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Who is tired of hearing about Karmaloop? Raise your hand. “Here goes Sanocki, the one trick pony. Karmaloop again? We’ve already heard about that, Drew. Tell us something we don’t know.” Right? Well, this is the problem when you have one big recent case study that kind of is very relevant to your audience. I mean, I’ve done stuff since Karmaloop. I was the CMO of this company Teamwork and I run my agency, Growth Engines. We’ve got a number of direct to consumer brands, but the problem there is I can’t talk about a lot of them.
Today I’m excited to announce something big and something I’ve been working on a long time. I was part of a team that bought a new company, and the company is called AutoAnything. Autoanything.com, they are in the car accessories category. They sell things like floor mats and converters and things to sup up your car or Jeep or truck. It’s the reason I’ve been in California so much. I know I’ve been saying, I do this podcast from San Diego. Been here for months, going back and forth to New York, and it was because I’ve been working on this deal.
AutoAnything, the deal was announced today by AutoZone. We bought it from a public company, AutoZone, I guess about an $8 billion company. There was a divestiture, so what that means is, any company that size owns a number of different business units and for some reason or another, they decide that this business unit isn’t core to their business and they want to get rid of it or think it’ll be better off as an independent entity. I was part of a group that could move fastest and put the right offer together to acquire the asset.
AutoAnything itself is a beast of a business. I mean, a million plus skews. If you can imagine in the auto category there is a make, model, year of every car and if you’re selling something like a floor mat make, model, year, and then that thing comes in every color imaginable. Just a huge product catalog. It’s primarily drop ship, but they do own a couple private label lines and brands, which obviously have great margins. It does about, I can’t get into the specifics, but call it a nine figure retailer and seven figures in EBITA, so seven figures in profits, which is great. It all depends on the deal price, on what you buy it for, and obviously I can’t get into that, but we’re happy with it. Obviously it made sense for all parties.
Man, I learned a ton in the process of this deal, and would love to kind of start getting into it, start getting into what we’re going to do with the company. Just for me as a marketer and as an online merchandiser, I look at a number of assets here that I’m excited to work with. First, there’s just the scale of this business. You know, you don’t get to work on a nine figure business every day. There’s four million people on the email list, from what I see a lot of discounting going on and not a lot of lifecycle marketing, so that gets me excited. Four to five million visits a month, there’s just traffic. You know, there’s scale here. Scale that you can sink your teeth into and make changes and see results very quickly.
Some of you might be saying, “Drop ship retail,” I mean, this was my first reaction when I heard drop ship retail, like, if I started a business today, an eCommerce business, it wouldn’t be drop ship. Right? Because you don’t have anything proprietary and you’re selling the same stuff your competitors are. “Drew, why did you buy a drop ship retailer?” Well, the reasons are because this is just at a different scale.
This is just big enough that, I mean sure, Amazon’s a factor, competitors are always a factor, but at this scale, there’s just so much you can do with the business, and with that customer asset that I’m pretty confident that we’ll get a great return on the investment. You know, at least priced where it was, the deal just makes a lot of sense and I think there’s enough low hanging fruit there, yes, even though it’s a drop ship retailer, that we can maybe reinvent the brand and reinvent the company and keep it profitable and growing enough to pay back our investment. We’re really excited. That’s why a drop ship retailer in this case.
We’ve talked internally, and me and the two other guys or three other guys that worked on the deal, we talk a lot about the strategy for this company and I think we break it down into defense and offense. Initially we’re going to play defense. We’re going to optimize the business, optimize SEO, we got some lifecycle marketing in place, things that I think are sort of low hanging fruit.
When you buy a company from a bigger company like in this case, especially a bigger company that’s not an eCommerce company, AutoZone is a brick and mortar retailer, to some extent the company’s been insulated. It’s been insulated inside this bigger culture. The culture is very much brick and mortar. Because of that, there are a lot of opportunities to do some “state of the art” or “best practice” eCommerce things that maybe the company wasn’t able to do because of the culture of the big company or the procedures.
I’ll give you one example. To get anything approved at this company, they typically had to go to AutoZone. You can imagine just the pace of change, you know, if you needed to get a Facebook advertising agency in on your Facebook ads, a lot of that stuff has to go through the main company, it takes time, and I think because of that the company wasn’t able to innovate on certain things. Now as an independent entity, we can move the ball forward quicker. That’s defense. Figure, you know, that will probably take us three months to kind of get things really cranking, three to six months.
Then we turn to offense, and the question is, “Okay, if you’ve got this thing just highly automated, throwing off cash, what do you do with it?” Do you just leave it as is or do you try to grow it into something much bigger? Man, there are like, three or four really interesting things we could do here. Everything from launching new brands and new private label brands to entering new categories, personalization, just around make, model, year of car. There’s just a lot we can do. I think core to any of those is really driving down the cost of customer acquisition if we can or are able to through any different initiative. In my mind, those kind of things are great. Those are things that would be icing on the cake if we could get to, but just playing defense, just doing some of the low hanging fruit I think is going to really help us here.
We’re really excited. I put in a lot of time and effort into this personally. I guess the other big news is that the Asia trip is off for me and my family. I think I really need to spend some time on the company, so we are going to move to southern California for at least the summer, just to make sure the deal goes through. I met the company for the first time two days ago on Monday. When you are working on a deal like this you rarely go to a company, all the meetings are sort of held off site and go through an intermediary or the investment banker. Yeah, it was great to meet the company and to start digging in. I think it’s going to give me a lot of stuff to talk about on Nerd, so really excited there.
Man, just, I can’t say enough about buying a company. This is the play. These are the smartest people in the room. If you’re looking around the room and wondering who they are, it’s the people, men and women who put deals together like this. They just really recognize value and, you know, they play with other people’s capital and they get a great return off of it. This would be a nice initial episode to start getting into private equity and start, maybe a short podcasting season about buying and selling companies. What to look for, why you’d want to do it. If you’re thinking of selling, how you can direct your business to fetch the highest valuation or to be more attractive.
I think this is an interesting topic. It’s something I wish I knew a lot more about in my 20s. Why? Because when I look at the biggest single income or wealth creators for me in my life, it was when I sold a business or was part of a deal like this. It wasn’t my paycheck. Now that I realize that, this is entrepreneurship in my 40s. This is entrepreneurship in my 50s. It’s going to be working and structuring deals like this. I think it’s a really interesting topic and we’d love to talk about how you can do it at all levels. You don’t have to be a billionaire to do this. I know people who are buying $50,000 companies and assembling small funds.
If you are interested, please go to this episode on nerdmarketing.com and leave a comment. Tell me what you want to hear about in regards to buying and selling a business. How to get started, what to do. Whatever it is, leave a comment and I’ll do an episode about it. I’ll do, I think multiple episodes about buying and selling businesses. What else? Oh, this is not the end of my agency Growth Engines, I mean, Growth Engines actually did a lot of the diligence on this deal. We worked with a lot of private equity funds to do diligence all the time. Sometimes there’s a great fit, in the case of AutoAnything to actually now do some work on the business.
I mean, this is part of what the agency does. We work with direct to consumer brands and in this case, there was equity exposure for us, which we’re really excited about. That’s the big update. Autoanything.com, now the podcast is being done by the executive chair of the board, Drew Sanocki, and go to this podcast episode at nerdmarketing.com, episode 36. Episode 36, and leave a comment. Tell me what you want to know about buying and selling a business, and I’d be happy to share.
Thanks a lot, I’ll talk to you next time.
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