Explore how online consumer brand company Cap Hill Brands has quickly cemented itself as one of the top four aggregators in the US, and how A2X plays a critical role in its mission to nurture ecommerce brands into thriving global businesses.
Taking ecommerce consumer brands to the next level
With pandemic shopping and a new wave of online sellers entering the market, more and more Amazon aggregators are exploding onto the ecommerce scene.
Known as “roll-up” firms, the major players are raising billions of dollars in capital to acquire Amazon businesses at a record rate.
At the helm of these Amazon aggregator companies are top business execs like Cap Hill Brands founders Kevin Saliba and Jason Lee Keenan. And they know all too well what it takes to scale a brand into a household name.
The first online consumer brands company
Kevin and Jason were early executives at Zulily, the ecommerce giant that grew from 0 to 1 billion in revenue in 5 years. The duo helped launch 15,000 brands and grow their customer base to over 7 million.
In 2020, they partnered again to start Cap Hill Brands, a new kind of consumer products company, dedicated to nurturing high-quality, enduring consumer brands – and positioning them to thrive in an ecommerce world.
In its first month, the company bought four ecommerce businesses. In 2021, it added another 21 companies.
So far in 2022, it’s already acquired two brands, with a plan to purchase at least 10 by the end of the year.
With this rate of acquisition, Cap Hill Brands is one of the top four aggregator brands in the US, putting it alongside other major players like Thrasio with a $10 billion valuation.
Recently, we spoke with Cap Hill Brands controller Bryana Aguilar about the company’s climb up the aggregator ladder, and how A2X plays a critical role in its mission to nurture ecommerce brands into thriving global businesses.
Before: messy books raise red flags
When it comes to acquiring a new business, Bryana says Cap Hill Brands looks at a myriad of things – margins, SKU counts, online reviews – but its biggest challenge is having to sift through ‘messy financials’ to determine the true profitability of a business, and therefore whether the acquisition is worth the investment.
She says most brands that have come into the Cap Hill fold have had “at least one financial issue that we’ve had to fix” and while that doesn’t necessarily bring the sale to a halt, “it definitely takes more time.”
Bryana adds that “most of the brands we’ve purchased” have been a team of one or two people running the business on their own, and “their accounting systems often aren’t where they need to be.”
Another scenario is sellers:
“…recording their revenue and costs based on the date range reports out of Amazon, which we’ve found are often missing expenses like Amazon fees or have too much variation.
“Going through a company’s books is part of our due diligence and we’ll often pull our own reports. That’s because we’ve had sellers both overstate and understate their revenue, and it can take months of going back and forth before we get anywhere near a settlement agreement.”
After: speedy month-end reconciliation
With 27 brands under its belt (and counting), Cap Hill Brands relies heavily on its knowledge and expertise to quickly scale newly acquired brands.
With that many businesses under one roof, the company’s headcount is still surprisingly lean, and it’s been able to keep it that way while maintaining efficiency by using integrations like A2X.
Bryana adds that A2X has also become a critical part of each brand’s continued success.
The company enlists the help of A2X at several steps in the acquisition process. It’s used during the verification stage of a purchase to obtain deeper insights into that business’ sales, and then further down the track, it’s an integral part of the month-end close.
As far as Bryana knows, A2X has always been a core part of the company’s digital tech stack, and for good reason.
“If we had to manually reconcile each store at month-end, it would probably take us almost a week. With A2X, it takes two minutes max per store. That’s because it’s super-easy to see what needs to be actioned and I can resolve that with the click of a button.
“I also like having the cost-of-goods-sold calculation in A2X – that has saved me hours upon hours of doing my own calculations.”
Considering selling your ecommerce business?
With plans to purchase at least 10 more online stores this year alone, Cap Hill Brands is always on the hunt for the next up-and-coming ecommerce brand, particularly in the ‘mum-and-bubs’ product space.
Bryana says when it comes to making an offer, there are lots of factors that come into play, but what she knows for sure:
“If your numbers are messy, we will want to dig deeper to see what else is wrong, because chances are, there will be something else.
“Ultimately, we can move quickly if we have confidence in your financials. That’s why we use A2X because it simplifies the whole settlement process out of Amazon and multiple other channels like Shopify.
“I don’t know how we would do what we do without A2X – and it’s a suggestion we always make to ecommerce sellers who want to scale quickly.”
For ecommerce sellers who are thinking about approaching an aggregator company, Bryana offers this advice:
“Two years out, you want to be concentrating on growth – diversifying your sales channels and expanding into international markets. Then, 6 to 12 months out, you want to focus on getting all your ducks in a row because if you have clean financials, it makes the acquisition process much smoother and faster, and that’s something we look for in a potential sale.”