Business Case Study - E-Commerce Client

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Overview

This mature e-commerce company had generated a growing income for the owner until the business went through a great deal of change and was producing much lower margins. 

The business growth had stalled, and the management team was not running the business effectively.

The owner wanted to grow the company and sell it when the net proceeds would meet their retirement needs.

Situation

The owner needed help getting the company moving down the right path.  The EYW Advisors were engaged to help grow the company, prepare for sale, and sell the business.

EYW Sales Consultants designed and implemented strategies to supercharge the company growth.

EYW Management Consultants helped the owner recruit and develop a management team and systems which could run the business well into the future.

EYW Business Sale Advisors provided the guidance and resources to successfully market and sell the company.

Summary

This 8+ year old e-commerce company generated a relatively stable income for the owner, but the business went through a great deal of change and experienced much lower margins.  The owner had grown the business to his capacity but the management team in place could not run the operations effectively and did not understand the marketing needs of an e-commerce company.  The owner wanted to grow the company and sell it when the net proceeds would be greater than $10 million.

Exit Your Way was engaged to help the owner grow and structure the company to increase the profitability to the point where the owner could exit and meet his retirement needs.

Exit Your Way identified three main areas that the company needed to address.  They were:

  1. Sales Consulting –The growth had stalled with the owner and management team’s knowledge. New marketing methods, sales channels and markets had to be developed to continue the revenue growth.
  2. Management Consulting – The company needed to make improvements to increase the product margins and improve overall company performance in many areas while handling the increased demand.
  3. Business Sale Advisory – The client wanted to sell their company when it achieved their target exit value. The company’s financial systems and procedures needed significant upgrades to switch to accrual-based accounting and completing a CPA Financial Review.

Exit Your Way advised on a myriad of business strategies including sales and marketing, human resources, and business management.  Exit Your Way spent several days a week with the client to quickly identify the low hanging fruit opportunities and to moves these forward while growing the business.  The company had a great deal of internal knowledge hurdles to overcome.  Working with the ownership and staff Exit Your Way was able to create significant results and achieved an enterprise value the owner was happy going to market with for the business sale.

Some of the specific items addressed in each area were:

Sales Acceleration

The sales and marketing changes below helped to increase the top line revenues.

  • The company was not actively using email marketing to enhance sales. The email marketing system was implemented, and a program developed to routinely market to existing customers.
  • The company owned websites were dated and did not show the strong company behind these products. The website formats were updated. The SEO was adjusted to increase the performance for specific market categories and the outside SEO resource was no longer needed.
  • No measures were in place to ensure that all the products were listed on the appropriate sales channels. Exit Your Way implemented a system to measure number of items listed on each channel and redirected internal resources to ensure listings were being added to appropriate channels consistently.
  • Product listings were not tailored for the channels they were being marketed on. Exit Your Way provided training on the channel differences and how listings formats and keywords should be changed per each channel. Channel managers were developed to ensure consistency across each channel.
  • PPC advertising was not being used. Exit Your Way implemented a program where Google AdWords, and Amazon PPC advertising was used to drive traffic and sales.

Results Management

Exit Your Way worked on the profitability and performance to ensure the company was performing consistently at a very high level.

  • A dashboard and weekly review were implemented to ensure top line growth, operational performance and gross margins were known and being improved.
  • Order processing changes were made to improve order fulfillment efficiency.
  • Equipment was purchased to eliminate manual labor and handling constraints for large items.
  • Warehouse racking was reconfigured to allow full pallet storage for large items and container queuing.
  • Warehouse layout was changed to reduce the amount of product movement.
    Customer Service training was conducted multiple times to improve the feedback from customers on public forums.
  • Key management team members were incentivized for performance and to stay with the company for the long term.

Deal Advisory

Exit Your Way coordinated changes to prepare the client for sale and managed the sale process through closing.

  • Analysis and most probably selling price range determined.
  • Legal work completed to get business loans and companies documented correctly.
  • Financial processes were changed from a cash basis to accrual basis.
  • Targeted marketing strategy was planned and executed for the sale of the company.
  • Financial advisory to minimize of transactional taxes.
  • Management of the due diligence business sale process.

Results

The sales and marketing efforts resulted in a doubling of top line revenues in less than 18 months.  The gross margin was improved by nearly 20 points as a percentage of revenue.  The owner’s value increased by over $18 million in 18 months.

 
  • Top line revenue increased by approximately 200% +
  • EBITDA increased by nearly 4x
  • The business value Increased by nearly $20 million
  • The owner received a 45X ROI

Business Description:

E-Commerce Client

Objectives:

Grow the business value to meet the owner’s goals and sell the company

Value Growth:

$18+ million

Timeline:

18 months

ROY:

45X

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