Unless you have been living under a rock, you must have heard about the Amazon aggregators/acquirers’ recent struggles and the bust of their business model. In fact, Thrasio, the biggest aggregator, recently filed for Chapter 11 bankruptcy protection.
But even though the aggregators bit off more than they could chew and bought businesses at sky-high valuations, the market for acquiring product companies is still active.
In this episode, I have the cofounders of GW partners, Chris Shipferling and Jason Somerville, to talk about the market for product companies and how to maximize your business value all the way to exit. Their investment banking firm prepares product companies for optimal valuation and sale
Chris and Jason give an inside look at all the things buyers/acquirers are looking for in today’s market to prepare your product company for an optimal valuation and sale.
From focusing on certain sectors to understanding the pivotal shift from growth to profitability, we cover a lot of ground with all the steps you need to take to ensure a lucrative exit.
If you’re aiming for that ultimate wealth-creation event through the sale of your company, don’t miss out on this episode!
What are Buyers/Aggregators/PEs Looking for in Today’s Market
While the gold rush of 2021 is over, deals are still happening. Buyers are being much more selective. One key aspect often overlooked when thinking about exit multiples and valuation is customer retention. Chris Shipferling emphasizes, “Knowing your customer is a prerequisite for growth and acquisition.”
Businesses boasting high customer retention rates hold a distinct advantage. Understanding customer behavior and profitability becomes paramount as businesses with high customer retention command a premium in the market.
Metrics like LTV curves are crucial, demonstrating your ability to retain customers and increase their lifetime value over time. Businesses that showcase consistent or increasing LTV are more attractive to buyers, as they represent lower risk and more predictable future profitability.
While one-time purchase businesses can still be profitable, they currently hold less appeal for acquirers. The rising customer acquisition costs (CAC) make it challenging for buyers to model future success in scenarios where the bulk of revenue comes from a single purchase.
Beyond Amazon: Building a Multi-Channel Powerhouse
As Amazon continues to wield immense influence in the eCommerce space, businesses entrenched in its ecosystem confront a pressing dilemma. Do they have to diversify to other channels? Relying solely on Amazon exposes enterprises to vulnerabilities, from policy changes to heightened competition.
While the platform remains a significant player, transitioning to multi-channel strategies is crucial if you want to command a good exit. This allows businesses to diversify their customer base and mitigate dependence on a single platform, ultimately enhancing their valuation.
Tune in to this episode to learn more about everything buyers are looking for in this market as you prepare for a potential future acquisition.
Book your Discovery Call today to learn how the experienced team at Avenue7Media can help you grow your brand on Amazon and beyond…