know, yeah, things with anything we can do to help or, you know, any opportunities to explore together. Well, great. Thank you so much, Nate. Thanks for having me. Cheers.
