Many merchants dream of building a successful ecommerce business and then selling it. Shirley Tan, the founder and former owner of AmericanBridal.com, did just that. She founded the business, built it to have gross revenue of roughly $6.5 million, and then sold it.
We spoke with her recently about the process — and the post-sale emotions of it all.
Practical eCommerce: You built and then sold AmericanBridal.com. Describe that process to us, please.
Shirley Tan: “I started American Bridal originally as a mail order catalog in 1994. We putted around for a couple of years, barely broke even and then when the Internet came along, a friend suggested registering our domain name. We listened and we moved the catalog online. At that time, we were still thinking of it as a catalog online. But we soon discovered quickly that it’s more than just a catalog online. We could actually really operate it like a real store, but have a virtual presence.
“That was in 1996. We moved to the Yahoo! platform in 1997.”
PEC: In 1996, you were thinking Internet. That’s way before most of us.
Tan: “Actually, we even had a shopping cart. It’s just nobody bought anything from it. Our stuff was great, nobody else had it. What was going on? We learned early on that the platform that you’re on is very important, so we migrated to the Yahoo! platform.”
PEC: You migrated to Yahoo! in 1997 and then you built your business over a number of years. When did you sell it?
Tan: “We closed the escrow May 2009, but the selling process really started in early 2008.”
PEC: Why did you sell it?
Tan: “I was able to visit a really large competitor’s operation, and I realized that for me to take it to the next level I was going to need a lot more capital. I didn’t have the resources, and I just wasn’t willing to bet the family farm and move in that direction.”
PEC: Who did you sell it to?
Tan: “The acquiring company is TheKnot.com, which recently changed their corporate name to the XOXO Group.”
PEC: Was that the competitor that you visited?
Tan: “It wasn’t them, but Theknot.com was a competitor, and they are the leading media conglomerate in the wedding space. They are the 800-pound gorilla, so to speak. They ended up buying it, so it’s good.”
PEC: You mentioned a need for expansion capital. Did you contemplate bringing in outside investors and not selling it?
Tan: “We had explored that as well. The people that I talked to didn’t think that ecommerce was sexy, and it wasn’t the type of business investors were interested in, especially here in the Bay Area and Silicon Valley, where people are more focused on technology companies. It was a bit discouraging, so I figured, ‘Okay, if I’m not going go that route, what other route could I take?’ The friends and family route wasn’t an option either.”
PEC: How much did you sell the business for?
Tan: “I can’t really say how much we sold it for, but I can say that at the time that we sold the business, we were doing about $6.5 million [revenue] year over year. That’s pretty much all I can share because I’ve shared that before, so that’s public knowledge.”
PEC: So, in 2008, you visited a big competitor and you decided to sell the business. Describe the selling process to us. First, how did you arrive at a price?
Tan: “I kind of knew based on people I’ve talked to — accountants, CPAs, attorneys — the range of what businesses are sold for. I’ve spoken with business brokers as well. In essence, I was a retailer. It’s just I had an online presence, right? I knew that there was a range of multiples. So, the range of multiples in retail is typically 1x to 5x [net income], maybe as much as 6x, right? So, the key is getting the maximum for what you invested all your life in, right? If 5x is the top, then you want to steer into that. It’s kind of like the blue book value of a car. It’s $5,000 to $8,000 — of course, you want to go to the $8,000 and not the $5,000. So, what can I do to help get that multiple higher is what I was focused on.”
PEC: How did you find the buyer?
Tan: “First, I made a list of who I thought were the most likely prospects in acquiring the business. I looked at which companies online currently would benefit from our database, the list of customers that we’ve acquired over time. I made a list of all those potential buyers, and then I made another list of companies that are competitors. Then I put in criteria: who’s going to have the money to pay me, am I going to be able to get out in a year, how long will I have to stay, things of that nature. So, I made all these criteria, what I would do if I were buying a business, and then I called all the long shots first, sort of like my ‘Hail Marys.’ That’s the only thing I know about football, you throw your Hail Mary out there and see who catches it, right? That’s what I did, and I practiced on all those people first because I figured, well, they’re going to say no anyway so I might as well get all the rejections out of the way and by then my pride won’t get so beaten up because I’ll be sort of used to it. So, that’s what I did.
“And at the end, by the time I got to The Knot, it was pretty straightforward. I called up the CEO and told him, you know, two sentences and he said, ‘We’ll call you next week,’ and they did.”
PEC: You talked to the CEO of The Knot and that person says, ‘We’ll call you back.’ He called you back, and from that conversation until you closed, how long did that take?
Tan: “That took almost a year. Things take time and so it’s good to start early. Start to get the conversation going. And, I wasn’t only talking to them, I was talking to other people too. You just don’t know which conversation is going to get further into the process. You call a whole bunch of companies because you just don’t know which deal is actually going to close and the timing of it all as well.
“One thing that I can share with you is how I decided to put The Knot on the [potential buyer] list. In one of the earnings calls that they had, the CEO had mentioned that they were in acquisition mode. Another thing that led me to pick up the phone for them, and that part was timing as well, was they just brought in a new COO at that time. When I actually picked up the phone, I think the COO had only been there for a couple of months and I knew that that would be a good timing because sometimes you bring in new people, they want to put a deal under their belt, if you will, right? The timing of it was fortuitous and it just kind of worked out.”
PEC: Are you still involved with American Bridal or The Knot?
Tan: “No, I’m not. I’m no longer there.”
PEC: Let’s talk about you. You’re a very successful, experienced entrepreneur. What are you doing now?
Tan: “I’m still keeping up with all things ecommerce. I’ve done some consulting last year and this year I’m sort of taking a break, but I’ve been doing a lot of soul searching and trying to figure what I want to do next. It would be great to work with a vendor who is focused on providing solutions for ecommerce entrepreneurs that can help entrepreneurs grow their business, I think it would be a great experience for me. It would be a great learning experience, and I can add value to the vendor in developing product lines and solutions because I’ve lived through it. I understand what entrepreneurs are going through, what’s going in their mind when they think about, ‘Oh, I’m hitting a wall on processing orders. I can’t get enough orders out or my solution is not helping me. What do I do?’ The challenges and just the mental psychology that happens internally, right? I think I could add a lot of value to that, and I would get a real kick out of learning a lot more things.”
PEC: With your experience, have you thought about starting a company that services merchants?
Tan: “Yes, except I don’t want to. I think when you start something like that, you kind of do it all, right? I think I’d be a lot more effective if I were really responsible for one piece of the infrastructure versus responsible for everything.
“At this time in my life, I want to zoom in on the things that I really think I can make a big impact instead of worrying about everything else that goes with managing and owning a business.”
PEC: So, what’s your advice for merchants that are contemplating selling their ecommerce businesses, not only about the financial aspects but also the lifestyle aspects? A lot of entrepreneurs don’t really consider that. They throw everything they have into a business, they sell it and they’re going to wake up someday and they’re not going to own that business.
Tan: “Had somebody said that to me before, I probably would not have even paid attention to that one aspect. I think in selling a business, everybody tells you get your books in order and all that kind of stuff. I think that’s the given. That is the minimum thing that you need to do. I think one thing that I never thought of, and I wish I had, is trying to figure out what I am I going to do with myself.
“What if I went to work for the company that bought me? That means that I’m no longer the boss. I will have a boss. I think if you’ve been doing your own thing like I have for the last 19, 20 years, that’s a big mental shift. I personally had a bit of a struggle, to be honest.
“The other part was I didn’t think through what I would be doing after I left. I went through a bit of a mourning process. I missed my staff. I missed the people I work with. I missed the third party vendors that I worked with almost on a daily basis, weekly basis. I missed all of that. Not just missing of being out of the action, but just the whole thing where I used to make these decisions, but now I’m no longer making these decisions. I’m no longer part of something.
“If there is one thing besides getting all your books in order, think about what you’re going to do with yourself afterwards. Not the rationalization stuff that we tell ourselves sometimes. Be honest with yourself. What are you going to do next?”
PEC: We really appreciate your honesty and transparency. That’s not frequently discussed; entrepreneurs are not exactly the type who are going to go play golf everyday. They build things, they accomplish things, and the process that you just described is an honest emotion and it’s not one that is frequently discussed.
Tan: “I never heard it before and I wished I did. I don’t know if I would be paying attention, but if your readers are contemplating selling, ask yourself that question. It doesn’t hurt to just have that in the back of your mind. Ask yourself, why are you selling your business? What are the reasons? Is it something that you can fix? Is it something that, like you said, can you bring in another person? Maybe you don’t need the money, what you need more is like help. Ask yourself those questions and be honest with yourself.”
PEC: For readers that want to reach you, you have given us permission to give out your email address. It’s firstname.lastname@example.org.
Tan: “I’ll be happy to talk to people who are struggling through this or just want to explore the possibilities. I’d be happy to help them out. I went through it and I’d be more than happy to share my experience.”