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[Music] what do you think are the top three things that you need to look at when you are trying to acquire an e-commerce business or invest into an e-commerce business the three things that we look at are customer lifetime value engaged users and what their organic visibility looks like now the process in which we uncover all of these is a pretty extensive process so step number one we need to perform a full deep dive marketing analysis of that business we need to identify where they're generating their user their users from whether it be organic paid um so on and then at the same time we need to then see from a revenue standpoint so we perform a full in-depth marketing analysis now the kpis that we're going to be looking for are customer acquisition costs customer lifetime value average order value return visitors new visitors coming to the site and of course what channels are driving these individuals to the site so after we've done that then we go into the technology what technology are they using how can they utilize additional technology or cut costs on technology that they shouldn't be using um and then last but not least we take a look at their back end operation from a merchandise standpoint right where they were they sourcing these products from could they potentially be saving money there um on and increasing their margins then after that we look at fulfillment right so at the end of the day it's from the forward-facing operation to what's generating revenue to the technology that you're using all the way to your back-end infrastructure and when you look at the growth rate of an e-commerce business you know what we look at is we look at today's data which is what they have done so far and we look at the potential growth or potential opportunity in what we can change what we can save right it's more about making more money than saving money though because with e-commerce you can get explosive growth if you're doing the right execution if you're following the right strategy so the due diligence that we do is not only about the current state of the business and the current operations are current marketing or current growth opportunities it's about the future value of the business as well and this is where i think we differentiate from other firms that do due diligence is because we own our own e-commerce operations and we know the steps that you need to go through and the exact formula of cpa cost per acquisition average order volume and lifetime value to be able to determine okay we're going to buy this for 10 million dollars we're going to put in 3 million dollars for a period of 12 months to scale to 20 25 million dollars and the objective is very important as well a couple of different objectives obviously private equity and vcs they want to um build it and they want to sell it right so we look at that formula of what a potential buyer is going to look at who might be a potential buyer for this specific business and what angels are looking at is they're looking at you know 3x 4x5xing their money uh with a specific investment for angels we look at the owner the operator you know are they 100 percent in this business are they doing the right things do they need coaching depends on what level of acquisition we're doing is it a half a million dollar requisition or is it a 20 million dollar requisition and the the scaling phases are all different this is why this process is incredibly important if you're an investor if you're a vc if you're a private equity firm if you are looking into investing or buying an e-commerce business you need to pay attention to these specific elements and objectives and how this process starts is with a very basic conversation even if you don't know which e-commerce business you're going to buy we're in this business we have clients who want to sell we have clients who want to buy we're not really in the business of brokering these deals but we're in the business of identifying these opportunities going out there and saying look this brand is really really ripe right now or this brand is really really established and we have the means and the know how to identify these opportunities so what a due diligence process is a negotiation process right you say okay my business is worth this much i'm asking for this much we sign an nda and an uncompete or whatever agreements we need to sign which by the way the legal needs to be involved in and then we go to work we look at every single aspect of this business um there's a cfo involved as well an outside cfo firm that also checks the the the books right we didn't even talk about that but that's a part of it so legal i would say financial technology operations four legs right regardless of you being a cfo or an attorney or on the operations or technology side this is a unified uh mergers and acquisitions process so the due diligence determines if the business is worth that money and it determines so what the missing elements are for that growth strategy that we're looking at so the reason that it's very important that it goes in this triangle is due to the fact that we will find things in the due diligence that affects the cost of the business obviously based on who hires us we're going to pull it to that way you know if the vc or the acquisition side hires us we're going to pull it to this way if the e-commerce business owner hires us we're going to pull it to that way and these conversations start six to 12 months before you actually decide to sell your business or before you decide to buy an e-commerce business you don't just wake up one day and say i'm going to buy something or i'm going to invest in something so with our clients we are always grooming them to have the highest net worth amount possible so they have their technologies in place if they have a b2b operation you have to have salesforce like there's no there's no way around it you have to have a very firm sales force very firm sales playbook if you're an e-commerce b2b business right if you are 100 b2c you have to have a nurture process so this is why the legal side of it is very important we're actually very involved with the attorney in creating that purchase contract due to the fact that we want to negotiate in that contract and we want to sometimes put closes there because there might be an earn out it might not be a direct purchase you might be buying only 51 percent of the business and you might be leaving the honor up owner operator there to acquire on an earn out at the end of five years or to deserve an earn out right different structures so legal needs to be involved because of these different structures [Music] yeah thank you for watching this video be sure to hit the subscribe button for more videos on e-commerce custom development marketing and much more and leave us a comment if you'd like to discuss the contents of this video further [Music]