Podcast Guest

Daniel Calleja

Head of UK Investments at SellerX

Podcast host

Martin Zerrudo

CEO SUEG Group

Martin Zerrudo

CEO SUEG Group

June 10, 2022

Are You Ready to Exit?

watch the video

Daniel Calleja is the Head of UK Investments at SellerX, the largest European Amazon FBA operator in buying and growing Amazon businesses. SellerX helps entrepreneurs realize the next stage of their businesses and their lives.

He was a Venture Capital Investor for Bambino Capital, an Investment Banking Senior Associate for Citi, and the Co-founder of an Amazon FBA private label retailer. Daniel graduated from the University of Bath with a degree in business administration and the University of Western Australia with a degree in finance and financial management services.

Here’s a glimpse of what you’ll learn:

Daniel Calleja talks about juggling a career in investment banking with being an Amazon FBA brand
What are some of the advantages and disadvantages of becoming an Amazon FBA seller?
How Daniel and his team at SellerX discover brands to buy
Why the background and experience at SellerX make it a great partner
Daniel explains how the pandemic changed ratings, rankings, and product inventory
The importance of organized financials when selling an Amazon FBA brand
Daniel shares his thoughts on trends with aggregators and private equity firms

In this episode…

In a saturated marketplace, how can you have confidence in your aggregators? Are you looking for expert tips and fortifying inspiration to guide you through the brand-building and selling process? If so, you’re in the right place.

Selling your brand is no easy task, especially if you’re a novice to the process. As an expert in this endeavor, Daniel Calleja has some advice for sellers working with aggregators or new brand builders: financially prepare your brand for the sale now. When the market is full of copycat sellers, Daniel says that while it may be difficult to compete on Amazon as an emerging brand, you can rely and focus on your strengths and not be afraid of launching on outside marketplaces.

In this episode of What Do You Do Next?, host Martin Zerrudo sits down with Daniel Calleja, Head of UK Investments at SellerX, to discuss the successes and value of partnering with an aggregator. Daniel talks about the advantages of becoming an Amazon FBA seller, scaling your brand through ratings and reviews, and why clean financials are crucial for exiting your brand with the highest valuation.

Resources mentioned in this episode:

This episode is brought to you by Seller Universe Ecommerce Group.

We provide essential Amazon and NetSuite service solutions for brand growth.

Seller Universe Ecommerce Group provides essential service solutions for brand growth and scale. We position brands for success through cost-effective growth initiatives and operational efficiencies. Our synchronized approach allows brands to dominate in today's complex, multiplatform ecommerce marketplace and ecosystem.

Our team at Seller Universe not only helps your brand on Amazon, but we also do Netsuite implementation and anything that gives you a headache around inventory management.

To learn more about what we can do for you and your brand, visit seller universe.agency.

Episode Transcript:

Intro 0:00

Welcome to the What Do You Do Next? podcast brought to you by Seller Universe Ecommerce Group. Whether you're just starting your ecommerce journey, finding ways to grow your online brand or can't seem to find the right tool or partner to help you break through. We're here to help. We interview experienced sellers, strategic service providers and other ecommerce experts who will help you answer the question. What do you do next?

Hi, I'm Mark Zerrudo. I'm the host of the What Do You Do Next? podcast. Whether you're just starting your ecommerce journey, finding ways to grow your online brand or can't seem to find the right tool or partner to help you break through? We're here to help we interview experienced sellers, top strategic service providers and other seasons ecommerce experts who will help you answer the question, what do you do next? This episode is brought to you by Seller Universe Ecommerce Group. We're a global ecommerce agency providing essential Amazon, NetSuite and Shopify services or solutions looking for brand growth and scale. But today, the most important thing that we're here to talk about is Daniel Daniel is the Head of UK investments at SellerX. SellerX is the largest European Amazon FBA operating buying, operator buying and growing Amazon businesses. They have a presence in multiple countries and can typically buy business in four to five weeks. While it's pretty quick. Daniel is a graduate from Bath University and finance and management and has experience in private equity, investment banking, capital markets, and venture capital. Hi, Daniel, thank you so much for joining us today.

Daniel Calleja 1:24

I must say thank you for having me. Of course.

Martin Zerrudo 1:27

So first of all, how are you? How are you doing today?

Daniel Calleja 1:29

Yeah, good. Very good. I mean, I'm actually I'm in Spain for a couple of days. Perfect. We have a bank holiday coming up next week. So we're having a couple of days off. But But yeah, everything. Everything's great.

Martin Zerrudo 1:42

Nice to hear. So when people hear Hey, he's in finance season investment banking. Is it as exciting as it sounds? Tell me a little bit about what that life is like?

Daniel Calleja 1:53

No, look, love to tell you. I mean, it's something I mean, I get that question all the time. Because, like, the spaces is quite different to do it ratio. Maybe. Let me stop. If you're my story. I mean, as you said, I studied in Bath. I'm originally from Spain, but But isn't the UK and I've actually never really lived in Spain. So I'm quite like, I was born in Belgium. Live like so in the UK. I normally live in London, for quite like a different background in my industry, like most of my professional experience has been in, in finance in working first Citi, the investment, some things in venture capital. But what I find what different from my profile is actually had an Amazon FBA business. So you did what were you selling? Well, I mean, my star product was a back posture. corrector. So

Martin Zerrudo 2:44

I have one right over there. I'm like, I'm looking at it on my door. I need it. I don't use it often, though.

Daniel Calleja 2:50

Tell me which one it is? Maybe Maybe it's mine. Might be. I mean, it doesn't because we when we started it. Just like my flatmate and me. I remembered as a good I wouldn't call it a joke, but it's something like yeah, like something that it was absolutely. It was going because we started in 2017 when it was becoming a huge thing in the US. We're like, Oh, this looks really easy. Let's let's do it in in Spain, Amazon, Spain. So we started doing it there that we really quickly expanded products. We were like selling like we did all sorts of things like soy sauce from like karaoke microphones. I don't know if you've seen those ones.

Martin Zerrudo 3:27

Yes, I'm Filipino. We all know about karaoke.

Daniel Calleja 3:32

You know what I'm talking about? Yeah, those ones I mean, very nice. Like knee protectors, all sorts of things. No

Martin Zerrudo 3:38

way. Which ones sold the most the fairy lights, the karaoke microphone or the back?

Daniel Calleja 3:43

Are Heroes to us was the backbone of the corrector. Like, we got in that like, amazing thing with those, like, pretty much nobody selling that in no competition. And then yeah, like, our main competitors were Chinese sellers that they had like terrible listings and not like a lot of like, major content wasn't that good. So first match. So I was like jumping both things I was doing investment banking on during the day and there's a little bit of free time. So somebody's gonna do a bit like crazy. And I we ended up selling the business. So I it was actually funny because if this was 2019 2020 when disaggregates away it wasn't really there. And like there wasn't like any any bias for this. Because Empire Flippers only European business for sale, like the no way out there. So I'm different. We were quite small, but we managed to find find a home like a private investor, someone that wants to get in the space and sold the business. So basically, that got me alone into this world. started seeing all these aggregators come up. I was like, Okay, this looks like the perfect place to do my next step in my career, because I can combine what I know about Amazon. Yes. Like m&a, buying businesses, etc. to really find like a cool job basically,

Martin Zerrudo 5:02

I mean, when you started all these brands was the goal to sell? Or was it to, like create your own, like Empire or products?

Daniel Calleja 5:08

I mean, when I started to be honest, the goal was, I mean, I was always really interested in entrepreneurship. So I was, like, take that leap of faith, like start my own thing, the how it goes, reality is I was very, like, money orientated. Like, I turn a profit. Exactly. Like I mean, I'm not gonna tell you like, a better product or anything like that. No, that was, like, an issue a good opportunity. I think it's close. Yeah, my investor hands on, like, Okay, here's where I can get a good return on my capital span, I can make money etc. So, yeah, that was really my, my, my main goal, I thought I was I'm gonna get a good learning.

Martin Zerrudo 5:46

No. Okay, so here's the million dollar or I guess, billion dollar question. If we're talking to SellerX, here's the billion dollar question. What is the difference between somebody who's starting off, you know, as an FBA seller, you know, private label or maybe 5-10 years ago versus now it both in the hopes of hoping to get acquired by by, by private equity and aggregator? What's the main difference?

Daniel Calleja 6:08

Look, I mean, I think the main difference, and we see it a lot is just how much more difficult that is now versus where it was 5-10 years ago. I mean, what makes it difficult, I think is number one is, is number one is competition, right? Like, there's way more people selling on Amazon, there is more of a wave of professionalization. So say, Tomorrow, you want to start selling like a back posture. corrector, you're competing against the guy that bought my business, like three years ago, again, that has been selling 10 years ago, maybe even an aggregator that's got a team on PPC agency has like other export any resources? So that's one of the things that like it's much, much more difficult. Also, I feel like I mean, I don't know if he did agree, like for for someone to start, like, as a side hustle. It's it obviously is still possible. But like the platform has also become much more complex. Like when we started the barrier of entry. Yeah, we didn't need to do any marketing, because we knew that if we we could get the organic traffic going. So we can bother having to learn about SEO, and we can rank well for the specific keywords we get to decide

Martin Zerrudo 7:17

when you're doing the back posture. How much you guys spending on on PPC, or were you spending at all any zero? No, it was all organic ranking?

Daniel Calleja 7:24

Well, what organic like we did, we did ask, I mean, we did do like some of my Amazon Marketing, we did Facebook ads. We did you know, we did try PVC. It's just the we didn't really know anything. I would go for like suggested bids, like oh, it's like really?

Martin Zerrudo 7:44

Like, oh, look, it's working. It's selling exactly what I

Daniel Calleja 7:47

owe something. But we're actually losing money for every sale. Yeah, no. I mean, it was more like the experience was great. And obviously it was, I mean, I'd never knew at the time that I would end up working in the space. So for sure. Better.

Martin Zerrudo 8:03

So in your experience, if it's more, it's different, and it's more difficult. Are there any advantages to the private label out there who's listening who wants to eventually, you know, scale their business so that it can be acquired by like a SellerX? What are some of the things that they can do now that that you weren't able to do before?

Daniel Calleja 8:19

I think I mean, there's a couple of things. Number one, yes, it is more difficult. But I think the the counter argument is, right now there's like, there's way more infrastructure built around it. So now, if you if you want to, like if you've got a passionate about a specific niche, a specific area, I think now is the time where you can find way more resources than you could at the time, like, now it's you can you can find it's much easier to find people that know about specific things, it's much easier, like there's better processes in place, there's less of that discovery elements. So in that respect, I think I mean, it's already still possible to start a good route. It's just, it's the, you need to be prepared that now. Like it's not the same like Goldmine that then people were going back five years ago. Yeah, if you want to sell it back posture corrector. And now, you need to be willing to invest a lot of capital capital. Yeah. A good product that can make a difference, basically,

Martin Zerrudo 9:18

what when you say invest in capital, but also, you know, the infrastructure is more complex. What would you say are some of the pitfalls of private labelers? Who, who may be coming? They're thinking, oh, yeah, I'll just type a listing. I'll put in a title put a couple of bullet points. What are some of the common pitfalls that you see for those who are trying to utilize the marketplace but they don't really know how,

Daniel Calleja 9:39

I mean, honestly, I I'm very lucky that I don't see that much. We, what we do is we like almost all the cells that we took extremely successful right there. Tell us that doing over like a couple of million in sales, they are like the margins are growing are such that so those ones are sort of The beautiful side of the story. I don't hear the other side, like all those people that are like stuck on page 15. I think the main, the main problem, I mean, maybe I'm wrong, it's just I think the main problem is people underestimate how cutthroat the competition is on Amazon in the sense that you, you literally compare side by side with a picture where you can't really differentiate that much. Like the price is extremely evident, the titles are like difficult to look at it. And most people never move away from page one or page two. So it's true, it's true. That's what you need, like that extra money to invest to be out there. I mean, I think it's still possible. I've seen a lot of like sellers that have sold their business, and then like, start a new one, and you see them picking up fairly quickly. But it's, it's not. But these guys have a big advantage that they already know how it was, and

Martin Zerrudo 10:57

they've done it before they've already made their money, they can dump that back into a new product. And then iteratively get better at the process over and this, some people are career sellers. They'll just make a product, scale it sell it, and rinse and repeat, you know, but thankfully, since we have you on the podcast, we have the inside track, what is SellerX use, or to the best of you that you can disclose what is your due diligence and finding those best case scenario? Brands that you'd love to acquire? Sure.

Daniel Calleja 11:22

I mean, to be honest, we like basically how we call it as we look at it as a pipeline, like where do we find sellers? And how do we find those I mean, we've got basically three main channels, but one is like brokers slash strategic partners, etc. I mean, I'm sure we I said Empire Flippers before, there's a ton of them. And a lot of new ones. So that's one of the channels that like, I mean, it's very easy. These guys know the market really well. They know what buyers are looking into. And they can sort of summarize the key areas of growth, size, that part of the spectrum, we can look at it. That's one of the areas where we can source deals. The other one is in bulk. I mean, we were quite lucky. As he said, we're like one of four, not the biggest player in Europe. So a lot of people when they're thinking of selling their business, very common they go to a website, to there's like a three page, three page or three names. Yeah. How big is your business, and then the comments. And then we always reach out, we'd love to have a chat on and get to know their business better.

Martin Zerrudo 12:27

And that falls into the four to five week turnaround time for filling out.

Daniel Calleja 12:34

We stopped counting since we since basically since we have the first conversation know what post discovery exactly versus cost per so that's one. And then the last one is, I mean, basically, you know, the you can download a lot of the information on the sellers, and platforms like helium 10 gives you estimates on on on revenue sizes. Yeah, exactly. So we do that by with our tech team, so of downloads, everything, and they use it a bit as like a massive spreadsheet to look at the size that it fits our threshold. The categories that we like, and what we what tends to happen is, I mean, the list normally is pretty big, like 1000s. And so we like to email them or because there's always like a contact email address, or and if not, you can always find like the company name. So you can take a step back to find out who's the

Martin Zerrudo 13:29

cold call, like, Hey, you guys are doing great.

Daniel Calleja 13:33

We do have a team of business development team, whose main focuses is a little bit that I mean, there's the cold calling approach is there but and sometimes we do it gently. We try to do a little bit more David, like if it's a man that we really love? Who's the owner behind? Okay, let's see. Let's message him on LinkedIn. Right? Because we don't say like, Hey, love your brand. More of like something, hey, we've seen your brand great innovation on your product. I want you to chat.

Martin Zerrudo 14:06

Okay, between those three sources, the referrals, slash brokers, inbound people filling out your form on your wonderful website. And then the third one is outreach based off of your tech teams eternal data and due diligence, which brings in the most amount of brands that you guys actually end up acquiring?

Daniel Calleja 14:24

It's it's a great question. I mean, comes in, right, like at the beginning, basically, as a summary, I'd say the best one is the album that because we we have a tailored approach, right? If we are being the ones that are messaging you that tends to be quite good. Like we already know, generally, at least from high level, we probably already like a lot your products. The the counter problem with that one, if we might message you and you might not want to sell, of course, of course. So yeah, at least you planted that seed, you know? Exactly. So that one tends to be like where we see sort of the best businesses But the counter argument is like a lot of times when we get inbounds when we get the brokers there we at least we know we 50% do that. Yeah, because they want it. If this person wants to sell now, it's more like, do we want to buy it? And can we find common grounds in terms of valuation expectations? So it varies a lot of market conditions plays in it. But yeah, I mean, in general, like I think outbound is probably one of the best channels,

Martin Zerrudo 15:24

aside from Empire Flippers. Are there other brokers that you'd like to mention that have been really helpful for SellerX and bringing great brands that you acquire?

Daniel Calleja 15:30

Oh, yeah. I mean, we, we've got like, I mean, the problem is no one I mean, I can tell you, I list but I almost feel bad, because if I started going through, I'm gonna, I'm gonna like, forget some others. And that's

Martin Zerrudo 15:41

okay. We'll have you come back in a second episode, if can you give us like, three? Three?

Daniel Calleja 15:45

Okay. I mean, for example, one that, like, we're just like, for chair or to group, it's a UK broker, that, that we that we that basically that that's been talking, I mean, I'm telling you, the ones I've been talking with, for example, and handbag brokers that I just happened to talk today, I mean, Dragon flip, we work with them in Germany before. Now I can, again, tell you the name, but they go got my act on like that, just like out there that? I mean, it's just, you've put me on the spot. And it's all good.

Martin Zerrudo 16:22

It's all good. We'll take it, we'll take it. So if I'm listening to this podcast, looking to sell, I can work with a broker who can put me into contact with SellerX. And with you, Daniel, or I can go on your website, fill out the form, or maybe if I'm doing so well enough that I, I, you know, take notice in your your internal algorithm and due diligence that you reach out to me, all of those things are great. What if another aggregators reaching out to me? What differentiates SellerX from others who will might be approaching me to purchase my business?

Daniel Calleja 16:55

Great, not knowing that that's the probably the most common question I get from sellers, right. Like, why should I sell to you, instead of like, selling to someone else? I mean, I tell you, obviously, it's a very personal decision. So there's a lot of factors that play in, I'll tell you what, sort of what makes us a bit different. And, versus versus our competitors. I mean, basically, number one, I'd say the size. Like, there's like probably 100 aggregators out there. Yeah, but maybe, like maximum five that actually have this global presence.

Martin Zerrudo 17:27

Yeah, it's like you through SEO boosted?

Daniel Calleja 17:30

Exactly. So it's like, it's actually the list of like, really big ones is fairly small. I mean, we're actually quite proud. We've got 750 people, we are lacking in six countries, like in the US and China and Europe. So that gives us I mean, for what we think is a match, in the sense that like, we can grow the brands that we acquired much faster than that, guys, because just we can just put in more resources into them. And obviously, that's important to you, because one, you probably want your brand to do well, once. And also, depending on the deal structure or interest will probably be aligned that direct or no payments or payments after that, that should help you basically benefit from from the growth of brand. Number two, I think we always say that, like our team is super important. And I know this one, this one is probably typical, because probably a lot of people say it and I guess they're obviously leave it to each person see how the connection is with it? Well, we have right off is like from the top all the way to lay the bottom, we've got like a very strong, both intrapreneurial but Amazon experience as well. So I mean, there are our CEO, for example, he started a business in Brazil called FET. Which went to billions in sales. Wow. Yeah, it was it was absolutely huge. Then, for example, our our Chief Commercial Officer used to be the head of Amazon FBA in Europe. I mean, you've heard it, I used to have an Amazon business. Yes. So I mean, across the organization, there's a ton of focus on on people both with experience on Amazon with intrapreneurship to try them. I mean, we think we like best or well qualified to write.

Martin Zerrudo 19:19

Because I will say Daniel, there is somewhat of a, I don't want to I'm not gonna say if it's correct or not. There is a concern that for some aggregators, and I'm not saying this is SellerX, that once the brand is acquired, you know, it's this huge machine that's great at handling finance and making these acquisitions, but do they really know the brand and do they really know how to pull the levers on Amazon to help it scale because it may look profitable, but if the the game plan to get it to where it's profitable for the aggregator might be a little bit shaky, because not everybody might have the extensive Amazon experience but from what you're telling me it sounds like everybody from top to bottom at SellerX has that firsthand experience of navigating the marketplace.

Daniel Calleja 19:59

Exact clearly don't get me wrong, like, Amazon is a jungle, right? Like anyone selling that? Yes, it may look pretty on the outskirts. But when you dive in it's, it's it's a bit more messy. And I mean also, I think it's it's also fair to say right like, maybe last year, there was a quite a complicated year for a lot of people

Martin Zerrudo 20:20

selling on our chain Delta

Daniel Calleja 20:24

Demetri limits. I mean, there's a ton of things. So obviously, that that impacts a little bit. I mean, it, I think I mean, whether you're like, the most experienced seller or versus you knew, like, last year was probably difficult for you. I mean, we've we actually quite lucky, I feel that like, because of this experience, that we've been able to navigate the waters fairly well. But in history, you hear some some horror stories on some cases, etc. But yeah, I mean, it's, it's difficult to say and it's obviously, there's a lot of a lot of times, there's more rumors than that. Thanks. But yes, in a space where there's like hundreds of 1000s of sellers, it's impossible to hear only wonderful stories,

Martin Zerrudo 21:04

of course, of course. And you know, what, I'm happy you brought up, you know, how challenging the last two years have been, first of all, I hope you and your family are healthy, they're okay. They made it through the pandemic, alright, it's happy to hear that, um, if I'm selling to SellerX, and you take a look at, you know, my last two, three years worth of sales, how do you factor in? Or do you factor in the, the erratic spikes in purchases, because of the pandemic? How do you take the last two years of, of, I guess, buyer, buyer patterns and trends versus what the next two years will be now that we're not significantly stuck at home. And there isn't so much of, you know, of an erratic purchasing pattern as things are happening in the world. First, it was tissue, that it was gloves and PPE, that it was hand sanitizer, and then was disinfected. And then it was work from home, everybody, you know, you couldn't find a webcam, everybody had to buy a webcam, you couldn't find a monitor or monitor arm, you know what I mean? So it's like, if I'm, if I was, you know, got a windfall from the pandemic, and I'm trying to sell to you and say, Hey, look at my numbers, they were fantastic. But we're all kind of going back into the office, and the restrictions are going down. How does SellerX Factor all of that in? No, I

Daniel Calleja 22:11

mean, you make a great point. I mean, that's basically my job, right? Like to try to do to clean up the numbers, try to see how the business is going to do long term. I mean, ultimately, the way we always look at it, yes, past performances is important. But we always try to project the numbers, see what the next couple of years is going to look like, on a standalone basis. But also, with the changes like what can we add to this business? If we grow it on this? In this places? What can it be like? What's the typical example is if you're a seller, that's only saying, for example, in the UK, you've got like great ratings, great products, etc, it might, it might even be that your ratings, you actually got better reviews and more reviews than in the US, which is the main market for for across Amazon. If we take this product in the US, there's what's going to happen if we make these changes of the shipping, because they're like still doing air freight, this is what's gonna happen. And we tried to factor all of these in, in order to see the potential of the brand. But you're absolutely right. I mean, there's some categories that even within my seat, I just want to be able to give you a right valuation ready to tell me like your hand sanitizer brand. I mean, as much as it can be a great business right now be too scared to buy dementia, the volatility of it, you never know. I wouldn't know what the real level is. Right? And maybe the real level is yes. 2017 2018 level? Or maybe it's a little bit between? So yeah, it's just that it's a difficult, it's, basically, it's difficult for some specific niches to do No,

Martin Zerrudo 23:42

no, no, for sure. But in general, is there any kind of adjustments that you've made post pandemic, in your due diligence when you try and do those outbound reach out? And going through the numbers? Or did you go? Or did you revert back to the way that you would look for them? Pre pandemic?

Daniel Calleja 23:55

No, I mean, we basically we, because we started in 2020. Okay, we're fairly young, like the in terms of, of looking at businesses, we didn't necessarily look at. I mean, we didn't have like that. So pre post pandemic view, what we do is we always take like a like, well, we call this a COVID Bump, like this product, that this niche, have a COVID Bump. And if they do, we do discount to it, because we know, we won't repeat itself. What's important to flag is in terms of how we see products, or call it more businesses that we looked at, we look at what we say evergreen categories. So it's products that are not like sort of trendy, that don't go out of fashion. They're not like so subject to continuous innovations, of course, things are gonna be there forever. And in theory, while like, for example, the best example I mean, you were saying Right, like sports, equipment, gym equipment, you think Oh, fairly evergreen went absolutely viral during pandemic. Now it went down just because they as a result like everybody that wants it gym equipment already has one. That's right. It's sort of it's gonna stabilize somewhere. But nobody really can pinpoint exactly where for sure.

Martin Zerrudo 25:08

Is there? Can you give us maybe three top three tips that you would give an FBA seller? If they want to position themselves to be purchased by an aggregator? What are three tips that you would give them to really put them in a position where they'll catch maybe Celebrex is attention?

Daniel Calleja 25:24

Yeah, no, absolutely. I mean, I think tip number one would be first like, it's like the sell processes. It's, I mean, yeah, it can take four to six weeks, etc. But it's, it's an intense process, I think it's good to start preparing for sale. And what I mean by preparing for sale is to make sure first, from a financial perspective, all your numbers are in order. So if that makes sense, like, make sure you have like a, like a, like, you know, your p&l, because a lot of sellers don't realize they don't have their monthly numbers don't know, the abilities haven't really updated, what the cost of goods sold, etc. So make sure you spend some time cleaning up your financials, making sure that you understand what what the real, your is your business making. So you should know also, how much is worth.

Martin Zerrudo 26:14

Do you mind? Yeah, no, can you just walk down real quickly? What a p&l is for those who don't know, you know, profit and loss? How that works?

Daniel Calleja 26:20

Yes, exactly. So profit and loss account is basically how much the money how much money the business is making, on a specific calendar year, month, year, month, whatever the time period that you select. So basically, the way to think it via typical Amazon businesses, you start with your revenues, which here would be sort of how much Amazon pays you. But then to that, you always need to remove returns, promotions, etc. And then I mean, high level basically need to take out your cost, the cost of goods sold, that normally includes your shipping. So you know how much and basically that is your contribution margin. And to that, I mean, depending on like we use, like, some Thurles might not be that familiar, but we call it contribution margin one. To that normally, to keep it high level, you have to deduct the Amazon marketplace fees, you have to deduct the FBA fees, then you have to deduct your your marketing fees. And that gives you what what the industry is called cm three, which is your contribution margin three, which is after all your main expenses, right, the only line after is SD, which is sort of the market standard for for evaluating how much your business is worth. And as the means seller discretionary earnings, which for people that are more like in the financial sector, we call it be like EBITA. But you add back some personal expenses that are not nature to business, per se, for example, but you are a one man show, you've got your business cetera, and your EBIT. Da is 1 million bird into that, say you're paying your car, your one I

Martin Zerrudo 28:03

paid myself 500,000 500,000.

Daniel Calleja 28:07

So all of those things, you add back to what would be a normal, like the real profitability of the business, right? Well, we call that the real profitability of the business.

Martin Zerrudo 28:18

And I know this is a loaded question. But after you go through that p&l, you'll end up with your net profit, or I guess profitability, you could turn that into a percentage, what would you say is a healthy percentage range for people who are selling on Amazon?

Daniel Calleja 28:29

I mean, I think what we tend to target is over 20%. Which I know depending on the category, you are, obviously given market conditions might be tricky. But that's sort of the like, the benchmark that we're looking for. We've seen people from like, obviously, by extreme,

Martin Zerrudo 28:45

yeah. Oh, extreme, low, extreme high. Yeah, for sure.

Daniel Calleja 28:50

But But 20% is what I'd say is like, I mean, it's normally not standard, we call it the minimum, but like, it's not like a minimum, like a minimal healthy margin, like you can get 25 Is that is a good profit margin. And professional 30 is exceptional. Yeah, I mean, having like doing 30%, the net profit margin and Amazon after everything exists, there are those unicorns are out there. We see that we see them out there and we see out there, but it's, it's it's called an exceptional and in general, it's also quite difficult to maintain, of course,

Martin Zerrudo 29:22

is there certain categories for those who are listening or like, hey, you know, what, I have the capital, I want to start sourcing products, I just don't know where to start. Because eventually in my six to, you know, I don't want to say six, six months, that's too short, maybe like three to five year journey. I'm gonna build this brand and it's gonna get acquired. Are there certain categories where you see that profitability of 20% up more often than other categories?

Daniel Calleja 29:43

Yeah, absolutely. I mean, I'd say the more differentiated your product is, the more unique it is, the more you can support the those high profit margins. So, I mean, the base example I mean, we see it sometimes, some products have got like utility buttons or very concrete design patterns that like basically, yeah, almost impossible for people to compete. Like for like with, you know, it was once command that high premium in general. I mean, that's like sort of the exception, right. But what sometimes we see is like more product innovations within specific things. I mean, like whatever class like a teacup with two handles. Exactly. Same thing. So if for whatever reason, like I was dizzy, Amazon is a niche, right, but for whatever reason, do t like to handle one, it's better? Yeah. And that and there's just not that many other you can command that higher, higher priced.

Martin Zerrudo 30:37

And you know what that that unique innovation or that small quirk that differentiates you definitely can be in a wide variety of categories. I remember watching this episode of Shark Tank, and this guy was trying to sell his his like, it was like a gag gift. But honestly, it was, you know, those hourglass that has sand, but if you tip it over the sand drops, he turned the hourglass into a toilet. And so when you go on the toilet, and you're on your phone, you flip it over. And it's make sure that you don't stay on the toilet for too long, because the toilet hourglass counter is showing how long you've been on the toilet. And you think, who would use an hourglass shaped like a toilet to measure how long they're sitting on the toilet on their phone. And it was selling for millions every month on Amazon because nobody had thought about it before, it was such a unique twist on an hourglass and you're like, you know what, maybe I'm in the, I'm on the can for too long. I'm gonna buy this, like $20 Hourglass toilet, and to your point, that's where you're gonna get a significant amount of profit margin, because it's something nobody has done before you have no, and even if it is a gag gift, and maybe it's gonna you know, the trend of the of it is going to end in like a year or two, you still made a significant amount of profit, like congratulations, like, that's how crazy Amazon it's insane.

Daniel Calleja 31:45

No, no, I mean, that's, that's a great example. I mean, we we see it all the time that I think what will tend to work better is those like, bullet like, small innovations with specific things, right? Like, you always call it like I mean, the whatever, are slightly better glass friendly, better chopping board, etc, that like I mean, maybe it's made a little bit lighter. And what happens if you can sell it cheaper because you're paying less FBA fees? Yes, there's more way. So there's the various more things and to your point, I mean, there is a lot of ways to, to continue to innovate. And that's also the beauty of it, right? Like, there's always like that element of product innovation product. Which the only problem as well, is as soon as you land on these, like amazing things. Sometimes you start seeing also competitors coming out for sure, for sure.

Martin Zerrudo 32:37

Any tips for those who are almost at the cost of the ready to sell, but they're just being crushed by either copycats or competitors, what tips would you give to those who were almost there? But they're kind of hindered by some of these barriers?

Daniel Calleja 32:49

But look, I mean, I think it's a, I think there's a there's a couple of things, right? Like, it's difficult to get like a generic, of course, everybody should do this, because then it'd be always something probably already be doing it.

Martin Zerrudo 33:02

But Daniel, you told me to do this and I lost millions. Exactly.

Daniel Calleja 33:05

Look at it, obviously, it depends, is that is the right answer, I'd say is focus on your strengths, right? Like if you if your product is better at whatever, like I mean, say for example, you have like a very good, say, for example, you lose the odd reviews, right? And you start seeing that, like just another one is getting more and more reviews, and just being it, it's gonna, I'm gonna get crushed, because I'm using them, maybe the solution for you is to start launching in other marketplaces, or benefit from like, international reviews that get transferred automatically. So of course, that's something where it's getting better. I mean, there's because the possibilities are endless, like maybe you see like, Oh, someone is just crushing you short term because of they, they're just selling much more cheaper at a discount. Or maybe your strategy is okay, I'm gonna wait him out for a couple of months, just to drive this guy out of business. And then like, once he's out, raise prices again. Make sense? It's very difficult to and that's the beauty. And the other problem with Amazon?

Martin Zerrudo 34:08

No, no, for sure. Where do you think Amazon and the aggregators place is going to be the next couple of years. So like you said, two, three years ago, this conversation about these gigantic aggregators and, you know, venture capitalists and private equity to scooping out likes playing Monopoly almost with these brands, and just trying to scoop up as many as they can. Where do you see it going in the next couple of years?

Daniel Calleja 34:28

It's it's a it's a great question. I mean, I wish I could tell you all this, well, I'm going to have only my my thoughts. I think there's going to be some consolidation in the in the, in the space. I think that's what like a lot of a lot of people are predicting, because now there's like, over 100 aggregators, I think, my sense is like, you're going to start seeing a dispersion between like, the ones are doing really well the ones that both really good brands, and the ones that maybe weren't as lucky and both worse brands. So not doing that well. So those guys are probably going to struggle to raise more money. Because if they can't grow, they can go to what they've promised the VCs that they would, they might find more difficult. And maybe they start thinking, okay, maybe it's better to sell my combined portfolio than Ober or to have to, or want to just continue operating like a small number of brands. So I think we're going to start seeing less and less egregious, I think, is that they huge estate in the sense that like, when aggregator is still, like, it's still really good for the ecosystem in the sense that by seller, like you, for example, and you might want to grow a brand started taking like 234 million, but you don't want to have like 10 employees, or even 100 employees, you're like, Okay, I want to start my next thing, this sort of provides you a way to exit capital gains is also a great way to discover new brands, and also continue to grow in organically, right? Yes, of course, you can launch the same thing, but it's probably going to take you three, four years to get to that level anyway, it's just much better to buy one that's already doing well, for sure. So, level prediction?

Martin Zerrudo 36:08

No, I think that makes sense. And see where we are. It's a crowded space. And you know, I mean, you can only have so many players with so many billions, that eventually there's gonna be some sort of consolidation, maybe even an aggregator space, as well. So, So full disclosure, obviously, Seller Universe, we're an agency, we help manage a lot of different Amazon brands. And of course, the question that we, that we get sometimes is, well, I do eventually want to sell my brand. They're going to look at my profitability and stuff. And so if I'm, if I'm spending money on an agency, then it will hurt some of my numbers. What would you say are the advantages and disadvantages of getting some outside help? Like you said, you don't want to have a bloated internal team where you're dropping so much money on payroll and optics and all that. So going to an agency like us can be very cost effective, and we obviously know what we're doing. But it will affect profitability. So are there some pros and cons that you can point out to to working with an agency?

Daniel Calleja 37:02

Yeah, I mean, I think the way I've said that the main pros is, I mean, it's obviously expertise advice, is gonna help you unlock your full potential of your brand, right? I mean, even we, as creators, we work with agencies as well. Sometimes it's like, Legacy agencies that that have, like, already been working with a brand. We also have limited resources and our team, that we not everyone knows everything. Exactly. And we can like, take like, I mean, we were moving like, a couple of brands every month, there's only so many people, I think so we can like take off. So that respect, I think I mean, it, the thing that's gonna benefit you the most is the growth of the business. So even if it's hurting your profitability, short term, it might be like, I would think it almost as an investment for the future, right? I think it's, especially if you're like a growing during, because you can you can prove. Yes, I mean, I think it obviously do everybody, like the tape, agencies take a cab, which was reflected stability, which is the obvious downside, it's, it's almost like a question of numbers, right? Like, is that extra spending worth it? Yes, or no. And yet, maybe it's a point where, like, I don't know, you take an agency to start, then you're thinking about selling? Okay, maybe you discontinue for three months? See if you can still hold it together. If it's not, then like, you go back, like maybe she's back? Yeah, that's the whole point. Like, I mean, in general, from what I've seen, very rarely have I seen, like someone, like come in and be like, Oh, look, I discontinued this agency. And now I'm doing much better. Like,

Martin Zerrudo 38:35

what would you say? Is the ratio of those that you've acquired successfully that had outside help from an agency? 80% 90%?

Daniel Calleja 38:44

I'm not sure because I've never like it's a little bit tricky, because obviously, sometimes you can use an agency along with, as you might have, like, whatever, like, couple of specialists VAs that doing just for different people. Like I'd say, yeah, maybe 80% of the people will probably, I'm not experts in VMC, I'm using outside help some have some sort of form, or they've brought in enough people that they've actually

Martin Zerrudo 39:10

hired someone that works in house create their internal team. No, that makes total sense. And to your point, yes, short term, it may seem like a significant investment. But then investment allows you to scale and grow off expertise that you don't have, nor do you have the time to learn at the cost of being able to ramp up sooner. And obviously, as you get to that point where you're profitable and you can sell, then that investment almost looks insignificant, versus what you're hoping to, to exit at.

Daniel Calleja 39:35

I mean, Martin, for me, the the best example is if I was going to start a new Amazon business tomorrow 100% I would use that someone like science and help us you'd use us, of course, I mean, some good rate. Of course, of course.

Martin Zerrudo 39:50

You know, it's funny, you're not the first person to say that. The ones that we've interviewed before even those who started on the road. Her name was Kip. She was really nice lady. She's from Florida. She goes If I could go back in time and start my brand, again, probably would have hired you guys just because it would have saved me so much time, you know. And to your point, if if SellerX such as significantly huge organization is also getting agency help. It's like there's no, I don't even say there's no shame in that because I don't want to entertain that thought. But it's like, dude, like you said, it's just a matter of numbers. And what do you know? And what do you have time to invest in and if getting a VA or hiring an internal resource, or going to an external agency, if all those things are going to help you get to your goal of eventually making an exit or even growing your brand? Like, like you said, those are just, it's like the cost of business, right? You're, you're investing in it, and this is what it's going to take for you to get to where you want to be.

Daniel Calleja 40:38

I mean, for me also, the other main thing is, if you look at Amazon, now, Amazon has become like a marketplace where it's impossible to be successful. Without pay, right? Like, yes, there is no like when, like, when I started that you could do things organically, like now it's virtually impossible to do it all organically. So yeah, if you can't do it organically, I mean, same as why you might need a lawyer for specific things you might need like an accountant for specific things. This is a platform that just requires that, that knowledge on how to do advertising, amongst other things within the platform. You can either learn it, or you can look outside for

Martin Zerrudo 41:16

Wow, that's a fantastic example. I'm going to use that in my future pitches. Think of us as your lawyer or your accountant. Of course, of course.

Daniel Calleja 41:26

It becomes even more important, like when you're managing like say for example, a 10 million brand is spending 10% on marketing. I mean, it goes 4 million expense. Like maybe you spending 1 million on on on Amazon I mean it's pretty significant amount of money. You maximizing it and making the most of it. I do you understand a little bit more delicate if you're like just starting

Martin Zerrudo 41:50

Yeah, right, because your margins are so slim.

Daniel Calleja 41:53

Exactly. And also you proportionately it may become higher than like the one you're you're bigger. But I mean depends on your long term ambitions as well. Like a lot of the times you need to invest it to make it grow.

Martin Zerrudo 42:05

Of course, we have Daniel here from SellerX external this has been a fantastic conversation. I want to be respectful of your time. So I only have one more question. But I feel like this isn't going to be the last time we have you on on the show if you'd be so willing to gracious. Oh, no, same. I'm learning a lot. I got to visit Spain at some point. It's way too cold here in Toronto.

Daniel Calleja 42:25

will welcome you with open arms.

Martin Zerrudo 42:27

Of course. Are you in Madrid or Barcelona? I remember. Man, I hear that they have better beaches in Madrid. Is that true?

Daniel Calleja 42:33

Well, actually, we

Martin Zerrudo 42:34

don't have beaches in Madrid. It's not I don't know my geography.

Daniel Calleja 42:39

In the middle of the we've got a lake which is a okay. I mean,

Martin Zerrudo 42:46

is it Barcelona what the beach is?

Daniel Calleja 42:48

Yeah, there you go. We have a better football team, which is

Martin Zerrudo 42:54

Oh, man and who's Oh my goodness. I can't forget. I forgot it is it is? Is it messy? Who's playing for Real Madrid?

Daniel Calleja 43:00

No, no. fought for Barcelona. But now he moved to Paris.

Martin Zerrudo 43:05

I see. PSG who does Ronaldo play for?

Daniel Calleja 43:08

Well, he used to play for Real Madrid. Now he moved to LA, he went to Italy, and now he's in

Martin Zerrudo 43:16

reality, you need a player, you let me know, I can run. I can give water to people. If they need some water. I can do all of those things. Daniel, probably a little bit better on the football pitch, but maybe not me. So last question, Daniel. You know, how old are you? If I ask?

Daniel Calleja 43:31

Yeah, sure. I mean, I'm 28. Allow me tomorrow, actually.

Martin Zerrudo 43:35

Oh, happy birthday, happy, advanced birthday to Daniel. So 29 years old tomorrow, working for one of the biggest companies in the world? Who are some of the people that you would like to think on your on your journey to this stage in your career? Who has helped you the most? Or who have you? Who do you respect to the industry that's really helped you and motivate you to get to this point in your career?

Daniel Calleja 43:56

Oh, that's a I mean, it's it's a very, I never had this question. I mean, it's funny, because I always hear it in like, a lot of the podcasts that I hear that I listen to, like I always hear like, oh, what's the Kansas thing but someone's ever done? I don't know. I mean, I'd say I mean, it varies. I mean, answering your question, like, who's been like, helped me a lot to get to. And I had a lot of mentors, a lot of people say, I mean, if I just look short term, like now, like, where I am today, I mean, especially give a big shout out to to the two co founders and, like, brilliant amount of SellerX is not only because that my boss is on the pay my salary. I mean, for full transparency. Basically, when I joined SellerX, I told you once to join an aggregator. So yeah, I was actually interviewing with with three of the main ones, actually with two of the main ones. And basically, I had an offer from the two of them. And then SellerX reached out randomly. They're like, Oh, do you want to work with us? And I was like, I was like, Look, I'm sorry, but like, I've already set my mind. I'm gonna go to this one.

Martin Zerrudo 45:00

So how do they how do they poach you?

Daniel Calleja 45:04

Probably the big one or SellerX not selected. I mean, they came through a recruiter, they were like, Oh, I said, I like have you thought I'm happy? I was like, yeah, thank you. But I actually love the space. I'm gonna like really good experience, but I prefer the someone under like, actually, you should have a chat with them. Because maybe they can. Like, if you're gonna, if you want to make it like in the space and get to know people. I mean, it doesn't hurt. So it's funny because I, I mean, I had this call from the recruiter, on a Tuesday. On Thursday, I spoke with one person at SellerX. And on Saturday, and on Sunday, I spoke with the two co founders, and then Monday, they gave me the offer. Wow. Yeah. Which was the other one they had told me they were gonna give me an offer. But I still didn't have the contract right in front of me or anything. So it was like a very strong signal that they really wanted me the tone of the story. Recognize

Martin Zerrudo 45:59

a good football player? Daniel, that's what the thing you know what I'm saying? They see your skills, like well enough on our team?

Daniel Calleja 46:06

Well, I don't know. I don't know about that. Luckily, I didn't have to show any any things. But no, I mean, I think that was, I mean, that was pretty, like I felt it made me feel pretty special. Like the intensity and I'm feeling really loved that they

Martin Zerrudo 46:22

really pursued you, ya know, and, and knowing that, have you gotten a chance to tell them like, thank you so much for showing such interest? And

Daniel Calleja 46:31

I joke about it a lot of times. I mean, to be honest, as well, like, I mean, the reason why they were so quick is because I had like a so another thing to go through, right? Like it was because I was gonna add another option. And that's why they had to move or they wanted to move, especially, especially fast in the space but not, I mean, extremely grateful. Because yeah, I mean, they gave me a really good chance and also like I you know, from from the beginning, they gave me a lot of responsibility. Gaby really involved in the project and also that Fantastic, thanks. It's joining.

Martin Zerrudo 47:09

Fantastic. I think this has just started a wonderful, wonderful journey for you with SellerX. We're so very thankful to have had you on the podcast. And I think this is just the start up of our wonderful online friendship. Here. We can talk more about aggregators, where it's going in the future Amazon and the wild, wild west. That is that marketplace and what is going to be post COVID pandemic. Thank you so much for your insight. I think our audience is in for a treat with the amount of information that you imparted onto us. So I really appreciate it. Daniel, thank you so much.

Daniel Calleja 47:37

Thank you, Martin. Had a great time. Of course. Thank

Martin Zerrudo 47:39

you. We'll see you again.

Outro 47:44

Thanks for listening to the What Do You Do Next? podcast. Make sure to tune in again next time and make sure to click subscribe to get updates on future episodes. Take care.

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