#329 – Revolutionizing Amazon Seller Financing: Game-Changing Innovations for Growth With Don Henig
In episode 329 of the AM/PM Podcast, Kevin and Don discuss:
- 01:30 – How Kevin King Met Don Henig
- 02:00 – Don’s Crazy Backstory
- 04:35 – Talking About His Stint As A Movie Producer
- 07:35 – Singing Tom Cruise And Big Stars For The Rock Of Ages Film
- 10:30 – How Don Got Started In The Amazon And E-commerce Space
- 15:10 – Don Is Innovating The Financial Side Of Amazon
- 16:20 – Kevin’s Financial Situation Starting His Amazon Businesses
- 19:40 – How AccrueMe Is Different Than Different Financial Services?
- 23:20 – Criteria To Start Working With AccrueMe
- 28:30 – How Do They Mitigate The Risk With Their Business Model?
- 29:50 – Not An Equity Partner, But A Profit Share Partner
- 31:45 – Is This A Better Way Than A Term Loan? What Are The Advantages?
- 33:40 – Have Any Of Their Deals Gone South?
- 35:00 – AccrueMe’s Standard Approval Ratio
- 36:20 – What’s The Biggest Deal That They’ve Done?
- 37:00 – Do They Give Financial Advice To Their Clients?
- 39:50 – The Reality Of The Lending Industry
- 42:40 – “Sometimes The Best Time To Borrow Money Is When You Don’t Need The Money”
- 46:25 – Is Giving Up Equity A Good Idea?
- 47:56 – Success Stories From Don’s Clients
- 50:40 – $100 Million In Capital To Help Their Clients
- 53:50 – How To Learn More And Get In Touch With Don And AccrueMe
- 55:00 – Join The Billion Dollar Seller Virtual Summit
- 55:40 – Words Of Wisdom From Kevin King
Transcript
Kevin King:
Welcome to episode 329 of the AM/PM Podcast. In this episode, I’m speaking with Don Henig. Don has revolutionized the way Amazon sellers can get money to grow their business. We talk about that. We talk about a lot of other things around raising money and growing your Amazon business. This is gonna be a great episode. Enjoy. Don Henig, how are you doing, man? It’s great to see you and welcome to the am pm podcast.
Don Henig:
You know, Kevin, since I joined this industry, I’ve wanted to be on the AM/PM Podcast. So thank you very much for inviting me. I’m really excited about it and honored to be on it and to do anything with you is pretty cool. So that’s, I’m excited. I’m excited. That’s all you gotta say.
Kevin King:
I appreciate that. I don’t understand why everybody always says they wanna be on the AM/PM Podcas. We have 17 listeners, and so it just, but everybody wants to be on so that those 17 people can actually hear. No, I’m just kidding. We have a lot more than 17 listeners a lot of listeners. So, welcome man. I’m glad to have you here.
Don Henig:
Thank you, Ken.
Kevin King:
You know, we run into each other at different events from time to time. We actually spoke at one point back in like during the pandemic because I was desperately looking for some money and someone told me, you have bags of money just sitting around your house. And so I was like Don’s the guy to call. But you, you haven’t always, we’ll talk about the money side of things and that’s always a problem for people when they’re growing their e-commerce businesses is cash flow and money. But you’ve dealt with money before dealing with e-commerce. You were dealing with a lot of money and what I think the film business doing, producing films and yeah. Then in real estate. So tell us a little bit about the backstory of Don.
Don Henig:
You know, my story is kind of crazy because I’ve done so many different things in different industries. You know most people find an industry they do well. They stay in that industry for the rest of their life. And for me, I started out as a financial planner. I started my first financial planning company. I learned about the mortgage industry and it was just really kicking off. I started a mortgage company. I built that to one of the largest in New York. Sold that I started a mortgage broker franchise. Never been done before. A new industry sold that in 18 months. I didn’t know what to do. So I looked around. I loved being on the fields with my kids. So this is pre-digital. I started a soccer newspaper, became the official newspaper for New York State Soccer, 167,000 copies a month, 32 pages, half of it ads.
Don Henig:
I did everything. I was the only employee sold that technology businesses. I built and sold and got back into the mortgage business and built one of the largest companies in the nation. I was not the owner of it cuz it was a publicly held firm, but I built my divisions of it to doing hundreds of billions of dollars and earning hundreds of millions of dollars in net profit. And the nice thing was I was paid on profit which was, which was very good. I got tired. I bought and sold 300 houses in 18 months, every one of them for a profit. And I just stopped doing that. I didn’t like it. I started an entertainment company to help somebody out from scratch. And we did eight feature length films with the biggest name stars like Tom Cruise and Natalie Portman and, you know Mark Ruffalo, on and on and on.
Don Henig:
We won two awards at Sundance, which was a riot. Also created, we created and produced the Broadway show, Rock of Ages, which ended up as the 30th longest running play of all time. And we did the movie Rock of Ages, which was a lot of fun too. So we’d done a lot when we were out at Sundance, what we did is having Rock of Ages, we flew the band and the actors and everything from Rock of Ages out to Sundance, out to Park City for a big party. So, needless to say, we were the key party for Sundance. Those two weeks, it was a riot. Best thing ever. A lot of fun.
Kevin King:
What was your role in these movies? Was it producing and raising the money or what was your exact involvement and role?
Don Henig:
You know, with the movies, I was more of a producer, but I didn’t want my name attached to the movies just because I felt that the people that were in the industry, my partners that were true producers, they should get their names up there. I shouldn’t have my name up there. It’s meaningless. And I didn’t want it to be an ego play. I don’t like that. So I chose not to have my name in Bright Lights, if you will. But I was involved in everything. I owned the company. So we would go out and find these scripts and then we would decide, okay, this is a script that we wanna make. Then we’d go out and we’d find a house that would say, yeah, you make that movie, we’ll, we’ll buy it. Then we’d go out and raise the money. And then at the same time, attaching actors and actresses to these movies. And then working on the scripts and the whole bit. And then finally filming the movies. And you know, I was offered to be in every one of them, but I wouldn’t be in any of them cuz I didn’t think that was smart. I didn’t like the whole idea of it. But it was fun meeting people like Tom Cruise, let’s say very fun. You know, it’s just fun stuff.
Kevin King:
So were you doing this from the East Coast or did you move out to the West Coast to do this? Or as you’ve always been based on the East Coast?
Don Henig:
Yeah, I’m a Brooklyn boy at heart. So our office was in Beverly Hills, that’s where my partners were. And so I would fly out there once a month and naturally I’d fly out there, I’d stop in Vegas for a night and have a great time and win some money, and then go over to Beverly Hills and work for a few days or a week and then come home. But yeah, I spent a good amount of time out there.
Kevin King:
So, raising money, I mean, as e-commerce sellers, we’ll talk about raising money and in just a little bit. But for raising money for films, that’s really difficult. There’s no Helium 10 tool that can say, Hey, this film is gonna resonate with this. I mean, you do focus groups, you’re like, this is the audience we’re going after. But it’s worse than probably rolling the dice on the craps table. I mean, when you’re raising money for a film. So how hard is that to do? Or is it more of an ego play where people just you know, because Tom Cruise is attached, they wanna get involved, or how’s that work?
Don Henig:
Yeah, it’s very difficult and it’s an ego play. It’s also a tax play. So at any given time, and I’m not up to speed on it right now, but at any given time, some state, some country, some county is offering ridiculous tax breaks if you do your movie there. So we would do a movie in Georgia or we did Rock of Ages down in Florida, which was a lot of fun. But raising the money. So we would first look at the script, then we would figure out who we could tie to the script. We would reach out to those actors and their agents. And here’s the timeframe that we’re gonna do it. We want to tie Tom Cruise, let’s say to Rock of Ages. Here’s the role we want ’em to do. And I’ll, I’ll just give you this quick story cuz it’s kind of interesting.
Don Henig:
So with Tom, we hooked him into Rock of Ages, and he agreed and we’re like, holy cow, this is unbelievable. You know, this is ridiculous. Now he’s gonna be the star, which means he’s gonna be an older drunken falling down, you know rock and roll star, that’s just an obnoxious person. And he’s gotta sing these tremendous songs. Well, three months, maybe four months go by with week after week, his agent saying, oh yeah, no, he’s in, he’s in, he’s in. And never signed the contract. And we’re like, oh my God, what are we doing here? We’re out raising all this money on his name. And then we had Alec Baldwin and one name after another. We tied them all together because they all knew that Tom Cruise was the lead. So the cast was legendary, really.
Don Henig:
So eventually we find out that he signed the contract, he signs the contract, and what happened, like, we were interested, why did it take so many months? Because here’s what this guy’s about. He’s gonna do his first musical, his first singing on film. And so he hired a voice coach, and he hired our music director without us knowing. And every day for those months, he would go into a studio and he’d perform all the songs and get his voice to the point where it was impeccable. And then once he felt like he could be a superstar, then he a real rock and roll star. Then he signed the contract. And he sang all those songs, and separately, he did a whole concert that’s not on in the movie, but where he was doing ACDC songs. The guy who was unbelievable, amazing.
Kevin King:
Now you had like Catherine Zeta Jones in that. And I think, what was it? Yeah, guy Brian Cranston.
Don Henig:
Yeah, Brian, I forgot he was in it.
Kevin King:
Alec Baldwin and Russell brand.
Don Henig:
Alec Baldwin. Yeah. What’s the girl’s name?
Kevin King:
Julianne.
Don Henig:
Julianne Huff. Yeah. She’s amazing. Beautiful voice. It was unbelievable. It was, it was a lot of fun. But the Broadway show was better than the movie. So
Kevin King:
Do you have, do you have a Tom Cruise of AccureMe
Don Henig:
I do all of our own stunts.
Kevin King:
No singing karaoke at the Amazon events.
Don Henig:
No, that’s not me. Trust me. That is not me. I’m the guy in the back making fun of those people. Although Liz Downing tells me she’s the best at it. So
Kevin King:
Yeah, I’ve seen her I’m sure she is. Yeah. At the empower of well, no, where was it? Some event. I, I’ve seen her do a little bit of singing on the karaoke. So you went from producing films and doing stuff in real estate, and then what, did you semi-retire and then got bored and decided to start AccureMe Or how did, or did, did you have a friend in the Amazon space such, like, it was fascinating to you. How’d you get involved in this, this, this Amazon e-commerce stuff?
Don Henig:
You know, here’s the deal. I ended up stopping work and I was making millions of dollars and I was an employee in a very large mortgage company running nationwide sales. And I decided it’s just not what I want to continue to do. I wanted to do something else. I don’t know what, so I quit and I left millions of dollars on the table and I walked away and I said all I wanna do really is clean my drawers and clean my my closet. You know, whatever, just organize life. I had no desire, no plan. Well, that lasted five years, where for five years I didn’t work. I would golf a couple times a week. I’d play racquetball almost every day, go to the gym every day. You know, all sorts would travel all over the world at, at a drop of a hat.
Don Henig:
Somebody would say they’re having a party for somebody’s birthday and wherever we’ll be there. It didn’t make a difference. My wife and I, we boat. So we had a nice boat. We went everywhere. We had a lot of fun. And then I made the big mistake, Kevin, I’m coming outta the city after having a meeting in the city. And I thought of an old friend of mine from the mortgage industry from 20 years earlier. I hadn’t talked to him. And I just sent him a little note just to I think of somebody, I wanna send him a note, wish him well, I sent him a quick note. Hey man, I hope all is well. You know, that’s it. He sent me back, let’s have lunch. We did. Anyway, over time, he tried to get me involved in different businesses.
Don Henig:
I kept telling him, I’m done. I’m not doing it. Then he told me about Amazon and that there were millions of Amazon sellers. And one thing I’ve always done in my career is help people grow businesses. I don’t need to be paid for it. I just try to help people any way I can. That’s my whole career has been made of just helping people. And you know, so I looked at that and mentoring younger people, and I went to bed that night. And you might, you might understand this, but most people in this industry won’t understand this. When you’re younger, you go to bed and you dream these big dreams, you’re gonna have the biggest boat. You’re gonna have this huge house, you’re gonna do this big business, whatever it might be. Well I’m 63 right now, so I was like 59, 60 years old at that point.
Don Henig:
I don’t have those dreams anymore. And that night I went to bed and I saw myself in a dream talking to a crowd on stage thousands of these Amazon sellers. And I don’t know what I was saying, but I was helping them grow their businesses. And I felt so good. And I woke up in the morning, I’m like, holy, this is under my skin. I really want to help these people. So that’s how, that’s how I opened my eyes to Amazon and started researching it. And since I have a lending background, I started researching lending. I didn’t like anything I saw I could tell you that story as well, because it’s kind of interesting. And so we created something that’s never been done before, which is not an easy thing to do. You know, lending’s been around for 2000 years. We found the way that it should have been done as opposed to the way it’s been done.
Kevin King:
That seems to be a common thing among entrepreneurs. I mean, like you said, you’ve dabbled played and exited and had fun in many different businesses. They tend to get to a point where they get a little bit of burnouts or they get like, I just wanna go play golf and go sail the boat and travel. And then that lasts a few years to five years maybe in your case. And then they get bored. They like, I gotta do something. And because you have all this knowledge and all this experience, it seems to be another common thread where they want to give back. They want to help, they wanna start a charity or they wanna give back and help other people make money at the same time. Don’t get me wrong, but also come help people.
Kevin King:
And there’s a lot of people in this space that, that need help. There’s a lot of people that get into, yeah, Amazon specifically, that there’s some very, very smart people that come into this business and they know the finance and they know everything that they need to know. And they got a great team, but the vast majority are winging it. And that they’re, they’re, yes, they’re either entrepreneurs or they’re want to be entrepreneurs, and they have no, no clue what they’re doing. And they get in, you can grow so fast on in this business that you can get in and over your head really, really fast and you can crash it down. Yeah. By just making one wrong mistake. When, if you would’ve just had the right guidance or the right partner or the right information, you could be blowing it up instead of it, it’s really easy to pivot one way or another.
Kevin King:
And so that’s what you did. You’re really doing with AccureMe kind of like you said, innovated the financial side of things on Amazon. Because before there was comp, I mean, I remember when I first started FBA in 2015, I’ve been selling on Amazon since 2001, but this FBA model, I started it in 2015 and there was no lending I think at that time there was Amazon loans and I think it had just begun and it was fairly limited. Now it’s, it’s grown quite a bit. And I just saw a statistic the other day, I think 2 billion worth of outstanding loans with Amazon lending or something in that neighborhood right now it’s, it’s, they
Don Henig:
Have like 1.3 and they’re gonna double it
Kevin King:
This year. This year. Yeah. That’s, that’s, that’s what it was. It was 1.3. And they’re expecting to get to over 2 billion. That’s a lot of money. And then there’s other companies, I remember there’s one called Banolio that popped up and they went out of business cuz they had too many defaults. And then there’s quite a few others that, that have, have popped up. And they’re all, some version of a traditional loan they’ll couch it different ways. And then you had all the OnDecks and the blue vines and all these others that, that popped up. And some of those have gone the way of you know, the pandemic brought them down cuz they had too many outstanding things. And then you had cabbage. Yeah, cabbage is an example. I’ve gone through all these cuz in 2015 I grew so fast.
Kevin King:
I started with a couple hundred thousand dollars of my money and a and a partner’s money. And then we, we grew so fast, we had to get money from wherever we could. And I didn’t have a rich uncle. And the banks at that time were like, I don’t understand what the heck you’re doing. I’m not gonna give you any money. And so I was using credit cards or I was, I actually had to resort to actually using, I call ’em mafia loans. And at the time there was, they’re MCA loans, Merchant Cash Advances. And it was a huge, they still exist. They’re a little bit more regulated now. But in 2015, these guys, you could get the money overnight and you could go to them and say, I need 80 grand. You know, you’d get ’em access to your bank account or bank statements.
Kevin King:
They look at, see if you have the cash flow. And then they would say, no problem. Go sign this this default judgment that they made you sign and get notarized a default judgment in advance, FedEx that to ’em. As soon as they got that back, they wired the money to your account and started taking daily withdrawals the next day. You know, if you got an $80,000 loan, it might be, I don’t know what the, you had to pay it back in roughly 70 days. So whatever that works out to 1500 bucks a day or something coming outta your account Monday through Friday. And if it was a holiday then they would double up on that that next day. They didn’t miss a weekday and I was able to actually get those, and that’s how I cash flowed the business.
Kevin King:
And I did the math. I said, the interest rate on these is ridiculous. But I had good enough margins. I was like, it’s the only way I can get this, keep this going. And I ended up stacking six of these on top of each other. And it, it, wow. And I never missed a payment. It became a problem and it started eating at one point I was having like $7,000 or $8,000 a day come outta my bank account just to pay back those loans. And it was bad. But that’s the only choice I had at that time to grow. And we grew the company. I don’t have any of those. I I quit using those in like 2016. I got out of ’em all in early, actually early 2017, I got out of ’em all and quit using them.
Kevin King:
But to this day, I still get cold calls, probably two or three calls a day. I’m on some list and you know, someone saying, Hey, we we got your approval for 150 grand. You know, it. So it was very, very difficult. And then you had the Amazon lending. I had Amazon lending at the time too. I had everything. You know, I think at one point there were 17 different companies that I had outstanding loans to just to grow the Amazon business because I just didn’t have, and we were growing so fast going into the millions of dollars really, really fast. And I had no other choice. And so that was I don’t wish that on anybody. It was, it was not good. But now we have people like yourself, a crew, me, where you can actually in essence, partner with you rather than, you actually have a vested interest rather than just making interest off of the money. But you have a vested interest in the success of the business. So tell me, how is AccureMe different than like Amazon lending or something like that?
Don Henig:
Well I want to just take a quick step back because what you said is about taking thousands of dollars out of your account every day to pay these loans, you can’t grow. And that’s when I started this, when I did the research, I called three sellers from my accountants and one was small, one was medium, and one was very large. I, I didn’t pick it that way. It just happened. I didn’t even know what FBA meant. You know, this is how early in the game it was. Sorry, I knew nothing. And I asked them all a bunch of questions. I just wanted to learn. And I just asked them the same question at the end. I said, so what do you need? They all said, we need good sources of capital. There’s no good source of capital. So that’s when I did the research, and you’ll appreciate this.
Don Henig:
I saw an ad, and this goes right to what you’re saying. And the ad was, and you might have seen this ad, it’s still out there. Borrow 10,000, payback 11,000. It’s that simple. I’m like, how could I compete with that? That’s great. What a deal. Then I researched it, I went and called the company and they’re still around. And I ran a little spreadsheet and I realized that to make that payment, you’d have to have a 19% ROI per month just to make the payment, not to put any money in your pocket, not to have any cash flow, just to make the payment. I’m like, this sucks, but how many sellers are gonna do that? They’re not. So I was like, I don’t want anything to do with this. And this is when my partner said to me, well, I literally said to him, I don’t want anything to do with this industry because it’s, it’s a little too scummy for me.
Don Henig:
I don’t like that. So he said, why don’t we do something different? So we brainstormed this idea, and the idea is simple. We’ll, as you said, you’re right on the money instead of lending, we’ll invest in the seller on a temporary basis just for as long as they use our money. We don’t take any equity. So there’s no share of ownership, but we invest in the company. We don’t charge any interest. We don’t charge any fees. We don’t have a term. They use the money as long or short as they want. They use it as a line of credit. So they pay us down, they take out more. It’s just on ongoing. They can take out more. Any, if they ask for more and it’s available, it’s in their account the same day.
Don Henig:
And all we get, we don’t have any monthly payments, which is pretty unique. And you think about it when you’re trying to grow your business, if you don’t have to take money out of your business and you can invest it in real good inventory that’s gonna turn over fast, you’re gonna make a hell of a lot of money. But if you’re taking, making that decision of sending me money or buying the inventory and you have to send it to me instead of buying the inventory, that’s a terrible decision. So we don’t have monthly payments. They pay us when it’s right for the business. And what we get is a percentage of profits at a high level. Here’s the way it works. Very simple. This is the way the math works. It’s not the details, but this is the math. The seller ends up with a hundred percent of the profit on their money and half the profit on our money.
Don Henig:
That’s the bottom line. It works out that way every single time. So they can’t lose. And I’ll give you one more thing. What if, what if, because you might relate to this. I’ve seen so many sellers who have good months and bad months they make a lot of money and then all of a sudden, whatever happens, they don’t make money, they break even, or they lose money, or they get suspended for a week, a month, three months, something happens. And what happens? They get suspended or they don’t make any money. We don’t make any money cause there’s no profit. They literally, there’s nothing accruing to us. They not only don’t have to pay us anything, but we didn’t earn anything.
Kevin King:
So let’s walk through a hypothetical example. Let’s say I come to you Sure. And I’m sure there’s some sort of minimum, was it six months or a year? What’s your minimum Selling on Amazon?
Don Henig:
Six months profitable so we wanna see at least the last few months that you’re profitable and you know what you’re doing. All
Kevin King:
Right. So I’ve been selling, let’s say eight months. And I come to you and I, my last three or four months have, have, I’m showing I’m eking out a small little profit and I say, Hey, I need 50 grand. You take a look at my books and my financials, I’m assuming do a little bit of due diligence. And then you say yes or no, correct.
Don Henig:
Basically, we only look at one thing. We look at your inventory. So we built a system to analyze your inventory. And so we look at your inventory to see that it’s gonna turn over on a regular basis and that it’s gonna be profitable. So you might, let’s just say you have 10 ASINs, we might look at it and say this ASIN ABC is not profitable and every seller says the same thing to us. Yeah, I know it’s a dog. I haven’t been able to make money with that in years. And I’m like, so sell it. We’re not gonna give you money against the dog. So we’ll take that one out and now, but we’ll give you money against everything else.
Kevin King:
So it’s basically the inventory that I have in stock. So it, it’s basically the inventory that I have, is almost like in your eyes is almost like the collateral that okay, there’s actually something there that can actually generate cash in a worse case scenario, right? Maybe even liquidate. So basically the amount of money that I can get from you is not based on what my projections are, or hey, I wanna do, I got this big thing coming up. It’s more based on how much do I have tied up in inventory right now and how much of that can I free up by partnering with you?
Don Henig:
Right? Pretty much. Can I give you a quick example? Yeah. That ma makes it crystal clear. Small example, very low, $20,000. And we go by capital and by capital the, there’s two big things, capital and profit. So what’s capital from our standpoint, capital is your inventory of cost plus your receivable from Amazon plus cash in the bank. So add those up and they come to 20,000, whatever that number is, maybe it’s a hundred thousand, maybe it’s a million. Whatever that number is, we’ll match that number. So let’s say it comes out to 20, we’ll give you 20 or less. If you want less, we don’t push money. We, we just want you to take what you need. So now let’s say you’re earning a 10% ROI per month. So on your own, you’re gonna earn $2,000 on that $20,000 of capital. Okay? Now we don’t take anything for the first 30 days after that. We’re a part of the profit. So, and I’ll explain how exactly the details here. So now there’s $40,000 working month number two, we’re assuming you’re gonna earn basically the same ROI then and going forward roughly.
Kevin King:
So $4,000.
Don Henig:
Yeah. So now you’re gonna have 4,000. So we’re 50%, 50% of the capital, whatever percentage of the capital we are at any time, cut it in half. So in that case, we would get 25% of the profit for that month. You’d get 75. So now you got $4,000 of profit. You got, you earned 3000, we earned 1000. So you got the 2000 you would’ve earned on your money, plus half the 2000 that you earned on our money.
Kevin King:
So the thousand that I’m paying you, is that an interest payment? And I still owe, I still gotta pay back that original 20,000 or does that go against the 20,000 or how does that work?
Don Henig:
Yeah, so, so that’s our income. So that’s like, like interest if you will. Except we don’t take it. So that thousand dollars, if you want us to take it, you can pay us. We’re happy to take the payment. But you know, I’m gonna say at least six or eight months out of the year, most sellers don’t make a payment. So that thousand just gets added on
Kevin King:
So now you’re at 21000 and the capital splits change the next month,
Don Henig:
Right? And now you are 23,000, we’re 21. So you are 52 and we’re 48. So we get earned smaller percentage of profits.
Kevin King:
Okay.
Don Henig:
Our percentage of profits naturally declines month after month after month. So we become a small piece of a much bigger pie. And you get to use all the money and grow, grow, grow. And when you’re flushed with cash, that’s when you should make payments. And it knocks our profit percentage
Kevin King:
Down. So what happens when if someone’s going to sell, they sell to an aggregator or something and they owe some people writing it out until that point, they’re just using the capital to grow, grow, grow. And then they’re able to sell for a higher multiple. And then when they get that payment from the buyer, they just pay you off or
Don Henig:
That’s it. Yeah. So, so we have sellers that haven’t paid us in over two years. So think about that. And it’s not like we’re calling them saying, Hey, when are you gonna pay us? No, we know what they’re doing. They’re growing and growing and growing and they’re gonna exit. So we want them to do that. And we’ve had a few that have exited. And when they’ve exited exactly what you say is that at the closing table, we get paid whatever the last amount that we were owed doesn’t matter. But typically what happens, what’s happened so far is a seller doesn’t want to have anything confusing. So a week or two before the closing, they find out what do we owed? They pay us and we’re done.
Kevin King:
So how do you mitigate your risk on that? I mean, like you said, there’s good months and bad months. If someone hasn’t paid you in two years, you’re at risk. You have all that Amazon platform risk. I mean, Amazon could shut their account down for a valid reason or an invalid reason and just totally, totally crush them like they did with us in 2020 on one of my businesses. They didn’t shut us down, but they in essence shut us down because of the algorithm. But how do you mitigate against that?
Don Henig:
Well in 2020 when they shut everything down, as far as, you couldn’t send any, any product in, we had a bunch of sellers that went from profitable to losing money. And you know, they would call me cuz we were early in the game and they would say, Don, what are you guys gonna do? Like, they were very scared. They were very worried they said, we’re not doing anything. This is part of business. You didn’t do anything we’re gonna ride this through and work it through and that’s the end of it. And three months or so later, they were all profitable again. But it took time for them to build their profits back up to where they were. You know, it’s just part of the game.
Kevin King:
Correct me if I’m wrong, but don’t you have some sort of agreement where the payments from Amazon, when you do a deal, the payments from Amazon either they get switched to like a mutual account or like a holding account so that that you do have, you have your finger on the pulse a little bit there.
Don Henig:
Yeah, so there’s two things that we do. One is we become a partner in your business but not an equity partner. We become what we call a profit share partner. So we create a new class of membership. So we own no equity in the business. Once our money is repaid, we have nothing zero in the business. We don’t own anything. Second thing that we do is we open up a new bank account in the company name. So if you are the seller, the bank account is opened up in your company name and we are the sign is on that account. So the money from Amazon goes through that, you handle it all, we don’t touch it. So we built a system that shows you everything all the time, a hundred percent. And you go in and say I need $10,000 wired to my account.
Don Henig:
We’re not looking at that. We only have one rule. We don’t want to be more than 50% of the total. So we don’t want to have more money in the business than you. Let use an example, let’s say you have a hundred thousand dollars of capital and we have a hundred thousand dollars of capital, and now you want $10,000 to go on vacation, fine, whatever you wanna do, but that makes us have more money in the business than you. So you need to send us 10,000 as well. Now we’re both 90,000, but let’s say you had a hundred thousand and we had 50, you could take out 25,000, knock yourself down to 75, take out another 25,000, knock yourself down to 50. So if you have a hundred thousand, we give you 50 and you want to take it all and go on a big vacation, you can do that.
Kevin King:
But if Amazon’s paying into this account, then I gotta take money out to cover my overhead, to cover my inventory. So I gotta do like a balancing act there to keep it equitable so that you, it doesn’t go in, you’re not higher than me.
Don Henig:
Right. But it hasn’t been an issue really. You know, there are certain times when sellers are higher than us or we’re higher than a seller, but we do everything with them. They all know they gotta get us down and we give ’em some time to do
Kevin King:
It. So why is this a better way than just getting a term loan or getting something else? What, what are the advantages to this?
Don Henig:
You know, a term loan’s pretty good. So the Amazon deal, when we did all the analysis, it came up to us being the best for growth for the seller and Amazon actually being number two. And that’s because their term was a little bit longer. So most of the deals that are out there are, as you said, 70 days or six months or four months or seven months, right? Nine months. It creates such a big payment. You can’t, your cash flow is dead. You’re dead in the water. You can’t grow cuz all your money is going to the lender with us, you get to manage your business. So it’s a variable cost. So as opposed to a fixed cost. So when you have a bad time, you, you’re not paying anything and you don’t own anything. So as you know, in in business, you’d much rather have variable than fixed costs wherever you can, it’s so much safer for your business. And then you have the cash flow now to grow where if you’re taking the money out of the business and sending it to a lender you’re not growing.
Kevin King:
What am I providing to you every month? Am I providing you just PNLs and balance sheets and your team and someone on your team is looking over that just, or are you guys creating your own version of that with your special software just to keep a pulse on what’s happening with your clients or how’s that work?
Don Henig:
Yeah, we do it all ourselves. So we look at the Amazon account, we see that, that everybody sees the bank account. We can see we see where your inventory is. If you have a three pl we either get technology reports or you know, digital reports or you know, sometimes manually and we see everything, but we don’t ask for reports. We, we don’t need them. We don’t ask for other bank statements and all that stuff. We don’t look at your credit report. You know, it’s all based on the inventory.
Kevin King:
Have any deals go south in this or has everything worked out?
Don Henig:
No, not everything’s worked out, but very few have gone south. So the the first one, it was a complete scam. And this is before we had our technology. So we had no way of knowing. The guy switched the account. As it turns out, he opened up nine new Amazon accounts in different countries and he moved the inventory into these other entities without us knowing, again, we didn’t have the technology at the time. Turns out this guy’s done this three different times to other companies. And so we’re in the process, we have a judgment against him and you know, we’re gonna get paid eventually. That was a complete scam. He did it on purpose. We have one other that we’re working through right now that we made a mistake on it. It was an error on our backend as far as managing where the money is and going and all that stuff. But hopefully we’ll get paid outta that one. And that one’s got a lot of inventory with Amazon. So it’s difficult when it’s with Amazon, when it’s with a 3PL it’s easy. But with Amazon it’s difficult. So we’ll find out. But in the end it looks like we might have one or two bad accounts out of everything else that we’ve done.
Kevin King:
And how, what ratio do you approve? So is it like 10% of the people that come to you get, actually get approved or what’s a standard kind of ratio of the ones you look at that you say yes to? Let’s partner up.
Don Henig:
So I’ll give you a number in a second, but our issues are since we become a partner in the business, we can’t have another loan. So we either have to take the other loan out or we can’t
Kevin King:
Help. So if you have an Amazon lending loan and you come to you, that loan has to be resolved some way.
Don Henig:
It’s gotta be paid.
Kevin King:
You have to be first in line.
Don Henig:
We have to be, because we’re an owner in the company, otherwise we’re liable on that loan. So we can’t do that, but we’ll give them the money to pay that off. But sometimes they’ll have a really favorable term loan somewhere and it doesn’t make sense to pay it off. So that knocks ’em out of the bar, out of the park right off the bat. And then it’s the inventory, is the inventory good? Is it turning, is it profitable? Things like that. But I would say we approve probably about 40 to 50%. And we end up closing out of that probably another 50. So if we approve 50%, we probably close 50% of those.
Kevin King:
Well, 25%, so
Don Henig:
About 20-25% altogether.
Kevin King:
And what’s the maximum you go up to? What’s like the biggest deal that you’ve done so far?
Don Henig:
You know, we say a million, but we’ve done 1,000,002 a million on a quarter. We’ve considered some larger ones. But the problem is, and, and this is a problem with the larger deals too, is people come to us with 2 million request, all right, we’re all excited, we’re looking at it, everything looks great. And then they show us their loans and they’ve got 3 million of loans and they’re with Amazon and whoever else, and they’re making monthly payments of 250, $300,000 a month. Yeah. Their profit is less than that.
Kevin King:
So do you give financial advice to your clients as well? Do you guide them, like you said earlier, you’re in this to help them, not besides just giving them money, but that seems to be a big issue. There’s a lot of people in this space, including some well-known influencer types or well-known people that are teaching or whatever, that’s, they don’t have two nickels to rub together on their business. They can show a screenshot of doing 10 million, 15, 30 million, whatever. But when you, when you dive into it, there’s a reason they’ve never sold a business or, or whatever. I mean, so do you see that a lot? Do you give advice do you really get hands on with like, your clients and like give them financial advice and strategic planning advice and stuff like that
Don Henig:
All the time? So my partner is a Wharton grad and a lawyer. So he is brilliant number one. And I’ve got tremendous experience. So I’ll give you an example. Recently, one of our sellers came to me because he had an opportunity. He heard about a very large business that was going to close down. And he thought, is there an opportunity? I said, I don’t know, but I know the owner, so let’s give him a call. And he goes, yeah, would you do that? Yeah, of course. So we get on a call and we negotiated a deal over a few months for him to buy the business and we would have to finance it. And I was actually helping him get money outside of us because initially we couldn’t go into it. I don’t remember the reason, whatever the reason was.
Don Henig:
But I was helping him with knowing all of my competitors, who’s gonna give you the most amount of money and but within six months, your payments are gonna be so freaking high, you gotta get out of it. That’s when you have to come back to us and we’ll, we’ll save you with that with that. So anyway, I, yeah, I help people like that. I help people all the time on LinkedIn. I’m constantly getting contacts with people that are new in the industry, asking questions. They need help on whatever it is. Bookkeeping, accounting, how does this work? How does that work? I’ll sit down with anybody anytime and go through and review any deal that they have financially to see if it makes sense or not. And I don’t give it, I don’t really care about selling the deal. I just wanna do the right thing by them.
Kevin King:
Is there any kind of like back of the paper math or just a quick little formula that people can use that if they have X amount of profit, let’s say it’s a 20% profit margin, they should not take any kind of financing, whether it’s from you guys or from anybody else that’s over a certain percentage to stay. Is there some sort of formula that’s just a quick down and dirty formula that you can analyze different deals with when you’re looking to raise money as a seller?
Don Henig:
There isn’t, but I’ll give you an example. It wouldn’t work anyway because the lenders are, they’re not out to tell you the truth and give you the whole deal. It’s just the way it is. It’s the way the whole industry’s been forever. There’s no lending contract that’s in your favor, just has never happened. So I’ll give you an example. And this is a pretty common loan that’s out there right now. And you’ll hear when I say you’ll understand and it it’s not one company, it’s across the board. So imagine getting a loan, Hey, we only charge 6%. All right? Now I think it’s up to 8%, but we only charge 6%. Wow, that’s a great deal. So let’s say you borrow a hundred thousand dollars, but it’s based upon your revenue. So you’re gonna pay a heavy amount back and the first time it might be seven months or six months, but after that, they’re going to knock it down.
Don Henig:
The goal from a lending standpoint on those deals is to have you repay it in four months. Three to four months. So let’s say you pay it back in four months. All right? So a hundred thousand over four months. What’s your average outstanding loan for those four months? It’s not a hundred, it’s 50. So you’re really borrowing $50,000 for four months. So now you just increased from 6,000, 6% or $6,000 on a hundred grand to 12. Now you’re paying 12%. Yep. And now what are you gonna have to do in four months? You’re gonna have to refinance that three times. So just bottom line, before you even blink your eye, you are at 36 to 40%. But you think you’re paying 6%.
Kevin King:
Yeah, it’s the same thing with Amazon lending. The Amazon lending’s the same, you see that 13% or whatever the number is there and it’s over four months, six months. No, it’s actually doubled that and add a few for cause of the compounding and stuff. And a lot of people don’t understand that.
Don Henig:
Let me, let me, let me stay with that for a second. Cause it’s worse than that. If you think about it here, here’s, and I’ve said this to many sellers and they all go, oh my God, you’re absolutely right because they’ve gone through this and you’ll appreciate this. You borrow a hundred grand from Amazon and you know, you may not need a hundred grand, but it’s an ego thing. So Amazon offers you a hundred, you take a hundred, maybe you need 50. So now you’re leaving 50 in the bank as a reserve. You feel very good at you’ve been in business long as I have, you feel very good when you have a ton of cash in the bank, but now you just doubled your cost cause you really only needed 50 to apply it to inventory. Let’s say to build your business, you took a hundred, you’re paying 10%, whatever the number is. So you’re paying 10,000 not on a hundred, but you’re really paying it on 50. And now now you’re paying that back anywhere from six to nine months. Typically. I’ve seen a couple go out to 10 and 12 months, but I’ve seen most of ’em are short term and then you’re refinancing it. It’s not a good deal.
Kevin King:
And sometimes though, the best time to get money is when you don’t need the money. And it depends on how you’re gonna allocate like Apple Computer. Apple, just recently they got billions of dollars in cash sitting in the bank, but they just took out a $4 billion loan. Yep. And they got whatever, I don’t know what the number is. 17 20 billion. Way more than 4 billion just sitting in the bank in cash. Well, not sitting it’s deployed, but it’s basically, it’s liquid, right. Why would a company like that do that? Or why should an e-commerce company that’s maybe flush right now consider partnering with someone like you or taking a loan rather than dipping into their own cash? It’s the same like with movies. And you say never finance a movie with your own money.
Don Henig:
It’s true. Yeah. Don’t do it. Trust me. Don’t do it. But you know, apple or any of the big companies they’re able to hit the bond market and you know, get money at three and 4% and you know, even lower at times in probably much lower. So why not take that money? It’s so cheap. It’s like when I was in college and they came out with student loans, I didn’t need a student loan cause I was working full-time and I made my own money and I paid for college, but I took out a student loan to buy stocks and the money I put into stocks, I bought my first house with so it was cheap money. Why would I not take it? Same thing with Apple. So it just makes all the sense in the world for them to have more cash, not use their own, and now they have dry powder. If they’re thinking about acquisitions, they can go after it in an instant. And what was the second part of the question? I’m sorry guys.
Kevin King:
Well, is AccrueMe cheap money?
Don Henig:
No, I don’t think we’re cheap money. I don’t think there is cheap money in the industry, but with us you can manage it. So you are also asking about you know, why would anybody want to use our money, let’s say if they’re flush with
Kevin King:
Cash. Yeah.
Don Henig:
In my mind, you shouldn’t, you should use your cash as much as you can and much you’re comfortable with. But with us it’s a good time to get comfortable. We’re a different model than everybody else. Nobody’s ever done what we do. We did it in, in as if we’re sitting on the side of the seller, what would be, what would we want? And you mentioned Rich uncle that’s, a lot of people call us it. You’re like a rich uncle you’re giving us all of this and you’re not taking you know, you’re taking all the risks, but you’re not taking a lot of the income and a lot of the whatever from the company no equity and all. So it’s a good time to start with us at a low level just to get comfortable.
Don Henig:
You need eventually in a few months you’re gonna need a hundred grand. Let’s say you start with us with 10 or 20, get comfortable with the system. If you don’t like it, pay it back. If you don’t like it and you pay it back in 30 days, it costs you zero. You don’t like it, and four months from now and you want to pay it back, you pay it back. There’s no risk. There’s no 30 day notice, there’s no penalty, none of that. You call me up this morning and say, Don, I want to pay you off. You already know the number. Just wire are the money in. There’s nothing.
Kevin King:
So what happens when that happens? Does that bank account that you guys that’s set up, does that just dissolve and they switch it back to their other account or whatever?
Don Henig:
Yeah, we don’t close it immediately. We leave it up to the seller whatever you want us to do. So typically they ask us to leave it open. Some sellers have said, can you leave it open for a few months? Cause I, I’m sure I’m gonna want to come back. And we say, yeah, but you know, truthfully, what you should do is just leave like a $5,000 balance something small so everything stays and then you come back and you want to pull out 80 grand, it’s in your account the same day. You know, it doesn’t make sense to close it, but if you wanna close it, close
Kevin King:
It. So some people say that they don’t really think through the process of they need to raise money. And some people go out and they give equity away. You know, they get the rich uncle and they give the rich uncle 10% or 20% or whatever and bring them in as like a silent partner. But other, because they say, I don’t want loans. Loans are bad, interest is bad. But that’s not necessarily true. And in your case, it’s almost like the best of two worlds. You’re getting the money. Yes, there’s some interest, but you’re not taking any equity. And you’re allowing people to have breeding room rather than you got this payment that’s due on the first and the 15th or whatever, every single month. That’s a lot of money. You’re like, if you need breathing room this month, fine. You know, we’re, we’re still here with you. Which I think is a major advantage to a lot of sellers.
Don Henig:
Oh, absolutely. Yeah. I, I wouldn’t give up equity and I think most of, most of the sellers that use us and have used us in the past, love that we don’t take equity. That’s probably their biggest thing. You know, they can get money anywhere. And with us, they have the flexibility, they have the cash flow. If they, from a growth standpoint, the whole key is for us is growth. You’re gonna be able to use all the money for growth. You know, my example earlier, the $20,000 and we earned 1000, you earned three. You are able to use not only the 20,000, but now the additional 1000 if you add all that up. So that company went from $20,000 of capital to 40,000. We gave ’em the other 20. The next month they have 44,000. The month after that it’s like 48 or 49,000. Then they’re up to like 54. You know, it’s amazing how fast these companies grow.
Kevin King:
What’s an example of one that started with you? Small? Have you had one that started with say 20, 40, 50,000? Now their capital is half a million or a million and just because of working with you guys that they’ve just exploded and it’s given ’em that leverage I guess to explode.
Don Henig:
I can give you a bunch of ’em, but I’ll give you the worst one and the best one at the same time. Same guy a guy from Israel, really good guy. And he came to us and he took out whatever it was 50 grand, 250 grand, I don’t remember. And four months later he called me and he goes, Don, I’m sorry I have to pay you off. I said, why? And he said, because I’ve made so much money, I have all this cash now. I don’t know what to do with it. I have to pay you off. The money that we gave him just like lit a fire in his business. So he paid us off faster than anybody else ever, but it’s only because he had so much money. A kid last year last December, not 22, but in 21 came to us, he made a net profit of $1,500 in December.
Don Henig:
In January we gave him 25 grand. We gave him more in February, more in March by May. His net profit was 44,000. By July, his net profit was 56,000. And I don’t know where he is now, but probably 70 or something, maybe 90 net profit. But to go from $1,500 in net profit to close to a hundred thousand a month in net profit is mind blowing. Another guy, this guy it’s interesting. We don’t just do private label, we do private label, wholesale and retail arbitrage. And so just, this is an interesting one, isn’t Guy retail arbitrage came to us. He earned $2,500 in profit. Okay? We get started just a little over a year. So it was 13 months later, his net profit also grew to $44,000. Then he hung around that number, 39,000, 45,000 per month in net profit.
Don Henig:
And he came to us and said, Hey, do you know any any wholesale distributors? And yeah, we do. He’s a great guy and great business. So we introduced him to a distributor, right? He started investing like $40,000 a month in wholesale, making money there. And now I haven’t talked to him recently, but at the end of last year he was telling me that at the beginning of this year, he’s launching his first private label product. And so he’s another one that’s gonna be go from $25,000 a month in profit to, I bet you by this time next year he’ll be 70 to a hundred thousand dollars a month in profit. You know, it’s life changing and there’s a bunch of them.
Kevin King:
So since a lot of people are taking, they don’t pay you off quickly in four months like the fellow from Israel. You have a lot of capital tied up out there. Is this, do you have outside? Is is this some like big VC firm that’s invested capital? Have you had to raise money? Is this your own personal money that dumped in? Or how do you keep that, that flywheel going when you’re constantly adding new new cash to bring on new clients?
Don Henig:
That’s a great question. So before I jump into that real quick with the guy from Israel, when he paid me off, I said, well, do me a favor. Would you tell your friends? He literally, he said, are you kidding me? This is a miracle. I’m telling everybody. So it was great. So yeah, so what we did initially is, you know I went out on Wall Street really on Broadway, Upper West Side on Broadway in New York with my partner initially. And we were going into the first hedge fund and it’s controlled by a billionaire and who knew me and had wanted to work with me in other projects. So before we go in, I said to my partner, do you know what 242 is? And he said, no. I said, 242 is the number of pitches that Howard Schultz from Starbucks made before anybody put money into Starbucks.
Don Henig:
I said, so we’re not going in to get money. We’re gonna get our asses kicked. These are the smartest freaking people, while we’re sitting there, they’re gonna build a spreadsheet that’s gonna make hours look like it was done in kindergarten. They’re gonna know more about our business than anything. They’re gonna ask us questions that are gonna make it us uncomfortable. And all we can do is do our best in here and learn as much as we can. And the best we can hope for is to be invited back and we’ll have to come back and answer their concerns. And we got invited back. Long story short, six weeks later we got a term sheet for a hundred million dollars. So that’s the way we kicked off plus an equity investment as well. Then from there, we’ve had so many other hedge funds and family offices from around the country and around the world looking to put money into the business.
Don Henig:
And what we’ve tried not to do is take too much. Cuz if you take too much, you have to pay fees on that money and it’s a pain in the neck. So it’s something that we manage. But interestingly enough, when we started the business, we started it with my money and you know, our first few accounts, I said to my partner this is probably all gonna be lost. And he said, I know. And I said kind of, kind of nerve wracking, but I think we’re gonna learn how to do this properly and it might cost us some money to do it, but we’re gonna learn. We didn’t lose anything. In fact, our very first account is still with us. That’s three and a half, almost four years now. And happy as could be. Yeah, it’s great. Well, hey, you know what else, Kev, on Seller Central, we are the number one rated capital provider on Seller Central, all five stars. On Google, we have just about all five stars we’re proud of that. We love that.
Kevin King:
That’s awesome. So if people wanted to learn more about about AccrueMe and about what you guys can do to help them, how would, how would they do that?
Don Henig:
So what I would say is just go to accrueme.com and how this website’s basic, it’s simple and A C R U E M E, AccrueMe. And it basically what it means is we let our profits, our share of the profits accrue as long as you want them to accrue. You can pay us at any time. Or you can also reach out to me on LinkedIn. You know, I communicate with everybody. So it’s my full name Donald, as if my mother was calling me for dinner when she’s angry. And my last name is Henig, H E N I G. And you know, again, you’ll check out my background, you’ll see what I’ve done. You’ll see the type of person I am and you know, I help people, whether they’re in the industry or not, if I can help them in any way, even with encouragement, I do. That’s what I did.
Kevin King:
Awesome, Don, I really appreciate your time today and for sharing. This has been great,
Don Henig:
Kevin. It’s really a pleasure, man. Thank you so much. Your questions were great. I love it.
Kevin King:
Thanks. I hope you enjoyed this episode with Don. We’re talking about money. And don’t forget the Billion Dollar Seller Summit. The virtual edition is coming up next week. It’s not too late to get a ticket. There’s just a handful left. So be sure to go to billiondollarsellersummit.com and get your spot for this incredible summit. There’s a lot of great speakers, there’s a lot of great content. It’s all live, nothing pre-recorded. You can interact with the other attendees, you can interact with the speakers. The average in the room last time was doing about $12 million a year on Amazon. So it’s a high level group. You definitely want to be there if you’re serious about your Amazon business, and you definitely want to be back next week for the next episode of the am pm podcast as well. And before we go today, I’ve just got a little bit of words of wisdom for you. If you don’t make time for your wellness, you must make time for your illness. If you don’t make time for your wellness, you must make time for your illness. We’ll see you again next week and hopefully at the Billion Dollar Seller Summit as well.
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