Ep 500 After the Deal: Ben Leonard on Watching His $6M Business Fall Apart After the Exit
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Hi there, and welcome back to another edition of Built to Sell Radio, the podcast designed to help you punch above your weight in negotiation to sell your company. I'm the executive producer, Colin Morgan, and this week we're continuing our After the Deal series.

Having conversations with founders about what really happens after they sell their business. And today's guest is Ben Leonard, who built Best Gear, a strength and conditioning brand into a $6 million company before selling it to Thrasio, one of the early Unicorn aggregators.

Now, we interviewed Ben back in April of 2021, and I'll link up the first conversation with Ben in the show notes over at BuiltToSell.com. And this time around, we're talking to Ben about what happened after he sold his business. Ben got most of his money up front and even hit his earn out. But what happened next surprised him and might change the way you think about selling your company. You'll hear why Ben calls it a pray out, not an earn out.

and what he did when the acquirer started dismantling everything he'd built. This one's raw, real, and packed with hard-won wisdom. Without further ado, here's John Morlow and Ben Leonard. Enjoy. Ben Leonard, welcome back to Build to Sell Radio. Good to be here. Thanks for having me, John.

Yeah, it's good to have you back. I think a lot of people will have heard your episode. It was one of our most popular, but for folks who didn't hear the Beast Gear story, let's just level set. I mean, kind of walk us through the narrative arc here of Beast Gear. Sure. Beast Gear was my baby, my pride and joy. It was a strength and conditioning direct-to-consumer e-commerce brand, which sold primarily on two channels, one being Amazon and the other being our Shopify website.

I founded the business in 2016 and we sold to customers in the UK, right across mainland Europe and a tiny bit in Australia and United Arab Emirates. And I exited that brand three and a half years later in late 2019.

Yeah, we're going to talk about that. And I want to kind of dig into what happened next. But just maybe walk through how big did you get ASKier in terms of whatever you're comfortable sharing revenue. Sure. And then maybe walk through how the sale came about. Did you approach them? They approached you? How'd that work? Sure. So...

I started the business as a hobby, honestly, because I'd actually had the idea for a strength and conditioning brand four years earlier, back in 2012. I was training with some buddies at CrossFit. At the end of a hard session, somebody was like, oh, we beasted it today. And I was like, beasted it? Cool. Beast Gear would be a badass name for a fitness brand.

And I did nothing about that because my mindset was that I had a job. So I was the token dolphin hugger in the oil and gas industry. My job was to help oil companies get greener. And I generally enjoyed it. I worked with nice people. My background is environmental conservation. I'm still super into that, just not professionally. And so in my head, entrepreneurs were other people. They were people who inherited a business or they studied product design or business or whatever. And nobody taught me about entrepreneurship at school. I actually believed...

probably at a subconscious level, the business was really boring and stuffy and all about suits and boardrooms. Four years later, I had an epic change in my life. I had a really bad heart problem for the third time. Totally fine now, but had to stop work for a while and stop all my strength and conditioning hobbies and whatnot. And I was really bored. My then girlfriend, now wife, was busy studying.

And I basically hit upon the idea. I remembered my idea for B-Skier. I was actually just like tidying out my gym stuff that I couldn't use. And I was like, oh, yeah, I had that idea. Well, why don't I give it a try? And so basically, I just Googled about how to find factories and whatnot. And I was going to sell directly into gyms. And that didn't work. I got laughed at of several gyms.

And I realized that I could sell online. I started... I researched and found that you could... Idiots like me could build a Shopify site. And then I discovered that actually when you buy stuff on Amazon, you're not buying it from Amazon. You're buying it from small businesses. And I was like, oh, I can do that. And before you know it, I've grown the business to $6 million per year in annual revenue. About 4.5 million pounds. And in early 2019...

I started to hear whispers within the e-commerce ecosystem, which I've become a part of that you could sell your business for life changing money and that it was becoming more mainstream. And I knew a guy who'd sold two fairly small e-commerce businesses for six figures. And he told me what he did and he sold on one of these generic flipping websites. And so I went to one of those. And in fact,

everything worked out okay with that deal at the time in the end. In hindsight, I shouldn't have used one of those flipping websites. They're okay for selling a blog or something, but not for like a real grownup business. It's generating millions in revenue. They nearly made a huge error that cost me half a million bucks, but my accountant and I tidied up the mess and got the deal done. And then after that, she and I went into business, um, advising, um, e-commerce M and a deals, which is a different story. But, um,

That's how the deal came about. And then in terms of your question there, did I approach them? No. So I went to one of these websites for listing the business online. And they connected me with, I can say this is public domain, with Thrasio, who have become somewhat infamous now. They emerged in September 2018. A bunch of guys on Wall Street realized that, hey, we can buy all these small e-commerce businesses, aggregate them together,

And they will be worth more than the sum of their parts. Buy them at 3 to 4x. Sell them on for a much higher multiple later. Benefit from economies of scale as well. Make them more efficient. Cut costs. And maybe even go public. That was their thesis. And mine was, I believe, the first European brand that they bought. And we did that deal on Halloween 2019. Hey, it's Jon. Look, if you're building to sell...

I want to let you know about a resource you may find helpful. It's called the Value Builder Score, and it will evaluate your company in the same way that acquirers will look at your business.

It'll give you a score on the eight factors that drive the value of your company. You'll also get an estimate of value and things you could do to improve that value over time, whether you want to sell now or in a decade from now. Knowing how the movie ends, I think puts you in the catbird seat, gives you all kinds of negotiating leverage. So

It's available exclusively through a Value Builder advisor. So talk to your advisor. If you don't have one yet, you can go to valuebuilder.com slash score. Let us know what industry you're in and we will connect you with an advisor who specializes in companies like yours. Just go to valuebuilder.com slash score.

Okay, so many questions. Let me just pause. You mentioned that you don't think it's a good idea to list on one of the listing sites. Maybe just unpack that for me. What makes you say that? Sure. And I'd also love to know the $500,000 mistake that you corrected. I think that those listing sites are great for casting a wide net and finding...

potentially getting your business in front of buyers. And actually, I think some of those listing websites, I won't name them, but some of them are actually doing something smart now. And I know this because I'm actually doing this, but they're partnering with independent M&A firms. So the problem I had with my experience back in 2019 was that they basically trained an offshore worker how to pull down reports from Amazon and Shopify, slap them in a Google sheet, and then decide what the valuation was. But

But they didn't do any work to understand the brand. The person doing that wasn't really an M&A expert. They didn't do anything sophisticated to try to attract the right buyers. It's a list and pray situation. So did you list Beast Gear with the price tag? Yeah. What was the price tag you listed? It was more or less three times SDE, three times Justity Vida. And what were you doing SDE-wise at the time? We were doing about...

or slightly more than 15%. I think in pounds at the time, it was something like 900,000 pounds was the adjusted EBITDA. I can't remember. Okay. So they listed it at three times. Yeah. And

It's sort of a pretty passive list and pray process. And there wasn't a chartered accountant who had gone through the numbers and properly calculated everything. And basically what happened was I saw the numbers. I was like, now that's off. That doesn't look right. So I showed it to my accountant. She happens to own the biggest accounting firm in the UK who specializes in e-commerce. They took some time to kind of dive into it. And I forget what the exact error was. It was something to do with VAT.

But it was akin to having put a decimal point in the wrong place. And that plus some other errors really kind of hacked me off. And so what I actually did was I said, hey, guys, this is what I said to the listing site guys. I said, we've just fixed your mistake. And once we actually list this at the increased valuation,

you're going to make a ton more commission. So where I'm negotiating down your commission to from, from X percent to Y percent, and you're still going to make more money because I found your mistake. And they were like, okay, fair enough. Got it. So bad experience with the listing sites, but you got Thrasio kind of approached you. It sounds like through the listing site. And, and what was their, what was their,

qualitative approach to you? Were they enthusiastic? Were they reserved? Very enthusiastic. Yeah, I actually got to speak with the co-CEO at the time, Josh Silberstein. He was like very, very enthusiastic, was, was, uh,

He was like a kid in a sweet shop on the call. You know how much he loved the brand name and the logo. I think he said words to the effect of this is so badass. I want to buy it. And of course, you know, I was, you know, pretty wet behind the ears entrepreneur. Yeah, I had three years experience building that business, but it was my first business, you know, quite big life changing numbers. I mean, thrown around, you know, I was quite not going to lie. I was kind of like a little bit like a deer in headlights kind of thing, you know.

At what point did Josh raise the specter of valuation? You know, he didn't actually. What happened was we had that call and some other calls and I had calls with various people from various departments, all of whom in hindsight, I can tell, didn't really know much about e-commerce. And we received a term sheet, which was...

Basically, yeah, three times SDE, more or less, with a pretty basic earn out. If we hit, I forget the details now, but if we hit X percent above the EBITDA in year one, we'd get this. And if we hit Y percent in year two, we'd get that. There is a guaranteed holdback payment. They wanted a little bit of inventory thrown in.

you know, pretty standard deal structure, especially at that time for these emerging aggregators in the e-commerce space.

Okay, let me just unpack that because, again, we have listeners all over the industry spectrum from manufacturers to service companies. So the one thing they have in common is that most of them will receive a letter of intent that they're going to have to read and evaluate. And obviously, valuation is part of that. And so did they, in that letter of intent,

give you a multiple of SDE or did they give you an actual number? It was a number. Yeah, it was a number. And therefore that meant that had this, had it dragged on, which it didn't, but had it dragged on and we'd continued to grow significantly during that say due diligence period, then effectively the multiple they would have paid would have been going down. Right. Cause we were growing. Right. But thankfully it didn't. I received the offer in September and we did the deal at the end of October. Okay. So pretty fast deal. Yeah. Okay. So, um,

They're offering you three times SDE. Now, with regards to the earn out, was that...

In and above? Like incremental above the three times STO? No, that was all part of it, right? So there was a decent chunk of cash up front. Let's call it 80%. Sorry, did you say 80? Something like 80. Yeah, 80. Okay, so the majority up front. Yeah, then there was like, I think six months later, there was a guaranteed payment. So a holdback payment, they called it. Then after one year and after two years, there were these earn out payments, right?

Yeah. And that's a pretty standard structure that you see in e-commerce. Yeah. The holdback, I've often seen that as sort of an escrow to make sure that, you know, when they, you know, your taxes are paid, some basic stuff that, you know, are in order. Was that the nature of the holdback or was it some other reason? Yeah, I think it was also just...

I think they just wanted to hold some money back. You know, if you can avoid paying somebody everything now, then do so. I guess it's a working capital kind of thing as well. You know, they also wanted some inventory thrown in. Okay. And so what percentage of the deal? So 80% up front. Do you remember what the holdback was in terms of percentage? It was like, I'm going to say it was 5% to 10%. And then the rest was split across those two earn out payments.

Sorry, the holdback was split among the... No, no, no. So let's say 80% upfront, 5% to 10%, I forget, was the holdback guaranteed portion. And then the contingent payments were like evenly split, whatever percent, year one and then year two.

That makes sense. Okay. So you had ballpark 15, 10, 15% at risk in the internet. Okay. And did, in terms of the upfront, did they pay you cash or in Thrasio stock or some combination? It landed in my bank account and I almost had a heart attack. And did, did they at all in the letter of intent and the kind of process leading up to the share purchase agreement suggest that

paying you in Thrasio stock? No, no. And if they had, that would have been a wild ride because at one point the stock was worth a lot of money. And of course, things haven't gone so well since then. At the time that we're recording this, I believe they're in Chapter 11 bankruptcy. There's been some headlines flying around the last couple of weeks about some more investigations going on. Yeah. So I'm certainly glad it wasn't stock.

Yeah, no, for sure. And I just wanted to make sure because I was doing some research on Thrasio in advance of this. And I think some of the e-commerce brands that were purchased later, you know, in their tenure were being offered stock in lieu of cash. And they got really hosed because stock obviously is arguably worthless at this point, or at least deeply, deeply discounted. Okay. So, yeah.

The deal is three times SDE, the vast majority up front in cash, a little bit in an earn out, a couple of year earn out. Okay. And that goes through in October 2019. Is that right? That's right. Got it. So when you accepted the earn out and the share purchase agreement, I mean, it's a pretty small percentage of the overall deal. Like how committed were you to like busting S&P?

through any wall to hit that earn out or was it like a lot of entrepreneurs it's like kind of well here's the thing and this is a problem i have with this whole industry it shouldn't be called an earn out because it was very much they should call it a prey out because it was up to me to pray that they did a good job to hit those targets they were operating the business

On the side, I negotiated a side deal with them where I would help them launch new products for the brand. And because I love the brand, I was, regardless of the earn out, I was very much regularly talking to the brand manager on my brand, which changed a couple times, to try to help them. And it became increasingly obvious as every day went by that...

Not the brand manager. They were actually pretty competent, but they were swimming against a tide of incompetence and chaos within the organization that prevented anything really getting done. And oftentimes things getting done that were just absolutely bonkers in terms of crazy decisions that literally took good stuff about the brand that had made the business a success in the first place, which is why they bought it.

And on purpose changed those things or stopped doing. Give me an example. Sure. So a majority of the revenue came through Amazon. They took Amazon listings, which comprises of photographs and branded content on those listings, which were perfectly good and changed it out for stuff that was just good.

really terrible and you could ask any e-commerce expert to comment on that and they would agree that hey this stuff is pretty good and this stuff is terrible why would you do you know if it ain't broke don't fix it you know other examples um they turned off our ddc website which comprised direct to consumer yeah our our website which is beastgear.co.uk which we will at the time of this recording hopefully it'll relaunch next week um

So they turned it off. Now, it comprised the minority of revenue, but it was a crucial, crucial cog in the machine which helped drive revenue on Amazon because it gave our brand authority. So people would find us on Amazon. They'd go check out our website. They'd see all the great content. They'd see that we're legit. Then they'd check out on Amazon. That was suddenly gone, right? And what was worse is every single product within the packaging would have URLs to useful resources, training guides, how-to guides, etc.,

which were all hosted on our website. So you've got all these customers buying on Amazon, trying to scan these QR codes, follow these URLs, landing on error 404 pages. And what justification did they provide for shutting down your website? I think by this point, they'd stopped communicating with me. So I didn't really get any justification.

Right. It was insane. Email marketing drove 30 percent of the revenue on the website. And we had an enormous email list and they deleted it. So they deleted the email marketing account, which was through an email marketing software called Klaviyo. And that is now disappeared. And that would have been really handy for the relaunch that I'm now trying to do with the brand, of course. There were many examples of just completely bamboozling incompetence.

I just I'm speechless because, you know, Wall Street folks aren't usually idiots like they can be obviously mercenaries and very, very, very hard negotiators. But they're not usually, you know, cannibalizing or destroying the businesses and assets they buy. It's because there was no nuance. They were they were just using a massive hammer.

on everything rather than, you know, I was trying, I was really trying to teach them for free how to do all the clever stuff that I did that made my brand better than all the other strength and conditioning brands on Amazon. Because a lot of those quote unquote brands that I was competing with weren't brands. They were just selling crap on Amazon.

But we looked and felt and behaved like a real brand. We sold on our website, we sold on Amazon, we produced excellent content on social media, we had partnerships with amazing influencers and top athletes. We had customers following, they'd buy our product on Amazon, they'd end up in our email flows, in our many chat flows, in our social media, they'd build a relationship with us and they'd buy on our website, et cetera, et cetera, right? And we had a real tribe of fans who were posting about us every day on Instagram.

We even had clever WhatsApp automations. So when somebody checked out on our website, they'd receive a WhatsApp message on their phone with me in a video thanking them for their purchase, right? And all of this was turned off, but I was trying to teach them how to do this. And I was saying to them, listen, if you listen to me, you can take what I teach you and cross pollinate it across all 200 brands you own. But it was too nuanced for them. And they didn't have, you know, they took a nimble speedboat

And took the passengers off and put them onto an enormous cruise ship, which takes half a day to turn around and can't change itinerary. And so the whole thing just became a big, I'm going to mix metaphors here, onion of bureaucracy. And nothing could get done. And in their defense, the people I was dealing with directly were basically agreeing with me. But they were like, we're just dealing with a whole load of corporate nonsense here.

Walk me through your role in the company post-selling Beast Cure. So you sell. Do you have an employment contract? Are you an employee of Thrasio or are you a contractor? I was an independent contractor. Effectively, they were kind of my client.

I was basically responsible for helping them develop and launch new products. And we should have launched, you know, probably say three a month. I think we launched three in total, all of which they royally messed up. So, yeah. Okay.

So walk me through. Okay. So there you're an independent contractor. Are you getting paid by the hour? No, it was a profit share deal where I would get a share of the profits of the new products that we launched for the first year that each of those new products existed. Okay. That's interesting. And it was also in my interest to help them with the whole brand as a whole, because I wanted them to hit the earn our targets. Right. But if I'm understanding correctly, you,

You had no influence or very little influence over how they dealt with B-Skier. Absolutely none. Yeah, it didn't belong to me anymore. I sold 100% of the business to them. It was not mine anymore. Well, it was mine, but only in spirit. Yeah. And when you signed up for the earn out, did you...

Like what were your thoughts in terms of how you would influence the ability to hit the urinal? Like what was your thoughts at the time? Well, you know, they talked a good game.

When they bought the business, they they liked they spoke about how much they loved the brand and they were they promised that they would take it to the US and it would crush over there, which I knew it would. I regretted not taking it to the US myself. You know, I think, you know, hindsight is a wonderful thing. But about a year before I sold the business, I took it to Australia and the Middle East. I think if I had taken it to the US, it probably would have been five times bigger for only maybe 10 percent extra effort on my part.

Yeah. But I guess from my listeners perspective, most of, most of my listeners will, will be offered some sort of earn out as part of a transition. Yeah. And, and, and you referred to it as a pray out and clearly you, you,

had very little influence on the company's ability to hit the earn out. Very little. And so if I guess my kind of take out, take away from that is you have to be comfortable that the way I guess I think about it is this. You have to be comfortable that whatever you're getting up front is all you're getting. You have to assume that it's all going to go terribly wrong after the fact and you won't hit the earn out targets.

As it happens, year one, we actually crushed the year-end target for two reasons. One is for enough time in year one, the flywheels and funnels that I had built were still moving. So they didn't have time to mess it up yet. The other thing is that COVID hit. And COVID gave everyone a sales bump, but especially me, because we were selling strength and conditioning equipment, which not all of it, but a lot of it you could use at home. Sure. And that helped.

Yeah. Yeah. I remember Peloton stock went from like 30 to $120. Six months as we were all working hard at home. Yeah. Um, now the year two or nine is a different story, but, um, well tell us that story. What, what happened there? Well, and it's interesting you mentioned this because I'm literally just, uh, approving edits on episode three of, of the brand rescue mission right now, which is the thing where I'm documenting it. And in that episode, I actually share clips from a loom video, which I recorded, uh,

for the team that I was dealing with, where I basically spent half an hour ranting about their incompetence because I was annoyed that we weren't going to hit the year two earn-out targets because of all these things that they had done wrong. Now, to their credit,

Now, I didn't ask for this, but I think they were worried because they made me very much their poster boy, at least in the UK and Europe. I was the first brand they bought over here. They put me on their YouTube channel and a few different videos. I know because I've seen pictures of it. I was even on like the billboards and stuff that they take to trade shows. And I didn't ask, but I think that they were worried. And so they actually paid me my year two earn out.

despite the fact that at the time, the way it was going, it didn't look like we were going to hit it. And after I'm pretty sure we didn't hit it. I mean, it would have been very difficult to hit it the way things are going. So, but at that time, of course they had, you know, that was so 2019, 20, that was 2021 late. That was late 21. So they still had, there's a throw money at everything at that point.

How did you convince them to give you your earners? They seem like I didn't really have to. I think I might have. I think I recorded the loom where I just pointed out basically everything. Many, many, not everything, but many, many things they've done wrong. Put it in an email, copied some important people.

And some replies later basically were quite empathetic and saying that they shared my frustrations and copying some other people saying, you know, please arrange to send Ben his money. A few days later, it landed. Really? Yeah. Did you think that video was... Did you record that video? I mean, it clearly worked, but was the video in hindsight...

a veiled threat from you like i'm gonna record this video i'm gonna send it to everybody and this is the first salvo but it gets more interesting after this because i'm gonna get lawyers involved etc like was that the sort of veil honestly honestly it wasn't um i wish i i could i wish i could take credit for being smart enough that that's what i was trying to do honestly i was just

I was upset in coming from two angles. I was upset that my baby was embarrassingly bad. And I alluded to it in the video, like there's stuff on social media that was so cringeworthily bad. There was right next to them. You still using me as the face of the brand. I was like, you know, I'm associated. This is so bad. And on the other hand, it was I was annoyed from a financial point of view because we weren't going to hit the earner target.

But I wish I could take credit for being a bit kind of more thought through and smart than that. Well, it worked. It worked. Yeah. I mean, now I've learned what I can do in the future should I need to. And maybe other people can. But what's interesting, right, is that some other aggregators in this space. So Seller X, I think, is one of them. People can Google this. Yeah, Seller X. They got sued.

by somebody who sold their e-commerce business to them. And they alleged that Seller X had basically been negligent in running the business, which is why it hadn't hit its earner targets. And I believe that the seller won. So people can Google that and see what happened there. Yeah, it's always tricky, you know,

earn out disagreements are everywhere and it's always tricky to navigate these because usually you're, you're sort of suing a company that is very large. The average acquisition, you know, is five to 20 times the size of the target. So it's usually a giant company with lots of legal resources and it takes many years to try to do this. So, um, you know,

It's a landmine of problems that can come up. But your videos seem to serve its purpose. But I can't help but think that, you know, it was more than just the money. Because at this point, you'd hit year one earn out. You'd gotten the hold back. You got 80% of your cash up front. We're dealing with kind of tiny percentages at this point. It was emotion.

I had and still do have an emotional attachment to that business. Um, I, I started that business at a difficult time in my life. Um, I managed to create something special that people loved. I was still getting messages from friends all the time. I still do who see my products out in the wild. The brand, despite the fact that the owners didn't post on Instagram for five years was still getting tagged multiple times a week by people. Um,

It changed the course of my life and my family's life. My youngest child was born right before I sold the business. And it was very sad to see what was happening to it. To what extent was that amplified by the fact that you were the poster child of Threat SEO in the UK? Definitely, because now I felt a little bit like a fraud.

Because I drank the Kool-Aid. I appeared in videos talking about how great they were. And at the time, I believed it. Like, I didn't, I wouldn't lie about that. I believe they're doing a great job. In hindsight, that great job at the start was the momentum that I had still got in the business. And then we got lucky with the COVID bump. And so, yeah, then I was like, I was upset because my, I felt like my integrity was being degraded.

Yeah, yeah, no, for sure. I remember this goes back a long time, but my company was acquired by a business called Corporate Executive Board, which ultimately became Gartner. And in any event, I remember the conversation where they said they wanted to change the name from what at the time was Worla, which is my surname, really creative name, I can remember.

And I'm like, no, no, please change the name. Like that's the last thing I want is for you to own this company with my name on it without running it. Because it's just, I mean, it's like your entire business

persona is is being manipulated by someone you don't control anymore no matter the like how good or bad they are you don't control it so it's like my family name my my face in your case like you're showing up in videos it's yeah yeah and did you like again and i don't mean this to be critical you had in your own words i think you said deer in the headline i mean this was a first time this is life-changing so i totally understand um did you

you know did you contemplate at the time the idea that like maybe i might regret being this face or maybe i should get money to be the spokesperson honestly at the time i was just like yeah sure like you know i just sold the business i was very happy they it seemed things were going along great and they're like hey do you want to just like jump on this call and we'll record it um we'll put it on our youtube channel i was like yeah cool no worries

And you know what? They were throwing money around like crazy. I should have mentioned this as well. So I forget the exact timing. Well, our second child was born in August 21. And it was, yeah, so it would have been summer 21. So we're almost at the end of the year to earn out. They started sending people whose businesses they had already bought

This was not part of the deal. They just decided to contact all the people whose businesses they bought at this point, probably hundreds and said, we'll send you on a luxury, all expenses paid five star vacation for your whole family. And due to timings of birth of children and whatnot, we didn't take the trip until summer 22. And so they sent my family and I on a luxury, all expenses paid 10 day trip to the Algarve in Portugal. Um,

And so I was very, but, but they were at the same time, my brand is getting destroyed. It was insane. The amount of money that they were just, you know, throwing around. So at the time it must've felt like bribery. Like you're, you're. That was after that was, so they kind of made me, they, they, they used my, you know, they used me in some of their marketing material in like 2019, 2020, 2020.

But that started to tail off. Right. I didn't do anything other than I think I did two YouTube videos and I used images and stills from those videos and put me on some banners at some trade shows and whatnot. But that was that was basically it. If they'd wanted me to do something else, like become their rep or something, you know, I would have wanted paying for that. Did you did you ever explore that?

you know, asking them to remove your face and likeness on the trade show banners? Yeah, I did. Yeah. So actually when I went to them with that video where I was saying, hey, this is embarrassing. Like here's this post on social and then here's next to it's me. You know, I basically said like either you stop using me or you seriously up your game and this becomes like good again. And you start implementing all the stuff I'm telling you to do and stop turning off stuff that's supposed to be turned on.

And they stopped, right? And pretty soon the wheels started to fall off the whole thing. So they stopped bothering to do anything with any of the businesses they owned. Like we only got the brand back late last year. And so really all they did with the brand was they would buy inventory and send it into Amazon fulfillment centers. And that was it. And multiply that across hundreds of brands, right?

They really stopped even bothering to even pretend to be a legit consumer products brand, which is hilarious. If you go to their website now, their strap line is something along the lines of where goods become great, which is clearly a ripoff of the Jim Collins book, Good to Great, which they have no business saying. They have no business saying goods become great here because, you know, goods become great.

get tanked basically right um you know there are brands i know for a fact that there are brands that are they're trying to get rid of now that are are doing they're a loss making um so yeah so you're reporting to uh as a contractor to this pro you know this um would you call them category leader or product brand manager yeah brand manager okay

And you shoot the email off to, and sounds like CCing kind of everybody in the world, which got lots of attention. And then what happens? Did you get, did other people in the company reach out to you or was it just you're continuing to interface with this brand manager? No, that was really it. I think by this point, I'd given up on any attempt to, you

I watched as the whole thing just got degraded. Websites turned off, email marketing's killed, new products aren't launched, review ratings of products are tanking because all the customer services disappeared, all the clever stuff we did in the DMs and social media to build relationships with customers all stopped. I just gave up. I just had to let it go.

And so I let it go. And for a long, long time, I just was like, it's gone. I've sold it. They've ruined it. But I got paid. That was the deal. I don't own it anymore. They have every right to destroy it. It's theirs. And I came to terms with that. Yeah, I was going to sort of say that playing the devil's advocate. I can hear some people in my ear saying, yeah, but Ben sold the company. Yes, they're right. They are completely right. I sold the company.

All of it. And if they want to destroy it, that's their prerogative. Yeah. That's how it works. I'm sad about it, but I got paid for it. What would you do differently if you could do it all over again? Yep. I know the first thing I would do differently. I would negotiate harder on the deal. I would ask for a higher multiple. You know, not very long after that,

People with significantly less good, that's not even good English, less good businesses, you can't say that, significantly poorer businesses than mine were getting paid 6x. This was at the COVID boom. It was insane. People just selling generic rubbish on Amazon with no brand identity, no emotional connection with the audience, nothing, just something off Alibaba, logo slapped on it, sent it to Amazon. We're getting six times SDE.

regardless of how big that SDE was. So a lot of very mediocre businesses got very rich and more power to them. I should have negotiated harder. And so you negotiated directly with Thrasio and there were no other kind of competitive business? Correct. Yeah, basically they came in with this offer, which was in the context of the market at the time, because this was October 20, it was September 2019 that they made the offer. Things didn't go crazy till after that.

It was a good offer. It was a really good offer. You know, like 80% cash at closing, I think. About 3x. We knew that they were good for it and that they would do the deal, provided they didn't find any red flags during due diligence. It was good. But really, I should have been like... I basically should have said...

Great business. But if you want it, you know, give me more like say three and a half or something like that. Right. That's regret one. Regret two is actually probably before that. I should have taken the brand to the US. You should have taken the brand to the US. Yes, for sure. You really should have done that. Yeah, those are really the big ones. Anything around the deal terms you might do differently if you had it to do structured again? I would have done the earn out based on revenue and not EBITDA.

Because the revenue went bananas. Now, okay, sure, hindsight's a wonderful thing. But even without the revenue going bananas, I have since learned, and this is what I try to help people do, that obviously EBITDA is up for debate. What's included, what's not, what's added back, what's not. Whereas revenue is revenue. And so I ought to have pushed for the earn out in year one and year two to be based on revenue rather than the SDE slash EBITDA.

Great wisdom there for sure. Walk me through. So you, you leave like, did you cancel your contract? Did they cancel your contract? Did you kind of, how did you, how did they terminate your agreement? We didn't like, we just, we just stopped communicating.

So you're not getting an in they're not getting an invoice. You're not getting paid. Yeah, well, I think that I think what happened was, I know I kept invoicing them until the so the deal was that I would get a share of profit for every product that we launched together for the first year that that product existed. And so I kept invoicing every month. But there was like nothing because they were doing a terrible job of marketing those products and the brand more generally.

and they haven't launched any new products. So I should have put that into the deal. Like, I should have pushed in that agreement that they would guarantee to launch X number of products per month or quarter. And if they didn't, then I would get ABC, whatever, don't know. Right. So that they had a reason to keep pushing to launch the products, but they didn't. And so, yeah, that just came to an end. That just fizzled out.

And at what point did the specter of buying the brand back? Yeah. Like what triggered that? Sure. Well, a few years ago, I think it was 23. People could just Google Thrasio layoffs. I mean, I knew things weren't going great because I was seeing a bit inside the hood.

But they also had some pretty big brands. They're still throwing money and sponsoring around all these e-commerce events and whatnot. But I could tell something was up. And then the news of these layoffs came out. And around about that time, I contacted them and said, look, is there a world in which you'd sell this to me? And they said, no, it's not part of our strategy to sell any of the brands. And then six months or so later, there was more news coming out that things were going badly for them. And I contacted them again and they said, no, we're going to turn this around.

And there was a lot of back and forth and flip-flopping. They eventually agreed that we could look at it. And we signed an NDA, got to look at the numbers. And they said, if we're going to do it, we're going to do it fast and simple. I think at that point, they bought 213 brands and sold one back to the former owner. And then they said, actually, if you want this, you need to buy this batch of like 20 brands. And I was like, well, I can't do that. However, around about this time, I basically was semi-trolling them on LinkedIn.

posting nothing like rude, but posting, calling them out and politely saying, hey, give the people what they want. Sell my brand back to me and I will publicly rebuild it and document the whole thing. And the posts like took off because I knew that this would be content that the e-commerce space was really interested in.

And some people that I'd been connected with in the past contacted me. And they were smart guys who basically had their own aggregator model, except that they knew e-commerce. They weren't just financial guys. And they were buying distressed brands. And they said, look, we're looking at buying this whole batch of brands, including yours, including Beast Gear. And so I've done a deal with them whereby they bought that batch of brands, but I have half of Beast Gear.

And so they are taking care of the nitty gritty day-to-day operations under the hood. And I'm taking care of the brand and the strategy, et cetera. So many questions. What do they pay for it?

What did Thrasio pay me? No, no. What did this... How do we do this deal? Yeah, this deal. So this is crazy. So I can't get into too much of the specifics on this, but put it this way. Very, very low downside. Borderline, nothing up front. Inventory, kind of on consignment. And anything on the upside based on how well we turn the business around, they get paid. And...

And, you know, if we don't, well, we're all right. So and that's kind of like, you know, they don't have much choice in the matter because they're in a pickle. So, you know, worked out reasonably well from that point of view.

Who are you dealing with at Thrasio to make that deal? Like, is that a bankruptcy lawyer or is it a... So to be fully transparent, I didn't have to deal with them. My business partners who bought all 20 odd brands or a batch of 20 odd brands from them dealt with them and they dealt with the M&A department there.

And I am in touch with that M&A department because they come to me with my M&A advisory hat on now with brands that they're still trying to sell. And so what is to stop this from happening again? Like you're now 50%, if I understand it correctly, shareholder in the Beast Gear brand. How have you structured things this time so that it won't or can't happen again? Sure. Yeah.

Well, my business, first of all, a lot of this is just trust. So my business partners and I want to build something special back to as big or bigger than it was before and eventually sell it again. So we trust each other. They have a slick operation in terms of the nuts and bolts under the hood to run all the things that we need to run from supply chain to pay-per-click advertising.

I'm more on the DTC side, the customer relationship side, the influencer market. I talk about this a lot with consulting clients and stuff. So most of our revenue is Amazon, right? We're also diversifying back onto our own website again. But so many of these brands, which are really not brands, they're just listings masquerading as brands. They're selling on Amazon and they're trapped in what I call the Amazon goldfish bowl.

And basically my job, right, or my role is to oversee all the stuff you have to do outside Amazon to look and feel and behave like a legit consumer product brand so that you still win on Amazon because it's doing all the clever stuff off of Amazon that makes you win on Amazon.

Got it. Yeah. I mean, search behavior, you're on Amazon, you see two products and one's branded. One looks legit. The other one looks a bit shady. You're always going to opt for the branded product. And that's a lot of what's going to go into the stuff that I'm doing now with the brand rescue mission, where I'm showing people kind of, you know, behind the curtain of what we're doing to turn this thing around.

Yeah. Yeah. And I'm asking this question because I think a lot of our listeners would be curious. They listen to the show because they want to have a successful exit where they're happy after the exit and not regretful. I guess I'd be curious to know how you approached diligence and

Yeah.

In your own admission, it felt like there was a honeymoon period with that relationship and it disintegrated. Now we're into a new relationship and it sounds exciting and new. How did you ensure, and I'm asking the question because I want my listeners to vet their potential acquirers differently and with rigor so that they don't fall into the same trap.

Yeah. What did you do the second time around to really vet these guys? I mean, saying you trust them is like, okay, but how did you get to a point where you trust them? Does that make sense? Yeah. Fair enough. So a few things. I came to know these guys through my M&A advisory hat. I'd actually presented various deals to them before. And this might sound a little

basic but um it's valid the reason that i one of many reasons i knew they were legit was the fact their business still existed because thrasio and others were the canary that went down the coal mine and the canary came out dead but so many people have learned what not to do and my partners are not financial guys who raised a bunch of money to go aggregate e-commerce businesses

They're e-commerce guys who raised a bunch of money to go turn around e-commerce businesses. And I have seen the brands that they own outside of mine and the job that they have done. And that's not just brands that are selling on Amazon. It's direct-to-consumer brands as well. And seeing sort of under the hood of those businesses. So that was really important. I never got to do that the first time around. So that was critical.

Fact of the matter as well, of course, is that the risk to me was low because I was getting half of the business and therefore had way more control than when I sold it the first time where I had zero control. Right.

other than just sort of a consulting agreement on the side. So I was able to influence or I am able to influence a whole lot more. And part of our partnership is that I'm responsible for various aspects of the business. And they know that me being responsible for those aspects of the business is going to grow it bigger and faster and better than they could without me. And at the same time, I know that I can't do the operations all by myself, nor do I want to.

So, you know, it's also a bit of them diligencing me. Hey, should we even bring Ben in? Like, what's he going to do? And I've been able to demonstrate we're going to, first of all, simply do all the stuff we did before that worked. And also I was able to pitch them on my brand rescue mission idea, which is actually already paying dividends because I get people come to me now saying, hey, I'll give you this for free or this at a discounted rate if you'll bring me on your show and we'll talk about it.

And that could be anything from supply chain analysts to intellectual property attorneys to somebody who's going to spice up our product images or whatever it might be. Yeah, I want to get to brand rescue mission. Before I go there, though, I guess I have one question that's sort of still rattling around in my mind, which is, you know, is there a part of you that questions that

Whether or not this is the right idea for your mental health to go back and quote, prove them wrong. There's a sentiment I'm getting, which is like, I built a great business. Thrasio screwed it up. I'm going to prove they were wrong. And I think there's an element of.

in every entrepreneur who sells their company, right? New buyer comes in, they screw it up or in the owners, the founders mind, they screw it up. And they do one of two things. One, they sort of, they wax poetic on the kind of

rocking chair saying, well, in my day, we didn't do it that way. In my day, it was better. We serve customers better. And they're frustrated by it. And they see their baby being disintegrated. Or they try to buy it back because they were like, they want to like, I'll prove you. I was right. I'm going to prove. And there's a sentiment of like, I've got to prove. And I just wonder like, to what extent that's healthy. And so I'm just curious if you've kind of had that

thought process go through your mind? Like, is this healthy for me to be kind of doing this at this stage? Great question. I don't. So there's a few interesting things to unpack there. The first is I don't hate Thrasio. In fact, I'm very fond of Thrasio. The way I look is, first of all, they did change my life.

And I kind of the way I view them is I feel like kind of a disappointed or an exasperated parent whose teenager has disappointed them. Right. By misbehaving. I don't feel like I have to prove them wrong because they know they're wrong. Like they're in chapter 11 bankruptcy. Right. I don't think anyone who's still employed by Thrasio, the handful of people that are, would try to defend really how royally they messed up so many brands. Right.

So I don't feel like I have anything to prove to them. Honestly, it's really just that I love the brand. I have an opportunity to turn it around. There is an opportunity undeniably to make money doing that. Won't make any money for a while yet. And I also wanted, I saw an opportunity to document the process and who knows what doors that opens. It's also just quite fun. And, you know, here's the thing.

What would have been even worse to me than just selling it to Thrasio and Thrasio ruining the brand? Would be selling it to Thrasio, seeing it get sold off in some kind of a fire sale and having someone else treat it like just some commodity they bought on eBay, like a garlic press, right? If it was going to go anywhere ever again, it had to come back to me.

I don't think I could have... There's no denying a lot of this is just pure emotion. And honestly, probably if a friend came to me in this situation and was like, should I buy it back? I'd probably say, nah. But here we are. Tell me a little bit about Brand Rescue Mission. Sure. Brand Rescue Mission is...

Me documenting the turn around of Beast Gear, radical transparency in public for free on YouTube. We're two episodes in.

It's a brandrescuemission.com. Nothing. You just, there's a video there. You can sign up and put your name in. If you want to get alerted every time we have an episode and I send more cool stuff by email or just search it on YouTube, search brand rescue mission, then my name, Ben Leonard or brand rescue mission, be skier. I'm sure you'll find it. And I don't believe anyone's doing this in our industry. So here's what frustrates me about the e-commerce space. We have a lot of thought leaders, gurus, call them what you want, who are,

talk the talk, but they don't walk the walk. Or they are very secretive about their businesses, either because they're paranoid that people are going to copy them, or more likely, I think, they don't have a successful e-commerce business. And so they decided to just kind of parrot stuff on the internet to make a living that way, which is why they have half a million Instagram followers, because they've got time to do that, but not time to actually do the work.

So my way of kind of rising above that is just to be radically transparent, be authentic, show people what I'm doing. I don't think anyone's doing this in our industry. And so far, the response has been pretty cool. So that's it. It's brandrescuemission.com. And we'll put links to Brand Rescue Mission, the YouTube channel and your LinkedIn profile in the show notes at builttosell.com. Ben, thanks for doing this. Thanks, John. Appreciate it.

And there you have it for today's interview between Ben and John. If you enjoyed today's podcast, be sure to hit that subscribe button wherever you're listening to today's show. As a reminder, you can watch this full video interview over at our YouTube channel at Built to Sell. For show notes, including links to everything referenced in today's podcast, including links to Ben's first episode here at Built to Sell, you can visit his episode page over at builttosell.com. It's

Special thanks to Dennis Lapitaglia for handling today's audio engineering. And thank you to our community of certified value builders who help us bring our message to you. Our advisors are experts in helping you build the value of your company. To get in touch with an advisor or learn how to become one yourself, head over to valuebuilder.com. I'm Colin Morgan, and I look forward to talking to you again next week.