Tweet by Sean Frank
COO of http://ridge.com
Building 8 figure brands with 8 figure profits.
I spent 3 days with 30 ecom owners who are doing 30m+ a year.
The same three conversations kept coming up, over and over, regardless of size, niche, or platform.
My first thread :) 1/16
1- IOS 14 and the effect on facebook.
If you are on ecom twitter, this has been the conversation for the past 6 months, but typically from a media buying/agency POV.
Talking to merchants, they are feeling the pain on the bottom line. The knife is cutting two ways 2/16
Scaling revenue is harder than ever and some are having a hard time comping LY. The targeting is literally WORSE than it was pre IOS. So even with more spend, more optimizations, etc finding someone at the right time of the buying journey is literally happening less. 3/16
The other side is that costs are up. CPMs are literally at an all time high. Facebooks revenue was up 35% YOY. No new users, no new ad space, we are just paying more for impressions. So even if you can navigate worse targeting, you are being squeezed on costs. 4/16
We shared hacks and tips, but honestly this is a macro problem. Targeting wont get better without data sharing and costs will just go up forever. The outcome will be merchants spending money other places. Google display, tik tok, tv, content, seo. All with worse targeting. 5/16
Facebooks share of the marketing mix will be suppressed or dollars will dry up. We are reaching the end of facebook arbitrable. Small brands will suffer more as they literally dont have the budget for new platform testing. 6/16
2- The supply chain and domestic manufacturing.
Some brands werent affected by facebook, but every brand is affected by the supply chain. We had auto part dealers who manufacture in ohio unable to get steel. No solution to the supply chain crisis besides waiting and paying. 7/16
The big fear was running out of things before the next shipment shows up. Lots of demand planning around when to cut marketing completely, raise prices, and slow sales. So where facebook fears relvole around customers drying up, supply chain fears force us to slow sales. 8/16
Just shows ecom owners are feeling pain from every side. No one I talked to is big enough to book a ship. Most cant air their goods. All they can do it wait and see. Lots of people are starting to bring manufacturing back to the US, mexico, Thailand, Vietnam. 9/16
But they run into the material+component issue. A fractured supply chain caps the effectiveness of domestic manufacturing. I think we will see a big big shift back to the US (or NAFTA really), but it isnt happening in 2022. Its a 10 year timeline. 10/16
3- M&A and selling your business.
Despite all the doom and gloom, its the best time ever to own a midsize ecom brand. A lot of these guys own their warehouse, that alone could pay for their retirement right now haha.
But the business multiples are starting to make sense 11/16
It wasnt uncommon 3 years ago for a small ecom brand to go for 2x EBITDA. Now the floor is 5x as soon as you hit 7 figures in EBITDA. From what I can tell, doesnt matter industry or product, you hit that number online you will have a line of buyers at 5x. 12/16
We are seeing large PE firms bid hard on small (for them) deals. Top 20 funds fighting for a 15m EBITDA business. This has never happened before, but really its just bankers playing catch up. (More dry powder + cheap debt) x a high growth industry with real profit= ... 13/16
Lots of transactions are happening in the 10x EBITDA range. Seeing 15x all the way to 20x for the right brand. And it doesnt look like it is slowing down. Depite facebook and supply chain issues, if you can navigate Q4 and grow in 2022, it feels like 10x will be the floor. 14/16
Q4 and 2022 will wreck a lot of brands. What happens when you cant find new customers? What happens when you cant get new product? These are problems 50m a year merchants are feeling just as much as 5m a year sellers. 15/16
But if you can survive it? If you can grow? You will be unstoppable. This isnt a time to hid info, fight, snake each other. Its really fucking hard and some brands will bust. All I can do is try to share and help. And it was cool talking to 30 people doing the same. 16/16