BI 361: Lessons From Making 25 Acquisitions (Ft Chris Bell)

On the show with me today is Chris Bell; founder and CEO of Perch - a company is focused on acquiring and building consumer brands.

Chris has a very diverse and interesting background and as a result of his background, the way they are building Perch as a technology platform is very interesting.

Prior to starting Perch, Chris - whose a software engineer by training - worked for 3 years at Wayfair and helped them to open 50 new distribution facilities and reduce the time it took to deliver a couch from 30 days all the way down to two. Before that, Chris worked as a Principle at Bain & Company, and while there, gained extensive experience in M&A.

So....as you can see, Chris career path has ideally positioned him to lead Perch toward his goal of a billion dollar company.

Episode Highlights

[04:45] What is Perch?

They buy great products on Amazon and add them to their technology platform.
They scale those brands internationally to other marketplaces.

[07:09] Chris Realizing What He Wants To Do

He was initially a computer engineer. His first job was product management.
After he finished business school, he went to Bain & Company to work in the private equity group doing transactions with leading private equity firms.
Afterward, he worked in Wayfair, where he helped in building North America's supply chain.
From his experiences in Bain & Company and Wayfair, he realized that he liked to build things, which inspired him to make Perch.

[11:31] Starting the Business

He thought at first that he could do this with his own money.
He realized that he has not enough money, so he began talking to institutional investors.
He met Alex Finkelstein, who became his lead investor.
The business moved forward quickly after their meeting.

[14:50] Journey of Perch

It took a lot of time, effort, and talking to investors to reach the point where they are now.
He got recommendations from Niraj Shah, the CEO and Founder of Wayfair, and James Savarese, the Former COO of Wayfair, that helped him attract investors for Perch.

[15:49] The Next Steps for Perch

Slowly he grew the business and started calling brokers and outside diligence support.
Chris only began hiring people when he was sure he had a business running. That was when he got a deal under LOI.

[19:43] Why Owners Want to Sell Their Business

There are two reasons why owners want to sell their business: capital restraints and businesses exceeding the owners' expectations.
Chris realized these based on his first deal with Flathead Straws.

[22:32] Lessons Chris Learned in Acquiring Businesses

You need to develop trust and credibility with the entrepreneur.
Make sure to check the quality of the things you’ll be acquiring.
Put some earnout or deferred payment structure into the acquisition.

[29:11] What Makes a Great Product

Chris follows the data.
They look for products that have consistently maintained growth and price leadership.
They also look for ratings and reviews versus competitors.

[31:48] How Did Chris Make Perch Grow?

They have a playbook where clients can find their processes, policies, and standard operating procedures.
Every entrepreneur has something they’re good at, but they also miss a few things.
Find excellent people that will be part of your team.

[33:38] Software Tool for Managing PPC Campaigns

They’re developing their own software tools and are using many different ones as they haven’t found a single best one yet.
It’s not a one-size-fits-all in PPC as it depends on a lot of categories.
They are building a software platform because they manage a lot of keywords and campaigns a day.

[36:55] The Importance of Customer Service and Referrals

At the end of every deal, they should get a Net Promoter Score of 10.
As they get a higher customer satisfaction rating, they get more customers through referrals.
They get more sellers through this network of referrals as well.

[38:41] The Future of the Industry

Five or ten years ago, you needed $100,000 or $250,000 to launch a new customer product.
Nowadays, you can launch products on Amazon, sourcing through Alibaba, all for $1,000.
People buy products through the reviews of their peers over the ads and campaigns they see on media.