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Persevering Through a Painful Exit with Brian Lejeune and Janine Do
Today’s episode is another show about incredible exits. We got the chance to speak with Brian Lejeune and Janine Do. They chat with us about their intensely difficult exit and the challenges they faced.
Tune in to hear our chat with Brian and Janine about their experiences as entrepreneurs.
Topics:
- Brian’s typical entrepreneurial journey.
- How Janine’s parents influenced her career.
- When they started to see sales.
- Why you shouldn’t get stuck on branding on packaging.
- Why there are no excuses for working less.
- When to consider the exit process.
- Why Mastermind groups are important.
- How much Brian and Janine made on their exit.
- Logic over emotion.
- How their level-headed nature was key to their success.
- Their emotional response to their exit.
Transcription:
Mark: All right Joe, I know that Jason Yellowitz sold your business. I actually sold Jason’s business before he came on board as a broker at Quiet Light Brokerage. I often referred to the story of selling Jason’s business to potential sellers to explain that sometimes when you’re in the process of selling and getting closer to that closing date, anything that can go wrong will go wrong. And that happened with Jason’s business. His business that he was selling these baby gates and dog gates. It had the worst three day period of sales in its history and of course, the buyers started freaking out; understandably so. This happens with deals sometimes when you’re in that due diligence period where all of a sudden all hell breaks loose and you kind of have to figure out what’s going on. I know you just went through an incredibly painful exit with a client who had that sort of scenario but it worked out.
Joe: Yeah, and it wasn’t painful for me necessarily because I’m at arm’s length so it was okay but, Janine, I think stopped eating at one point. It was that incredibly painful. I remember I was at eCommerceFuel down in Fort Worth this year and we were about to close and something went wrong. And I don’t want to give the details away here in the intro because you’ve got to listen to this. What could have gone wrong; went wrong and to the nth level; this is like deal killer, account close, things are over kind of gone wrong but Brian and Janine; the owners of the business, remained level-headed. Even though, like when I called him from the ECF event trying to cheer him up and like, hey, how’s it going today? We got over this hurdle and I could hear it in his voice something else happened. Like he was kicked when he was down on this second hurdle that we had to get over and it was incredibly painful. That aside, these two are incredible people. They are pharmacists by trade. Janine has her PhD and she comes from a family with six children, five of the six have Ph.D. They’re immigrants. They lived in the projects in Roxbury, Massachusetts and it’s just an incredible story all around; incredible story, incredible exit, incredibly painful with light at the end of the tunnel. And they’re actually now under LOI buying another business so it’s a full story. They launched another brand, another business before they closed this transaction and so they’re already generating another income stream and now they found an opportunity where they’re under LOI buying another business. And that’s really within 60 days of closing the last transaction so it’s an incredible story all around.
Mark: That’s fantastic. Let’s get to it.
Joe: Hey, folks. Joe Valley here from Quiet Light Brokerage and we’ve got another Incredible Exits episode here. We’ve got Brian and Janine Lejeune on the call. Welcome, guys. How are you?
Janine: Good. How are you, Joe?
Brian: Very good, Joe.
Joe: Now, listen, we normally call this Incredible Exits but I want to change that for this episode. We’ll call it the Incredibly Painful Exit for you guys because there were certain components of it that were incredibly challenging and painful. And I think at one point, Janine, you might have stopped eating if Brian was telling the truth.
Janine: I stopped eating and I stopped sleeping.
Joe: Well, good. Let’s get a little bit background on you first. You guys are both pharmacists by training, I believe, right?
Brian: That’s right, yeah.
Janine: I’m the one with a doctorate degree though; he’s only got like a normal degree.
Joe: So I need to call you Dr. Janine?
Janine: Yes.
Joe: Dr. J, how about that?
Brian: There’s just more responsibility that comes with that. I keep telling her on the plane when they if there’s a doctor in the house.
Joe: It’s a Ph.D., right?
Janine: Yeah.
Joe: So I have a father in law that has his PhD and he said it just stands for piled higher and deeper.
Janine: Yeah, that sounds about right?
Brian: Yeah.
Janine: [INAUDIBLE 00:05:28.7] loan debts when I graduated.
Joe: 200?
Janine: 200,000 yeah.
Joe: How incredibly painful, have you paid that off with the sale of your business?
Janine: We’re going to. But right now with the stock market doing some fun stuff we’re putting some money there.
Joe: Cool. Good for you. All right, well, let’s get the background and Brian, let’s start with you. Because honestly, Janine’s story is much more interesting so I just want to get yours out of the way.
Brian: Yeah.
Joe: What’s your story background; the business history, offline business, and then online, I believe, right?
Brian: Yeah, so pretty typical in the entrepreneurial journey. I’m kind of been dabbling in a lot of things for a lot of years. I went to college, came out, and became a pharmacist. So that was the path I took but even in college, I’m kind of always entrepreneurial and just always looking for other opportunities. I think about maybe two years into pharmacy I started saying, okay, I don’t think this is quite what I want to do for the rest of my life. So I started looking at businesses; looking at local businesses. I bought my first business when I was about 26, 27 years old and it was a tanning salon. I knew absolutely nothing about the industry. I was honestly just looking for a business. It was five minutes from my house. I learned as much as I could from it and kind of grew it to a really nice level where I was actually able to leave pharmacy completely. And I left pharmacy for about seven, eight years, and in that span opened up other salons, pulled some partners in, did some distributorship. I did a lot of like brick and mortar type stores; bought some, sold some, but have never sold them at the correct time. Always kind of passed its peak like oh, we should sell or something’s going wrong with a partner and always getting out not at the ideal…
Joe: A little too late.
Brian: Yeah, so that was a big thing that looking at what we did that was my one goal. Like, let’s do this at the right time. You never know when the perfect time is, but you just don’t want to do it the wrong time.
Joe: True. When did you jump into the online space?
Brian: Online in terms of jumping in probably not until like 2014, but a lot of little things here and there; trying to start blogs, trying to sell things on eBay or whatever. But that was very, very small. It was always kind of like, oh, what can I do next? What can I do next? But 2014, 2015 I kind of found the Amazon space…
Joe: Was it before or after the young lady sitting beside you, the two of you met?
Brian: Yeah, so before. But honestly, I owe a lot to her because I didn’t really get super deep into it until she came along for sure.
Joe: Well, she does have her Ph.D. She’s a lot smarter than you are.
Janine: I’m obviously smarter.
Brian: It just takes me a little longer maybe.
Joe: Let’s hear a little of your background, Janine. And do me a favor and just tell everybody about the generation before you because I think you’ve got a fascinating family story as well.
Janine: Yeah, sure. So my family came here in 1989. My dad was 35 years old at that time; seven kids, pregnant wife, no money, no English whatsoever.
Joe: What country did you come from?
Janine: We came from Vietnam.
Joe: Okay.
Janine: Yeah, So he fought with the American soldiers during the Vietnam War. He was of course against the communist people so they put him in jail. Things were just getting pretty rough for us back there and we got the opportunity to come to this country and he decided to take the chance. So he came in at ’89. He was 35. He’s making minimum wage, raising a family of probably more even seven kids in random age; so fetus to, I think 17 or 18 years old, maybe even a little younger than that.
Joe: Any idea how much money the family had when you came to the country?
Janine: Oh, yeah, nothing. Not even like a ring that’s worth anything. Besides the clothes on our backs, we’ve got nothing more. My mom didn’t own anything that was worth anything. No heirloom ring or just nothing like that. So we rely a lot on government help at the time. We spent 10 to 12 years in the projects.
Joe: In what city?
Janine: In Roxbury.
Joe: In Roxbury. Okay, I spent some time up on Mission Hill myself.
Janine: Well, you know the police station and radio station?
Joe: Sure.
Janine: So I was five minutes walking distance from the police station. That’s like the highest crime-ridden place you can think of in Massachusetts.
Joe: Wow.
Janine: That’s where I grew up.
Joe: And you did this and managed to have how many PhDs in your family now with all the siblings that you have?
Janine: Oh, so we have a dentist, four pharmacies, three bachelor degrees, and one masters; so [INAUDIBLE 00:10:27.4] more than one.
Joe: A true incredible American success story. That’s incredible. No excuses to my kids are now your kids that are second, third, fourth, fifth-generation Americans that don’t want to do the hard work that you guys did.
Janine: Well, it’s tough to teach them and I don’t know how to impart the same wisdom on them that my father did for us. But when I was little he used to tell me if we see someone who was homeless on the street he was like do you see that? If you don’t do good in school, that’s where you’re going to end up and it freaked me out. And I actually believed him. I actually believe him so we are always doing that in school; every one of us. So I was top in my classes on like grade school.
Joe: Wow. And you still married Brian? That’s amazing.
Janine: Yeah, and I don’t know how this [INAUDIBLE 00:11:15.4] tricked me into in.
Joe: All right folks, I know these guys pretty well at this point. We’ve gone through a lot together so, yes, I like to give them both a hard time because they give it back to me as well. All right, so your online entrepreneurial journey; and you were obviously a pharmacist. You have a PhD but at some point, you and Brian met. Did you already have online businesses before you met Brian or did you jump into the space when you guys met?
Janine: Yeah. So since I was like 16. My parents opened a restaurant and that’s when things kind of got better for my family. And so I saw the opportunity of having a business would mean. I mean, literally, he opened a restaurant and two years later he was out of the projects. He bought a house. He bought this brand new Lexus. Somebody has always want to fall on time. So from that, I see the incredible opportunity of owning a business but I also saw how much it consumed my parents. So they were always there. That’s all they talked about and they’re literally there; sometimes my dad is there at four in the morning to make this broth that takes six hours to cook. So I see how much it consumed them. So I saw the opportunity in business but didn’t like the brick and mortar aspect of it. They were always gone. They were always there. So I stumbled on eBay when I was 18 years old in college. So this is 2002. I was struggling with money, so I looked around my room; whatever was worth selling, I put on eBay. Whatever I can get, like ten bucks I would do it because; you know a college student, typical story. That’s kind of how I got into the whole online space and I just never left. I saw the opportunity. I was trying all kinds of things over the next 15 years. I did a feel at marketing. I tried selling cellphones. I tried selling used sports shoes. I did affiliate marketing; just all kinds of things and they made me a decent side income but just not enough to replace a full-time job. And then when I became a pharmacist making over 100K a year, it became harder to justify that $20 or $30 I’m making on the side business. And then I met this guy who told me about FBA. I didn’t know anything about it. It was the first time I heard of the word private label. I have no idea what that meant so he explain it to me. We bought ASM. I think you had ASM3. So we got that and that’s how our journey began.
Brian: It was that private label route that really kind of changed things. Both of us were always selling other people’s products or always looking for that next thing to sell whereas it was like, okay we can develop our own brand. And I had sort of done this in the tanning salon world where like we were private labeling back in early 2000s a line of skincare that we would bring into the salon. And then we started doing tanning beds and we basically brought some tanning beds in from Italy. We put our own name on them and we started selling them to other salons. So I’ve kind of been familiar with it but the Amazon thing really opened my eyes to kind of like okay, we can do something really big. The volume is incredible. Get a good product, get a good brand, and just try to blow it up and fortunately, it worked out.
Joe: And you learned both the initial stuff through ASM3 I think you said it was.
Brian: Yeah.
Joe: That’s a while ago, right?
Brian: Spot on.
Joe: Several years ago and many variations since then. If somebody is new coming into the space and let’s say they’re a pharmacist working and listening to this podcast right now, what would you suggest they listen to; courses that they take, masterminds that they join, anything that you can recommend?
Janine: I think the most important thing is to take action. There are a lot of courses out there right now and I remember I heard one of the guys spoke on stage and he was like; so this is speaking to the ASM crowd who all paid and all wanted to be there and he said, I know 95% of you here today aren’t going to take action. I sat there and I thought to myself, that’s so weird. Who the hell spends that kind of money and that kind of time to go there and not take action? I thought there’s no way that that’s true because I knew that there’s no chance in hell that I wouldn’t be taking action. But then over the years, I learned that he was right. People just aren’t taking action. They buy these courses and then their brand is kind of like they took it off as some I did it, kind of the same thing with when someone signed up for gym membership in their brand [INAUDIBLE 00:15:42.9] release of you actually going to the gym, even though you didn’t and all you did was bought the membership. It’s like a psychological experiment I read about so much will buy courses and in their brain is checked off as, hey, I did it. The most important thing is just really to take action.
Joe: No matter which course, whatever it is just take some action. Figure it out, get started, and learn from that experience. Okay. So the business that we worked together on that you sold through Quiet Light is in the electronic space. Is this the largest business that you had gotten off the ground and launched?
Brian: Yes, definitely.
Joe: Okay. All right, let’s talk about that process a little bit. When did you first launch this particular business?
Brian: So that would have been the last quarter of 2016.
Joe: And did you use any particular tools to research the niche; like a Jungle Scout or a Helium10 or anything like that?
Brian: Helium10 at that time.
Joe: Okay, do you recall how much your initial order was; how much you spent on the first batch of products?
Janine: 1,000 units so that would have been…
Brian: About $10,000.
Joe: Did you have the money in the bank for that or did you have debt and use a credit card; what was your financial situation then?
Janine: Well, at the time I was working overtime whenever I could so I literally sat there and mapped out how many hours can I work overtime and how many hours did I work and all that money gets put into the business. Because I could justify to myself that I’m not risking my “own money”, this is extra money. So I was starting over. I was doing like sidestep. I was doing all kinds of crazy things. It was like the second order that I had to use credit card and some of these loans.
Joe: How long did it take between; well, let’s actually back up, when you got the first 10,000 units…
Janine: 1,000 units.
Joe: 1,000 units, $10,000, how quickly did things take off for you? When did you start to see sales and then how quickly did you go?
Janine: It just started selling.
Brian: Yeah, that one started selling really good but it’s a little bit unfair to call it like that’s when we started, because both of us had products before that time that we’re marginally successful in the sense that they would sell but neither one of us could make the products profitable. So we got to decent volumes of we could sell 15, 20, 25 a day type of thing but spending more on PPC than we were getting in and it never kind of went over that hump, whereas with the electronic product that actually Janine launched, it was up to 20, 30 units a day almost immediately. So it was kind of we got sat there and we’re looking, okay, what do we do next? And she was trying to figure out because there wasn’t a big bank account that had all this money ready to go to invest. So she says, okay, I think if I buy a thousand now and then I save up and I buy a thousand, and she had literally a whole path of what she wanted to do. And we sat there…
Janine: At an ice cream shop.
Brian: We’re at an ice cream shop and I said, no, that’s not how you do it. You need a hundred thousand dollars. We need to do a big order. Like that’s it. This product is going to work. You could see it. It just didn’t take a lot of effort. It got bigger and bigger every day. And then it was loans and credit cards and scrounging.
Janine: I thought he was insane.
Joe: He won that argument? He won the argument of more like spend a hundred…
Janine: You know I’m sitting there and I’m like where are you going to get a hundred thousand dollars; like what kind of overtimes do you think I can work? And at that point, I’d already quit my job but I knew that he was right. And this is why our partnership works really, really well. He already knows how the business road works whereas I’m kind of new to it. And this is whether you run a brick and mortar like a tanning salon or online, the principles are the same; the cash flow principles, how to allocate money, how to leverage debt. Those principles don’t change no matter what business you’re in. And I agree with him, even though it never occurred we would do it. He brought it up and I thought he was right. So I literally spent one day because when you apply for a loan, credit cards will know about it and they’re more like three reject to you. So I had one day off of work. I sat there and applied to every single credit card that I could think of and applied to every single loan that I could think of and I scrounged around between credit cards, new credit cards, and a cash loan I was able to come up with a hundred thousand dollars.
Joe: Wow. You actually pulled the trigger and raised a hundred thousand too. So we have a lot of people that say, how do we raise capital? How do I buy a business and raise capital? You just found a hundred thousand dollars through cabbage and multiple credit cards just like that.
Brian: And I kind of told her, I said money is not the hard part. That’s the easy part. I think we can all figure out a way to get money, whether it’s borrowing from family if you have to or credit cards, whatever. The hard part was done like she found the product.
Joe: She found the product so getting to the point where you buy product.
Brian: Getting the money was always easier.
Joe: Okay, that’s interesting. I’m mentoring some students at a local college here and they had a hard time finding money to incorporate. And they need to listen to this podcast and do what you guys did.
Brian: Yeah.
Joe: I said to them, I said look around, just sell something, you need to do it. Come on.
Brian; And I think a lot of people get stuck on I have to set up this first, I need a corporation, I need a logo, I need business cards. And all of that is way overrated. I think people use that as sort of a stalling mechanism. They need to get things set up, they need to be ready and it’s not true. It’s sell something first and figure out the other stuff after.
Janine: Yeah, I think I was at a million dollars before I had a corporation before I was properly set up, before like a lot of things. I don’t even have a domain, I didn’t even have a .com. I know you e-mail sequined, I know e-mail list, I didn’t have a brand, didn’t have a Shopify present, I didn’t have any business card. I know a lot of people to keep asking me for one and our packaging was literally this box that had that background on, had a bunch of textbooks, and then on sit Cinderella on it. It looks like someone just kind of like threw something together…
Brian: It was just the stock box from the manufacturer.
Joe: And just for the record, Cinderella had absolutely nothing to do with the product folks.
Janine: Nothing at all.
Brian: Yeah.
Janine: My point is sometimes you get stuck on these things. Oh, I have to get the packaging right, I have to design this, I have to design that, I have to get a domain, I have to brand register and all these things. I didn’t do any of them until I’m already well over a million.
Brian: All of it is important but if you get stuck on doing that before you actually have something to sell…
Joe: You have to get out of the game.
Brian: Long path, exactly.
Joe: I’m curious. You had said you’d each tried multiple things and you didn’t get past 15 or 20 units a day. Were they all in the same Seller Account as this one or separate Seller Accounts? How did you manage that aspect of it? We’d always recommend separate brands for separate seller accounts.
Brian: Yeah, so at that time we both had our own seller accounts. But then the one that we ended up building with was the one she had set up. And there were multiple products in there and they were…
Janine: Totally unrelated.
Brian: Totally unrelated. A lot of like; it became like test products so like we finally found the one that stuck and then that became the brand and sort of just slowly fades out.
Joe: And the rest faded away.
Brian: Yup.
Joe: Okay, so the biggest challenge you would say is actually finding the right product and getting it to work, and don’t let yourself get stuck in the gate trying to get to be perfectly set up before.
Janine: Yeah. That and also, I don’t want to our story to make people feel like, oh, I need a hundred thousand dollars or, oh, I need 10 grand otherwise I can’t get started. That’s totally not true. If I hadn’t had four products that failed, if I hadn’t had four products where I spent all my time; all the things I learned; photography, how to talk to freelancers, going to Fiverr.com to hire people, how to write a good listing, how to use Helium10, how to use all kinds of software; I learned all of that but all of those products that cost me like a dollar, a dollar 20 cents. I only started with a few hundred bucks. That’s when I learned all of those skills so when the right product comes along, I’m ready to go. And I think that’s contributed a lot of our success. I imagine if my very first product was a successful product maybe I wasn’t ready for it and maybe we wouldn’t have gone the trajectory that we were. So even if you have 200 bucks to buy something that cost a dollar or two and you may not make money on it, do it.
Joe: Education; right, you’re learning along the way.
Janine: That 200 bucks is worth it.
Joe: Okay, so lots of failure or enough failure or mediocre success before you head to the home run; the seven-figure eventual exit, so to speak. So you found a way to raise money, not an issue for you, as the business continued to grow were there challenges with cash flow management trying to keep up with more and more inventory demands? Well, you don’t have a job any anymore Janine, you have an income. Talk to me about those challenges and how you overcame them.
Brian: Yeah, there were definitely challenges but it became; so she had left her job, I was still working for about a year. I left in the end of 2018 so now neither one of us are working in pharmacy but during 2018 when the real growth really started to happen, it was always a struggle to order enough to grow because we’re growing 30%, 40%, 50% month over month. It wasn’t slowing down so it was always trying to stay one step ahead with inventory. We use Amazon lending extensively. So, I mean, we started with the smallest. They offered a thousand-dollar lone, we took it, and then every time we paid it off, the loan got bigger and bigger.
Joe: Do you always have to wait for them to offer or is there a way that you could…
Brian: Yeah, and as far as I know, the offer is the offer. There’s no getting anymore.
Joe: So you take it, pay it off and then you’re going to get a…
Janine: Yeah it was really stupid. The first loan for a thousand dollars I would have done anything for us. We were already doing; I can’t remember the exact number, but at least maybe 50 or 60 grand or maybe even a lot more than that. So I remember looking at it and thinking to myself, what the hell is this going to do? Why is Amazon giving us such a cheap ass loan like a thousand bucks? But we took it and it went to 10 grand, it went to 70, and it went to 300,000, 500,000. It ended up over 800,000. It just gets bigger and bigger.
Joe: Wow.
Janine: So if you get an offer even if it’s 500 bucks or $100, take it.
Brian: Yeah, and they’re short term loans so they’re expensive to have on your books, but it allowed us to fund the inventory and fund the growth, and it worked out well. Like going back there would be no other way to grow the company too. So when we sold it was almost at five million a year.
Joe: Okay, let’s get to the niche itself and the incredible painful exit as opposed to just incredible. It’s incredible, no question about it. The whole story is amazing and inspiring and hopefully, it’s going to get people in that starting gate to getting out of it and taking some actions; looking around the room and selling whatever they have to, working more hours. I mean, when I was a kid, I was complaining that I didn’t have enough money. That was kind of to the millionaire next door, the best friend of my parents. I never know that they are, but they were. And I worked for the company and instead of staying I’m like [INAUDIBLE 00:27:34.5] where I said at some point I was in the room complaining I think probably as my parents were playing Chinese checkers which they do. And he said, just stop your whining. There’s plenty of work. Just go work more hours. There are lots to do. Work more hours. And that’s exactly what you did Janine. You do the math on how to work more hours so that you can fund that $10,000 purchase. So no excuses, people, if you want to be an entrepreneur, that’s what you got to do. All right. So why the electronics space? It’s a space that we talk about in terms of risk and that’s risk of obsolescence and again, it took me a long time to learn to pronounce that but it means that there’s a fear that the product will be outdated someday in the future with changes in updates. So why the electronic space, what attracted you to that?
Brian: I don’t think there was a lot of thought as to that we want to go into electronics. So it just came from product research and finding a good volume product that didn’t seem to have a ton of competition that seemed to be somewhat new in the marketplace with already a lot of volume. So it kind of checked all the boxes that we’re looking for. Also, there’s a lot of training and there’s a lot of categories, there’s a lot of products, there’s a lot of things that they tell everybody to avoid. We tend to; especially now that we’ve developed a better skill set around this and we have more confidence…
Janine: We do the opposite.
Brian; Yeah, we do the opposite a lot of times. Don’t always avoid because guess what? I mean, the space is already crowded but the things that everyone is not avoiding, everyone’s in those. So the ones that they say don’t avoid and maybe it’s an oversized, maybe it’s electronics. If it still seems like a good opportunity, go for it.
Joe: Take it.
Brian: Yeah, I don’t like to use like a definitely do not do this.
Joe: All right, so launched in 2016, 20 million in revenue before you ever incorporated, at what point from your experience selling too late; at what point did you say to yourself, okay, we’re going to exit this. We’re going to talk to me, talk to Joe, talk to somebody, and learn about the process of selling the business. How long was it and how far in advance do you think other people should consider the exit process or the training or planning, as it’s called?
Janine: Well, they always say they won, right?
Joe: Nobody ever does that.
Brian: No.
Janine: No, no one does.
Brian: I think as soon as you know that you have a business. So, I mean, it can’t be day one because maybe that’s never going to go anywhere but as soon as you sort of maybe feel traction, you’ve kind of built the brand, it’s still growing, and you see like an upside to it maybe start planning. Definitely from the day one keep your books good. That was a major thing.
Joe: Remind me, did you use QuickBooks or Xero?
Brian: We used QuickBooks.
Joe: And did you outsource to a bookkeeper eventually or do you do that yourself?
Brian: Eventually. So we’re doing it. I was doing it myself and then when we sat down with you, that was kind of one of the things you helped us with.
Joe: Okay.
Brian: So we used CapForge and they were awesome. So they went back and had to recast all the books to the accrual method. So that was a little long, tedious, painful.
Joe: Yup.
Brian: It’s probably more expensive doing it that way than to just keeping it correctly from the start. But, yeah, I think just planning is always better, of course. So as soon as you think you have a business, I think you should at least have it on your radar because who knows? I mean, we’re all in this to make money. You own a business to make money and if selling it is going to make you money, that should be part of your plan.
Joe: Yeah, so one of the things; I would just try to shift everybody’s mindset. Everybody’s always called it plan to sell your business the day that you started exit planning, flip it, and call it training because you’re learning. You’re constantly learning by your failures and in launching new products until you hit that right last one that launched a seven-figure exit. Think about the exit planning as training as well. If you’re going to run a marathon, you’ve got to train for it or you’re never going to get out of the gate. You’ve got to learn about the process. You’re listening to this podcast so that’s a great start. Get a valuation. Look at other listings and how they’re valued and how the packages are put together. Train as much as you can. Don’t make it your sole focus and your mission, but make it part of your overall business plan and operating your business so that you can eventually exit before you get burned out and things turn the wrong way and it’s too late to exit at a strong value.
Janine: I think the idea was initially planted in our heads when we had our initial conversation with Ezra on our mastermind group. And then that brings me to another point, the importance of having a mastermind. Brian and I are always a part of masterminds. Sometimes we’re in two different masterminds. Right now I’m in three different masterminds, but having a group of people that you can talk to is like super-duper important. So Ezra we talked to him, he planted the idea in our head. We connected with you to get the initial phone call with you. I love that you were not fishy at all. It was just very informative, very casual when we got to talk with you. And we got off that day and we decided, yeah, we’re going to do this. But it took us six months to get everything set up; all the books probably correct but it’s never too late.
Brian: And like you said about an education, going through the process, I think allows you to learn how to run the business better anyways. So even if you were to keep it, you should be in a better position after going through it.
Joe: I agree 100%.
Brian: Even going through the sale there were things that we learned. So during due diligence, it’s like you get asked a question or someone else organizes information in a different way and you say to yourself, oh, I wish we did that before. But now guess what? We’d do it next time. So our next business, we set up a little differently because of things we learned by being exposed to the process.
Joe: Right. Did you make more money on the exit than you made while you were running the business?
Brian: Yes.
Joe: 50% of all the money you ever made, 90%?
Brian: Cash flow is a funny thing. So there was a lot of money flowing through our business but in terms of what you end up with yeah, I definitely think the exit; I don’t know what percentage, but yeah, a big amount of what we actually ended up with was from the sale.
Joe: Total earnings.
Janine: Every month I’m like where’s our money?
Brian: Yeah.
Janine: We had Like 300,000 to 400,000 monthly sales so I was like where’s all that money?
Brian: Yeah, we’d laugh as we’d wire money. We’re like the Chinese they’re taking all our money. I’m like why do you keep sending it to them but yeah.
Janine: So the exit is when the cash came down and it definitely…
Joe: And it comes at a lower tax bracket too.
Brian: It does which is incredible.
Joe: Very, very helpful. All right, let’s talk about the painful part of the exit. So we were a couple of days away from signing an asset purchase agreement with your buyer. The CFO of the company bought your product and his wife plugged it in and it started to smoke and catch on fire.
Janine: I don’t think it caught fire, it just smoked.
Joe: Just a smoke; okay a minor technicality.
Brian: Yeah, and not a few days before it closed it was literally…
Janine: The day of.
Brian: The day of that we were supposed to close. Yeah.
Joe: When details in your life are incredibly painful, you remember them very, very well.
Brian: Yeah.
Joe: You guys can remember exactly where you were when you got that e-mail or phone call, I imagine, as well. But we overcame that. We were able to sort of get over that hurdle; get around that hurdle. Can you address how that was overcome?
Brian: Yeah, the exact how so we had a lot of confidence in our product and in our business and we didn’t feel that the buyer had that same confidence. And I think that’s normal, right? So they don’t know exactly what they’re getting. There’s always going to be maybe some reservations, especially like you were talking to electronic product obsolescence, safety hazards type of thing. But we had kind of built it, we had huge volume, and, of course, we had problems along the way that we were always able to overcome and solve. And every time we overcame them and solve them, the company just continued to grow and grow and grow. So all that I felt was like, I just need them to believe in the product. And we kind of really structured the deal to make them feel a little bit more comfortable. We were willing to take a little bit more of the risk on some contingent payments but we’re completely willing and confident do that because we kind of know where I think this product will go. And the company that bought it I think can grow it way beyond where we would. So we just needed to kind of instill into them that we’re confident so we’ll take some more risk and I think it worked out. I think it was a really good negotiation.
Joe: Yeah, I think they’ve done well with it. They started to grow it immediately after closing. And with COVID more people are staying home and more people are buying that particular product anyway so it’s a double whammy for them. So what would you did was shifted some of the risk into contingent payments, meaning that you got paid three months out if things were stable or six months out on another payment. And you also shared some statistics, too, though, in terms of the total number of complaints you had in that regard.
Brian: Right.
Joe: And then I think they did a little research in terms of looking at other similar products in similar categories and seeing that complaints were pretty similar and in some cases even higher.
Janine: Even major brands had the same problems. Apple, Google, and Samsung that fiasco with the cell phones like [INAUDIBLE 00:37:55.6] with the batteries exploding on airplanes or something, it’s not unique to our products.
Brian: Right, and I think that’s what we just needed to kind of work through to make them feel more comfortable.
Joe: And you did it with logic and level emotion. You didn’t go off the rails, you didn’t scream and shout, you didn’t…
Janine: Well I did.
Joe: Well you did that with Brian, you didn’t do it with the buyer.
Brian: Yeah, I’m very patient and I don’t give up and I knew that it could be solved and it was something we could overcome. I was confident that we could…
Janine: I thought it was over.
Brian: Yes.
Janine: Honestly, I wasn’t eating. I thought it was over and this guy is very level headed. He sat on his computer, thought about it, sent out an email negotiating, and they accepted it.
Joe: They did. They love the logical approach and that you put some risk on you. At the end of the day, you’re still going to get paid out but you said, okay, look, I’m going to take some risk just to prove to you that this is not an issue, But the next problem, wow, it’s almost one that you could never be able to overcome. So I remember I was at eCommerceFuel down in Fort Worth and I took my phone and checked in with you, Brian, and I’m like hey man how are you doing? You were like, yeah, I’m not so good. I’m not so good. I’m like come on, we’re getting close. We’re almost there. He’s like, well, we just got hit with an IP infringement and all the ASINs are down or all the top ASINs are down.
Brian: Yeah.
Joe: So someone else ended up getting issued a utility patent on…
Brian: Design patent.
Joe: Design patent on the primary SKU; you’re hero SKU essentially because you had pretty much a hero SKU here. How did that feel?
Janine: So this happened on the same day that we were supposed to sign; again like we can’t even make this up. I remember waking up that morning to an e-mail from the buyers saying hey I’m looking forward to closing today at two o’clock or something like that.
Brian: Yeah.
Janine: And I saw my other e-mails from Amazon that was sent at five o’clock that morning to tell us our ASINs are down. That literally happened within seven hours the same day.
Brian: Yeah, so it was sort of like we got this other problem behind us. We’re feeling good and literally the business; I mean this couldn’t have been any worse because it went basically to zero. And they took down every SKU except for I think two or something like that and they weren’t top-selling SKUs. So I think we went from like $12,000 a day to about a thousand dollars a day overnight and no path to see it being fixed.
Joe: None, whatsoever; it was a patent issued by the US government. Janine, did you say those emails came in from your buyer and from Amazon within about seven minutes of each other?
Janine: Seven hours.
Joe: Seven hours of each other. So seven hours and the loss of seven figures; pretty painful. You’re pretty down and basically like you got kicked somewhere that would hurt really bad. Brian, I’m talking to you. But again, levelheadedness, you reached out to your Chinese manufacturer. You looked at the dates, you looked at the history, you looked at whether or not this is patent was issued legitimately or fraudulently; meaning the guy didn’t fully share everything with the US government; the US TPL that he should have. What did you find when you did all that research?
Brian: So he had sort of, after the fact, applied for a patent. So we had the product selling in the marketplace first, but there were others so it was shortly after us where there was maybe five or six of us all selling similar designs, same exact product. It never even really crossed our mind that it was a patentable thing because we didn’t design it. We purchased it as a private label thing, had our logos put on it, did the packaging, yada, yada, yada. So did this other buyer, so did lots of other buyers. About a year; so after we’re already over a million dollars, he applied for design patent. The path he took was…
Janine: Sketchy.
Brian: Yeah, a little bit devious; claiming rights to something that he really didn’t have rights to that was prior on this space but none of that sort of matters in the Amazon world because he did actually get granted the patent and Amazon is not going to rule on whether or not that pattern is valid or not. One thing that I did quickly was contacted some of our other competitors. So almost immediately I think we emailed…
Janine: They were also taken down.
Brian: Yeah, so we tried to reach out to our competitor that took us down, but then got no response. And I reached out to other competitors and we kind of all worked together. We’re all doing our own research. We all had our own lawyers. And I think that little pact that we formed, in the end, helped as well. Because it was a lot of us working together, even though we’re competitors, we kind of all had had one thing to solve. And yeah three weeks; I mean, this was a lot worse than the first thing so this one actually took a lot of time.
Janine: 14 days.
Joe: It appeared by all imagination as something completely insurmountable.
Brian: Right.
Joe: But you did, you banded together with your competitors. You also reached out to your manufacturer to reach out to them and put a little pressure on them as well. And you eventually got in touch with the patent holder. I’m cutting this short a little bit and telling the whole story because it’s long, folks and it was painful. A lot of e-mails back and forth, a lot of negotiations, a lot of okay, I’ll think about this and I’ll get back to you and then not hearing back for days on end.
Brian: And I got on the phone with them. I actually was able to speak to them and tried to work it out as just two businesses competing in the same world. It didn’t seem like it was going anywhere. It wasn’t working, but it did. Finally, cool heads prevailed.
Joe: And so at one point, that conversation led to, okay, I will allow Amazon to put your stuff back up and that’s good. So your stuff was back up and selling on Amazon, but your buyer really wasn’t willing to close because that issue was still out there, that this person had the patent and they could shut you down at any time. We worked with a buyer who was very good about being patient, understanding, and all this. A lot of buyers would have just walked away. In this situation, they hung out. They hung around. They trusted you guys. They saw the commitment you were willing to put in by putting some risk on your side. And they said see if you can work it out. We’re good. And one of the other things that you did is you said, look, we will backdate this asset purchase agreement. Let’s go ahead and get the APA signed contingent on getting a mutual release of the ability to sell the product now and forever on any platform and being able to transfer control of that right to sell the product as well but backdate it. I think we ended up closing in March, but we backdated you said effective, I think January 31st as far as the asset purchase agreement. So you are essentially managing the business, not taking any money out of it, and if we were able to close the transaction, you essentially had ended up managing it for the buyers for 45 days or so. So, again, you’re putting yourself out there saying, look, we’re here, we’re going to fix this and it’s yours as of that date back there but we’re going to run it until this problem is solved and we did. We ended up with a mutual release letter. There was the strangest possible clause in a legally binding contract I’ve ever seen. We won’t go into the exact details, but the buyer’s attorney said, I don’t think this is enforceable. And I said, really?! Absolutely just a little clause that this person needed to make himself feel better perhaps in the afterlife and we don’t know if you could enforce that in the afterlife or not. But the key is that that you worked with him closely to accommodate his personal needs and your own personal needs and you got through it. You remained level headed. And at the end of the day, you wound up with a seven-figure exit. I want to know how you felt not when we finally got that release letter but I want to know how it felt when that first wire eventually hit your account.
Brian: Yeah.
Janine: It couldn’t have; so right now we’re going through COVID-19, I don’t know if you remember, but on March 17 was when the stock market dropped by 20%. The whole country woke up and the stock market was down like 20% or more and that was the same day we got our seven-figure finally hitting our bank.
Brian: Yup, this couldn’t have closed at a better time. I mean it put us in such a good position. Obviously, we’d been waiting for it for a long time so it was a relief but timing was just incredible.
Joe: Although the buyers seen a spike in sales because of…
Brian: I mean, we, of course, follow it very closely.
Janine: Oh my God I font know how they are doing it.
Brian: I think they’re up over 100%. I mean, they’re growing. It’s awesome. They’re growing the way we thought they would. They have the capital behind it. They’ve got a good, strong team to put behind it. So, I mean, we know…
Joe: Are you excited for them. Are you glad; you just said it’s awesome, are you…?
Brian: Oh, it’s so awesome. Yeah.
Joe: Right. So, folks, that’s the mentality that will get you a better value and a better deal and a better transaction. Because Brian and Janine ran this business and created something that would be great for a buyer to take over. And a buyer saw that took it over, and now it’s up over a hundred percent. Yes, COVID is having an impact but even without COVID, it would be up substantially. That is absolutely the right mindset to have.
Brian: Yeah [INAUDIBLE 00:48:35.2] Like that brand even if we potentially could grow it to, say, 10, 20, 30 million dollar brand, I honestly don’t think we wanted to. Like that wasn’t our goal. We didn’t want to have to leverage ourselves to get there. Take the extra time.
Janine: Things were getting scary.
Brian: Yeah, like we built the business to be kind of a lifestyle brand. We travel all the time. We have a lot of flexibility. In order to take it to the next level, we knew that we’d have to sacrifice a lot on that.
Janine: Probably more people or more agencies, things that would mean that we need to spend more time on it and that wasn’t our goal.
Brian: Right, so to see them be able to do that, of course, we would love it. We’d still feel that same pride that it was ours and we built it. She was always like this is my baby I don’t want to give it up.
Janine: It was my baby.
Brian: But you know you kick the baby out of the house eventually.
Joe: You have a new baby. It’s got seven figures.
Brian: Yeah.
Janine: And we are in the process trying to buy another one.
Joe: Right. Yeah, so you guys did something smart that is interesting. When we were; was it Blue Ribbon? Yeah, we were at Blue Ribbon Mastermind in St. Pete and you had already; we hadn’t closed on this yet, we were still working out the details and you had already launched another product on Amazon.
Brian: Yeah.
Joe: On a separate seller account you launched something new. And I think at that point you’re already up to 20 or 30 sales a day which I think is brilliant. This business model that you’re in has you be able to build, sell, repeat, build, sell, repeat, and continue to do it with the skillset that you have. So I think it’s fantastic. It’s the exitpreneur process; you all know about the book. It’s a little plug for my book but it’s brilliant. I’m so excited and pleased for you guys. It’s been a privilege, honestly, getting to know you, spending some time with you out in Seattle. I mean, you got to meet my son. We had lunch together with Bronson and then getting to spend more time down in the Blue Ribbon Mastermind. Congratulations. It was fantastic what you guys have done and I hope that people hearing the story from both your angles and approaches will inspire some of them to look around the room and sell something others to have the hutzpah that you had to raise $100,000 because you knew you had a winner; pretty incredible all around. Any last thoughts or words of wisdom that either of you would like to share with potential listeners, both buyers and sellers of online businesses?
Janine: Well, Amazon is kind of like a world where we are kind of secretive about what our product is. Some of us won’t even divulge what our category is. And it’s like that for a reason but it doesn’t mean you can’t have a Mastermind, it doesn’t mean you can’t network with people. And that was one of the most important things that we did. And also going to the process that we did with IP infringement made me realize, you know what? We’re not companies competing against each other; we were all families, we have kids, we have a mortgage. All of us are the same so a lot of these black hat strategies where you’re kind of doing something to get a competitive edge by sort of burning that person; you know, really just don’t do it, because, at the end of the day, you’re hurting a person who’s probably just like you married with kids, probably with a student loan or a mortgage; you don’t know. And I think we got through to the patent holder with our issue because we made him see that and he’s also a family guy; a religious man, of course. And I think getting to know them and seeing that we’re just another family just like him that’s how we got through to him.
Brian: And some of his actions were when we got on the phone, we were actually able to talk about this. I couldn’t so much fault him exactly for what he did, because we’re all business people. We’re all kind of doing things to get an edge and that’s what he felt. He felt he needed to get an edge. It’s almost hard to fault him for that but it was making him realize that hey, we’re not some Fortune 500 company. We’re just like you. We’re working out of our house. We have a family. This is our business.
Joe: And at the end of the day, he saw that because…
Brian: He did. Yeah, so we have…
Janine: We were lucky.
Joe: Yeah, you took care of each other as competitors and rivals and gave each other the opportunity to continue to grow in business.
Janine: Yeah. Amazon is so big. There’s room for everyone.
Joe: Agreed.
Brian: Yeah, there definitely is.
Joe: Guys, I feel like I could honestly talk with you for another hour and a half. Maybe we’ll have you back on with your next incredible exit but thank you so much for sharing your story and giving me the opportunity to work with you.
Brian: Thank you, Joe.
Janine: Thank you, Joe.
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