Emmett Kilduff of The Fortia Group: Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit

An Interview With Jason Hartman

A lot of the principles for building a business are the same regardless of industry. However, eCommerce is very fast paced, where a sole founder-operator with the right tools can build a multi-million dollar company. That said, when it comes to selling a business, it is far easier to assign a multiple against a product based business and sell it than a service based business.

As a part of our series about “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit, I had the pleasure of interviewing Emmett Kilduff.

Kilduff is Co-founder and CEO of The Fortia Group, an M&A firm focusing exclusively on eCommerce exits.

With more than a decade in leading M&A firms Morgan Stanley and Credit Suisse, Kilduff brings billions of dollars of acquisition expertise to eCommerce exit strategy, helping entrepreneurs position their businesses for the most lucrative exit. In addition, Kilduff is founder and executive chairman of Eagle Alpha, a data business with clients including hedge funds, private equity firms and aggregators.

Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

In 2018, a start-up named Thrasio began raising money and buying up smaller eComm businesses. Somewhere north of 100 copycat startups followed suit. Now valued between $5–10 billion, Thrasio is among at least a dozen of these rollup aggregators with unicorn-status valuations, according to the latest dealroom rankings. Investors have poured more than $13 billion into the space, transforming it into a buying frenzy.

Having worked at a couple of the largest global M&A firms, it was an opportunity to provide a Wall Street-level of advisement that’s typically out of reach for mom-and-pop shops. The Fortia Group’s entire value proposition is not just about the sale. We help prepare these independent eCommerce businesses for a lucrative exit. We aim to become the Morgan Stanley of eCommerce M&As.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

We’re a global company with Irish roots. At a recent conference, we hosted an Irish whiskey tasting event. We completely underestimated how much attendees would drink at 3:00 in the afternoon. $1,500 of whiskey was polished off in just over an hour. Lesson learned.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“Never give up.” This is particularly important for entrepreneurs. Everything is stacked against you at the start, but it is key to believe in your vision and persevere. Even if that means being stubborn sometimes!

Ok super. Thank you for all of that. Let’s now shift to the main part of our discussion. Can you tell us a story about how you were able to build a business from scratch, scale and sell it to a bigger firm?

I have not started an eCommerce business myself, but we regularly help our clients build their businesses, scale, and sell them. Even if the exit is one or two years from now. This is called our Exit Ready programme and it’s designed to ensure businesses are fully optimized before they start an auction process.

Based on your experience, can you share with our readers the “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit”. Please give a story or example for each.

With regards to an eCommerce business, buyers want a business with a brand, and healthy margins and revenue. Brands are hard to replicate, and healthy margins and revenue show opportunity.

At The Fortia Group, we use the old adage “By failing to prepare, you are preparing to fail” as a mantra. So, when growing a business to sell:

1. Maximize your margins and revenue so it’s SDE level

2. Grow your brand equity, articulate your brand growth and product roadmap

3. Ensures accounts and financials are “Buyer ready.”

4. Ensure the business is legally prepared

5. Refine your financial pitch with KPIs and obtain early feedback from buyers

In your experience, is there a difference in approach for building a service based business versus a product based business when you have the intent to eventually sell the business. Can you explain?

A lot of the principles for building a business are the same regardless of industry. However, eCommerce is very fast paced, where a sole founder-operator with the right tools can build a multi-million dollar company. That said, when it comes to selling a business, it is far easier to assign a multiple against a product based business and sell it than a service based business.

How does one go about the process of finding a buyer?

In a sellers’ market, the buyers find you. However, we know too many stories of sellers taking the first offer on the table, often undervaluing their business. We find the right buyer for your business by running a professional auction with our trusted buyer network (>130). Our process typically achieves multiple offers. Then we advise the seller through each offer, which results in a bidding war for the asset — ultimately giving the seller choice.

How can one decide if it is better to build a business in order to exit, or if it is better to stick around for the long term and let the company bring in residual income, or if it is better to go public?

We work with independent Amazon entrepreneurs who have spent a lot of time weighing whether to stick around or exit. Here are the six cases for exiting that we hear the most:

1. Burnout: A lot of times executing on a great idea or product is just the beginning. A lot of independent Amazon sellers are one or two person operations, and managing all of the necessary daily business operations is a constant and endless task. As competition increases, sellers can easily experience burnout and just wish to move on.
2. Competition: There are more than 40,000 independent businesses that are doing more than $1 million in annual sales on Amazon. As more rollup aggregators come onto the scene, they are looking for ways to streamline, cut costs and boost profits. Many Chinese competitors also have operation cost advantages. All of this makes it harder for independent brand owners to compete.
3. Difference of Interest: The profile of a serial entrepreneur is to create, build and move on to the next project. Many sellers prefer the early growth stages over business optimization and streamlining as growth reaches a certain point. Exiting gives them the opportunity and equity to transition back to doing what they are more interested in.
4. Financial Risk: Particularly for Amazon sellers and other eComm entrepreneurs, there are a lot of overhead costs including inventory, advertising and fees. Many small eComm business owners carry business-related debt to cover expenses or invest in growth.But products can get suspended or fall out of favor, leaving them stranded.
5. Lack of Expertise: Going back to competition, aggregator teams are assembled with the expertise to streamline every aspect of a business. Most independent Amazon businesses have some expertise in some areas, but generally not across the board.
6. Limited Resources: Scaling requires resources. As businesses grow larger, they typically require more resources and capabilities to maintain profitability.

Can you share a few ways that are used to determine a good selling price for the business?

While each buyer has their own criteria (product category, channel split, branding etc.,) by which they judge a business, valuing a business is based on SDE (seller’s discretionary earnings). We work with eCommerce business owners to get an accurate valuation of their business so they have a more stable negotiating position when offers come in and due diligence begins.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

At the moment, I just want to do what’s right by the people in our company and our clients, to ensure the name Fortia is synonymous with integrity in the eCommerce/aggregator space.

How can our readers follow you on social media?

LinkedIn: The Fortia Group

Thank you so much for joining us. This was very inspirational.