085: How To Buy An Ecommerce Store And Triple The Profits With Dana Jaunzemis

Steve: You are listening to the My Wife Quit her Job Podcast. And if you are new here, it’s a show where I bring in successful bootstrapped business owners to teach us what strategies are working and what strategies are not. Now I don’t bring on these famous entrepreneurs simply to celebrate their success. Instead I have them take us back to the very beginning and delve deeply into the exact strategies they used early on to gain traction for their businesses.

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Welcome to the My Wife Quit Her Job Podcast. We will teach you how to create a business that suits your lifestyle, so you can spend more time with your family and focus on doing the things that you love. Here is your host Steve Chou.

Steve: Welcome to the My Wife Quit Her Job Podcast, today I’m really excited — you know what Dana, how do I pronounce your last name?
Dana: Jaunzemis just like it looks…
Steve: Jaunzemis, okay.
Dana: Jaunzemis.
Steve: Welcome to the My Wife Quit Her Job Podcast, today I’m really excited to have Dana Jaunzemis on the show. Now Dana is actually someone who I met through Andrew Youderian, and she is actually in a private group that I meet with on a semi monthly basis. And if you’ve never heard of Dana she runs homehealthtesting.com, and she also blogs at 44ideas.net. Now she is a lifelong entrepreneur and has been studying and buying and selling businesses for the last 25 years. And what’s cool about Dana is that she specializes in acquiring small businesses whose sales had plateauted, and she reignites their growth.
Now I know a lot of listeners out there already have ecommerce businesses that may have already plateauted, or you might be interested in buying a business someday online. So in this interview today, Dana is going to teach us how she does it, and what she does to rejuvenate their growth. And with that welcome to the show Dana, how are you doing today?
Dana: Great, thanks for having me Steve.
Steve: Yeah, Dana actually we’ve chatted on several occasions, but I actually don’t really know your background story. So when did you start buying and selling businesses, and did you actually ever work a day job?
Dana: I did in my early 20s, that was the last time.
Steve: So five years ago or?
Dana: Yeah, like 25 years I have been without — maybe two day jobs, so but early on I started in accounting and I had worked in an accounting firm. I’m a college dropout, but I was majoring in accounting when I was in college. So when I stopped school I got a job in an accounting firm and that was my last job. And then I went on, when I was in the accounting firm I left there, and I went actually to a law firm that was my second. My last job was the law firm in the accounting department.
And the accountant in the law firm came to me one day and he says, “I want to leave and start my own accounting firm, and I think you know more about it than I do because you’ve worked in a public accounting firm, so I was wondering if you would be my partner.”
So we both quit, he was the CPA of the law firm, and we both quit and started a small accounting practice that specialized actually in accounting for the law firms. And then we went and bought the old accounting firm I used to work for. So…
Steve: Interesting.
Dana: And that was when I was like– I 24 or something at the time.
Steve: So without a college degree you could get a job as an accountant?
Dana: Well, I worked in an accounting firm, I mean technically my title would have been book keeper.
Steve: Got it, okay.
Dana: I just acted like I was the accountant.
Steve: Right, wow, okay so…
Dana: I have been impersonating in accountant and in entrepreneur all my life.
Steve: So age 24, you actually bought out your old firm, that’s crazy.
Dana: I did, I did.
Steve: Okay and then how did the ecommerce kind of roll around?
Dana: That was like six businesses later.
Steve: Oh my goodness.
Dana: Yeah, I went through a couple of different types of businesses. I have done start ups a couple of times, and really learned that I don’t like to do start ups. So the last start up I did, I sold it, it was in a recycling — construction recycling. It was a local service business, and when I sold it, I think that closing process when I watched the buyer walk out of the room with that fully functioning profitable business, I just thought why am I beating my head on the wall with these start ups, when I could just start when they are already profitable. So that was a good 15 probably 18 years ago, and since then all I have done is buy, and then eventually sell and then buy another one.
So the ecommerce started about six years ago when I bought Home Health Testing. So pretty much all of my businesses have been in a different niche, but when I held the model for ecommerce, it fits my personality more than any other niche, because I’m a data analytics kind of person. I love to dig in the data and have a business. So ecommerce gives me — I can do that, and it just fits my personality better than any I’ve had.
Steve: So when you buy these companies, do they have a staff that comes along with it or is it just usually a full transition of just the assets?
Dana: Just the assets, typically the size that I’m buying has worked really well for me, because I’m buying from the founder who started it. And they are typically very possibly the only employee, they might have one staff member, but they typically won’t transfer. But most times when I’m buying firm as an individual who started it, they’ve run it for three to five years, and is profitable, it’s making a living for them, but to them that’s pretty much just a job.
Steve: Okay, so we are talking about revenues less than seven figures then probably?
Dana: Yeah, usually something that is general — I look at it from a profit standpoint.
Steve: Okay.
Dana: So profitability is something that’s generating 40,000 to 50,000 net a year. So that might be 200,000, 300,000 gross revenues, just depends on the products.
Steve: So these are small ecommerce companies that are just typically run by the owner?
Dana: Yeah.
Steve: Or maybe one other helper?
Dana: Right.
Steve: Okay, and do you like companies that carry inventory, do you like drop shipping, what type of companies do you look for?
Dana: I tend toward inventory only because I like seeing my work I guess. I like seeing packages go out every day, and I think I’m old school in that just because I was in business before the internet, and before drop shipping was really a big thing. So I’m kind of used to seeing that work, and I have an office and a warehouse, so I like inventory type businesses.
Steve: Okay, so you kind of mentioned this already, but your motivations for buying existing companies as opposed to starting them for scratch is, mainly because you don’t like the start up phase so much?
Dana: Yeah, I don’t like it at all, not even so much. I think some of us – some of this is kind of my personal discipline, and if there’s no enough structure, like I have trouble working when there’s too many unknowns. And I will put it off; I’m a procrastinator unless I have a lot of structure around me. And if I have the structure and I can set a deadline based on here is what we need to do, and this is what we need to accomplish it, then I’m really good. But if it’s all open ended like a start up is, I can never make myself work on it to the point.
So I do better if there’s more structure and I also because — like I said I enjoy the data so much. I do really well if I have some history to work off of. So I prefer businesses that are at least three years old, I’d really prefer them to be five to seven years old, so that I have all that history that I can study and I can just really make some growth plans based on what the business has already been good at.
Yeah, and what I found even when I did a start up and the ones I have done, is businesses evolve in those first three to five years. They evolve into what the market wants. The founder always thinks they’re starting it, because of something they know or something they think the market needs. But eventually the market tells you, the market shapes the business and a lot of founders don’t realize that, and they keep running that business like it was what they wanted it to be.
Steve: Right.
Dana: But it became something different, and that’s what I like to do, is to take that — take it from that point, and then really focus on what the business became and grow that portion of it.
Steve: Okay, I know you’ve acquired at least two companies, ecommerce companies that I’m aware of. And it seems like the two that you’ve acquired that I know off, they seem completely random, so do you — it just seems like the niche doesn’t matter that much. Is it just based on the numbers when you do this?
Dana: Yeah, the niche doesn’t matter at all. And actually the one I had before Home Health Testing, I’m not sure you know about this, and we sold music to libraries.
Steve: Interesting.
Dana: So that one I had for quite some time. I had it for about ten years and it was interesting because it was when I bought it, the internet was just beginning to become useful in business, and small business, like the only way we used was email. And you would just have like almost like a business card, website, just the very beginning. So that business we were able to– and it was B-to-B a model, we only sold to pretty much the university music libraries throughout the world.
And so that one, we evolved all the way through from no internet presence till at the end it was probably 50% ecommerce based for a very specific niche market. So no, they don’t matter; I mean I have been in selling music CDs to urine drug test. It doesn’t matter to me what the item is, it’s more about who the market is. And I really liked B-to-B a lot.
Steve: Okay.
Dana: Because I like repeat buyers, I like to establish a relationship with customers.
Steve: So that’s interesting then, so it seems like you don’t really need to have that much knowledge about your niche so much. Or is it just a huge learning process in the beginning when you acquire anything?
Dana: Yeah, it’s yeah, it’s an intense learning process.
Steve: Okay, and let’s dig a little bit deeper into that, so when you are looking to make a purchase, and we can probably refer to Home Health Testing for the remainder of this interview. What were similar things that you kind of look for when you are making an acquisition?
Dana: Well, because I know based on what the business is, and let’s just say it’s making enough 40,000 range gross and 200 and some thousand. I know my initial goal when I buy a business; my first round of goals is I want to triple the net profits within the first three years.
Steve: Okay, wow.
Dana: So what I have to look at is if the business looks good as it is, it’s profitable and it has good gross profit margins on the products, I want to see at least 40% to 50% minimum on gross profit margins.
Steve: Okay, so this is just strict product minus — revenue minus cost of goods right? Okay.
Dana: So if it has those then the next thing I have to look at is, is the niche big enough, that I’m not going to have nay problem growing this three times. So sometimes some niches are so small that the business for sale is making 40,000 net a year, but that might not be 120,000 or 150,000 net available out there.
Steve: What tools do you use to do that analysis?
Dana: Just, I mean all the basics that we all use, key word tool to see what kind of searches are going on. And then just kind of some just old school market analysis of how big is a market. And some of them because I’m in really odd niches, sometimes you can’t — there’s no data you can put your hands on, you kind of — you have to use a mix of intuition and fact finding.
Steve: Okay and when you acquired Home Health Testing was it in that $40,000 to $50,000 revenue range — all right, sorry profit range? Okay.
Dana: Right there, exactly.
Steve: And since you also– let’s tell the listeners what it sells, you sell drug tests, right for the consumer?
Dana: Both consumer and B-to-B.
Steve: Okay, and if I were to think about how large the market would be, I guess I could use the Google key word planner, and see what people are looking for in that realm. But in terms of just the holistic market size, how would you go about calculating that? Or what did you do for Home Health Testing?
Dana: Well, one of the things I look at when I’m analyzing the business for sale, I usually at some point before I’m — when I’m in the due diligence stage, I will be able to see what type of customers they have. And because I’m looking for something with a B-to-B repeat buyers component, that’s going to give me an idea of who is buying. So if I see — and I don’t have to see very many of those customers in there, but then I can look at like one that happens in drug testing is staffing companies, so the staffing companies buy drug tests. So the previous owner, the reason he named the site Home Health Testing he was selling to the consumer, that was his market.
Steve: Okay.
Dana: And what he ignored was the business buyers because that really wasn’t like he set out to do it, but they were buying from him. So they were buying inspite of the fact that it really wasn’t set up for them to buy from him, and I don’t have to see a lot of those type of customers. But then I can go down that route at home and say, okay, well, are there a lot of staffing companies, well I don’t even need to do any research to know that, right?
Steve: Right.
Dana: So then I’m thinking how many per day staffing companies are testing their employees, how many employees are being tested a day by a staffing company. So I use other– just other thought processes. But what I’m looking for in the business itself is these little pockets of things that the previous business owner really wasn’t acknowledging, and saying can we grow those. Can I be a niche within a niche in a sense?
Steve: So does that imply that Home Health Testing did not have that many B-to-B customers when you acquired it?
Dana: It did not, it just– it had very few, it had a few enough that swung my decision.
Steve: And what about some of the other things that you look at, so you saw this B-to-B opportunity, were there any other things that attracted you to Home Health Testing?
Dana: Well, when I got into the key word planning, there was more than enough searches on a daily and a monthly basis, because at that time the — he was shipping about 12 orders a day. And that’s the other thing I look at is just number of orders per day, and thinking about three time growth. So just logically in my head and sometimes this– like I work a lot, I think all my gut instinct, I back it up with facts. But my gut instinct is just to ask myself questions like, if he is doing 12 orders a day, do I believe there is 36 orders a day potential.
Steve: Okay and this guy had been running his business for five years and he was only — okay. And he was only making $50,000 in profit, okay, interesting.
Dana: And there’s a lot of them like that out there Steve, there’s a lot.
Steve: Are there? Okay. And so in terms of his marketing then, he couldn’t have been doing that much of it or — let me rephrase that. So what things did you notice that he wasn’t doing outside of targeting B-to-B, like was his website okay?
Dana: No it was horrendous.
Steve: Oh it was horrendous, okay.
Dana: And that’s the other thing I look for is, I look for something that is succeeding inspite of itself. I look for something that needs a lot of work.
Steve: Okay.
Dana: So I love ugly websites, because again that’s going to tell me if he is making this profits and this site is this bad, I feel certain when it’s good I can do better. And I also want to, when I buy, I want to deliver, I want to add a lot of value myself and those are the areas– the technology is the area that I feel that I can add immediate value and get a strong return. Typically we always double profits in the first year. By the end of twelve months I’ll have doubled the profits of any acquisition I make.

Steve: Incredible.

Dana: So far, I might take long in the future, but so far that has always happened.

Steve: So how was this guy getting his customers then?

Dana: At the time, because this was six years ago, so he was ranking strong for organic and that was definitely part of it. And he had—he was a running an adwords campaign that was horribly wasteful, and that was another area that I could see improvement. He was spending about, I think, it was about $1800 to $2,000 a month. And he was– these are other like little, little I look for. He was spending more ad dollars on his lowest profit items than he was spending on his highest profit items.

So when I took over, I just shut down all the ad words on the low profit items, and threw all the money into the high profit items. I mean it just didn’t even make sense to me to even spend money on some of the items that were like a 20% gross profit margin when I had items that were more than 50%.

Steve: Does that imply that he was losing money on those campaigns then?

Dana: He was, but he didn’t know it because, and this where I see this happen a lot, and I think partly because I’ve lived it so many businesses for sale and I’ve talked to so many sellers. The start up phase is, as we all know brutal and tough. You spend a year not making any money. You spend a year guessing on how to run this business, or possibly you outsource things that you don’t understand, and they get put in place in that first year.

In the second year and maybe the third year you finally start making money, but it’s like this guy when he sold, you know he’s making about $40,000 and he’s just– they get to the point where they are tired of it. So now what happens is it didn’t grow to be the business they wanted, they hoped it was going to be, and they are tired. And now because they are three to five years in, it actually needs everything upgraded. All the technology is now behind. The website is behind, everything is behind.

Well, the only thing they can liken that process to was the startup process. They don’t want to rebuild it. They don’t want to redo it. This business when I bought it, his adwords campaign was set up in the very beginning by someone he outsourced it to. He never went in and looked at it. He never tweaked it. He didn’t—he just kind of lost interest. And this is really common theme in sellers. I mean I see it over and over and over. And that’s why sales start plateauing, and revenue just kind of baseline because they are like, “I don’t want to go rebuild the website. I don’t want to look at that ad words campaign. I don’t really know what I’m doing. I don’t really know what to do next.”

Steve: I see. So where did you find Home Health Testing? Like where do you find the companies that…

Dana: Well I always subscribe to BizBuySell as far as the—that’s the largest market place on the internet, BizBuySell.com and they– almost every broker, almost every listing broker will put their listings through BizBuySell.com. So I get a daily email of any internet business that comes up for sale on there. And then any internet, any broker who specializes in internet businesses I’ll subscribe to their mail list as well. So sometimes they’ll advertise something for sale to their list before they put it on BizBuySell which this was the case with Home Health Testing was that way. It came to me through quite like brokerage, because I was on their email list.

Steve: Does that imply that you are constantly on the lookout for companies to buy?

Dana: Always, always.

Steve: Okay. So how long did it take from the start to finish of acquiring Home Health Testing?

Dana: Like when I got the listing and when I closed? Pretty quick.

Steve: Just trying to get an idea how long they…

Dana: Two months.

Steve: Oh really? That fast, okay.

Dana: Yeah I got the listing probably, I know we closed in June, I probably got the listing late April. And then we just—you go to the offer stage, and then you move through due diligence which allows you to see everything, and then you set a closing day. And there are slower processes. I mean it’s not always that fast, but it can be quite quick. Now what you don’t see when you say it only took two months, is I had read businesses for sale for two years before I found it. I mean I used to always say I look at, at least 100 before I buy, but the truth is that I probably look close to 1000.

Steve: Oh my goodness. Can we just kind of talk about the process. So you are interested in Home Health Testing, I’m just trying to understand how the process works. So you reach out and you say, “Hey, can I have access to your financials?”

Dana: Yes, so when the broker sends you a listing, or if you see a listing on BizBuySell you respond to the broker. Then they ask you to sign a non-disclosure agreement that says whatever you learn in this process you are not going share with anyone else, and you are not going to go compete against the business. So you sign that and then they email you a prospectus of the business which the broker typically writes the prospectus, so you can get all different kinds. There’s no set way you get it. Some are really good and they are ten or twelve pages long and they give you a really good overview of the business, and you will see usually annual financial statements.

And then it depends on how the broker works. Some brokers like to really control the process. Other brokers are a little more customer-service oriented, but usually the next step is to have a phone call with the seller and the broker and you get to– and it’s usually maybe like an hour or so phone call where you get to ask a lot of questions, and then if you have more questions by email.

And then pretty much after that, it’s in the rare occasion, you might go visit the business depending on, if there’s inventory involved, or machinery involved that you want to see, if it’s a smaller ecommerce company. When I bought Home Health Testing, actually the owner was living in Thailand, and he was shipping out of a warehouse in Florida. So there was no visit needed. But after you go through that process, then it’s pretty much up to you of making an offer.

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Steve: How did you deal with the inventory? You just had everything shipped from Florida to your warehouse?

Dana: Yes.

Steve: And in terms of– so I had Bill D’Alessandro on the interview, on the podcast many months ago. And he was mentioning that he likes to go into the office and just see how they just operate on a day to day basis to just to make sure that there’s nothing like ridiculously manual about how they run their business. But it sounds like here you didn’t even visit or get to see the day to day operations at all.

Dana: Right, I did not, and actually Bill and I are opposites on this, because I’ve talked to Bill about that as well, and I heard him speak at the Ecommerce Fuel, and he likes to see if they are organized and how they are running. I love it when I see a horribly disorganized mess, because I know I’m not going to run it that way, and it tells me that’s one of the reasons they have plataeued.

It tells me that they are not running it like a business. They are not organized. And that’s the strength that I bring to a business. So it doesn’t scare me off. I’m not looking for a perfect business. I’m actually looking for a business in bad shape, but it’s still profitable. That doesn’t scare me. I’ve seen some pretty horrendous things.

Steve: It’ll just scare me a little bit personally, like if a business is being handed over to me and I would have no idea how to operate it for that initial period before you had a chance to improve it. You are seeing where I’m getting at?

Dana: Yes it’s scary. I mean it is scary, but it still doesn’t bother me. I don’t feel like—I think the way I liken it is if they are running it that way then most likely, almost 100% of the time, their customers are getting shitty service. And I know I’m not going to do that. So even if I continue at their level for a week or two weeks, or even a month, they are going to—the customer are going to see such a difference after I get it organized, that we are going to shine. So I don’t worry too much about that.

Steve: Okay. And what are the typical multiples that you like to see when you are buying something?

Dana: I mean I would love to see a multiple list than we are seeing right now, but right now what we are seeing is– two would be a good deal. Right now, we are seeing more like two and a half to three on the net profits. So something like Home Health Testing right now in today’s market would be, two would be $80,000, two and a half is $100,000.

Steve: So it sounds like you make your money back within a year or so, right?

Dana: Yes.

Steve: Okay, amazing. So let’s talk about the transition phase. So the company is—you’ve done all the due diligence, the transaction is closed. Company is handed off to you. What are some of the things that you do right off the butt as soon as you take ownership?

Dana: Well obviously what we were just talking about. The very first thing is making sure we can manage day to day. So shipping, getting the product out, but getting the right product out of the door, which takes that a little bit of a learning curve. When we take over the inventory, we have to quickly learn it well enough. At the time when I bought Home Health Testing, I didn’t know the difference between the different drug tests, or things like that. So that’s just kind of like getting thrown into a really bad job with no training, but it doesn’t take long.

Here’s the other thing, and I think this is kind of how my personality operates. I need pressure. This is why I don’t do well in a start up. So throw me in warehouse full of inventory and I have twelve orders to ship, and I will do well. I will do fine with the pressure if I have to get it done. But if I have to sit around and just pick products and think about what niche market I want to be in I won’t get anything done. So it’s just for me, the pressure of taking over a business, I can really thrive in that.

Steve: Do you tell all your B to B customers that the company has a new owner?

Dana: If we need to we do. It kind of—each one has been different. Yes if we need to, sometimes not. With Home Health Testing we did not. So what I did, first and foremost within obviously the first day within the week we had shipping done without a problem. And then the next step within two weeks I had launched a new website on that one.

Steve: Wow, within weeks.

Dana: Yeah. It was a—we only had—we had less than 50 skiers [ph] when I bought it. Yeah, that was pretty easy. It wasn’t bad. And the old website was so hideous. We knew that that was immediately needed. And I made some mistakes in that process. I ended up—I made a big mistake, and I put it on osCommerce and realized that I had no business being wound up in source. That just wasn’t what I wanted to spend my time managing that side of it. So then I switched it to a platform.

So I actually redid the website twice in the first six months. Yeah that was stupid. That was dumb on my part, but that was learning. You know, when I make mistakes like that, I always say, I’m glad I did it now. I’m glad I made the mistake now, and I’m willing to make the switch when I know I’ve made a great mistake. But I don’t consider– I don’t beat myself up over it. I just say, make the mistake now, because later it would have been much more painful to make the change. Or if you make a bigger acquisition later, thank God I know not to do that now, so I won’t make that mistake again.

Steve: So you’ve mentioned a couple of things already. So redoing the website, improving adwords campaigns, what were some of the other things that you did to triple the growth I guess within three years with Home Health Testing?

Dana: Content, tons and tons of content. We blogged in that first year, I think we were writing– I had a writer on staff for a while. So we were writing two or three posts a week, and that really helped us get an idea. It really helped us learn the products too and just kind of learn the whole industry. The more you write about it, the more you are going to learn.

Steve: What were some of the example posts that did really well?

Dana: The one that did the best that we really capitalized on, and I think that was the other thing I learned over the years was if you watch your content to see what’s doing well as a blog post, then put more resources behind it. And the blog post that got the most traffic for us for a good solid year – was just so much traffic – was how long does marijuana stay in your system. So it was a blog post, and it was just a text blog post, but it got a ton of traffic and a lot of comment from readers.

So we took that, the content on air. We made it an infographic, and then hosted it on our main site instead of just on our blog. We put the infographic in that same blog post as it was, but then we also put it on our blog and sent that out to some other bloggers. And it started getting picked up. It got picked up by lawyers.com, and different things, because it was a really good info graphic in that it explained, you know very well how long does marijuana stay in your system.

And then we took that, this is one of the best thing we did, we took that infographic, I have the same graphics guy that does our infographics and things. I said, “Can you make that a video without us– just add some animation to it and let us do a voice over for it.” So he took the same, you know all the art work from the infographic and made it a video, and we put that same thing over on You Tube answering the same question. And it’s done excellent over there. It’s probably even done better on You Tube than on our site.

Steve: So I’m just curious on this content page you have this infographic and text, do you have buy-buttons for your products right underneath, or how do you get them to your shop?

Dana: I don’t worry about that. I mean they can click over on it if they want to. I mean it says, I think it says somewhere at the end of the article, “The best way to know is to test yourself,” but I’m not too worried about converting as a buyer, but I was more worried about the content and Google. So that’s where we got the biggest paying for our buck is the more we wrote on our blog and the more we explained our products, the better Google liked us.

Steve: So it was kind of like a domain strength kind of play.

Dana: Very much so. And that was—I think I didn’t mention that in what do I look for when buying a business. All my niches are very different, but I will say there’s one thing that’s about them is they are somewhat moderately complex. They are—either the product is, or it needs explaining. And I’m drawn to that, because I know in due time you can really become the expert. And I find being an imposter expert that I haven’t done this all my life, but I will learn everything there’s to learn about drug testing, so in due time within three years.

And I think by the time we did that infographic, I think I already had Home Health Testing three years. So I’m kind of in it for a good five to seven years when I buy a business. So I’m not looking for everything. Typically changing the technology and just upping your game and treating it like a business on the ones that I buy is enough to double the profits. I can usually hit my triple by just gaining more traffic, and the website is speaking like an expert.

Steve: How do you know when it’s time to sell?

Dana: Well if I lose interest, that’s the tell tale, and if I in any way feel that I can’t keep growing it, because I like to work in a growing business. If I feel and when I sell—you get the best multiple if you have a very pretty increasing sales graph. So I don’t want to be the owner that stayed too long. Actually that’s who I buy from, is maybe the owner that stayed too long. They’ve lost interest and sales were declining. I don’t want to be that guy. So I want to sell when I can still get a good multiple because my business is growing.

Steve: So here’s the thing about your products, and I kind of did a little bit of research prior to this podcast. There’s a lot of big bucks companies that sell drug test kits, and a lot of them are very similar to what you sell, right?

Dana: Mhm.

Steve: And so if I’m a B-to-B customer like — so number one how do you acquire more B-to-B customers, and two how do you beat out some of the big bucks companies?

Dana: Being that expert, being– having more information that’s accurate, and more information that’s useful to them. If you look at a lot of the bigger companies, and definitely if you look at these products on Amazon there’s a lot of missing pieces to the information. So knowing what a B-to-B customer wants, and I think being a small business myself really helps, because I know what I want from my vendors.

Steve: Okay.

Dana: I want service, I want them to ship on time, and I want all the information to help me make a decision. So we have volume discount price thing, but if you are sitting there thinking should I — if I’m going to use 1Ks of drug test per month, and I look at the prices and I’m thinking about buying three months supply, well, and — for drug testing you need to know the expiration date then of the test they are going to sell.

So we use things like that adding things like expiration dates to our — which means we update our data product listings every time we get new stock. But that’s minor in the grand scheme of things, if they move someone from buying one box to six boxes, then that’s a good thing. And that’s why I see great opportunity in ecommerce, we are all worried about the Amazon effect, and how it’s going to affect small ecommerce properties in the long run. When it comes to B-to-B, I think we can still shine, I think B-to-C is getting tougher and tougher for the small business.

And if Amazon carries your product it’s going to be hard. But if you are in the B-to-B realm, you have customers who have very specific needs, and they need someone to tell them is this going to ship today. They need the assurance that it has the right expiration date, that it’s fresh inventory. And not everybody has an expiration date issue, but if you have a moderately complex product, and they know you are going to stand behind it, and you provide great service, it’s worth it.

It’s worth it and especially for the repeat buyer, they want that consistency, they want to come back and you are going to do the same thing over and over for them. So I see huge opportunities still in B-to-B, near as much in B-to-C as six years ago when I bought Home Health Testing.

Steve: Right, that’s interesting because after one of our little talks about what you just said essentially B-to-B, we actually went out and started focusing more on that with our business as well, because we deal with a lot of event planners. And it’s just great consistent business.

Dana: Yeah, it really is, and another thing I have learned about B-to-B, and I learned this back when I had music library service the first time. And the first time I learned it, but I have seen it repeat in more than one business is, I’m a big 80-20 rule person, and I make longer decisions especially when I’m buying a company of how I’m going to tailor our growth by focusing on the 20% that really is producing most of your profits. But one thing I have learned is there’s another force in the 80-20 rule, so I kind of call it like the external 80-20. So when I look at customers — so if my 20% best customers are somebody else’s 80% worst customers.

And I don’t think I understood that, I don’t think I believed it in the beginning, but like for music library service our customers were music libraries, very-very specific niche. And when I bought that business, using 80-20 rule what’s my 20% best customers, and I studied
all their demographics and how can I get what I wanted. Our best customers were spending $15,000 a year with us with that company, and so one of my one year goals was to get five more of those excellent customers. So I went out and started doing either direct mail, campaigns to other libraries that fit the demographics of my best customers.

And in the second year of that campaign I landed a customer that spent $200,000 a year. And it’s never failed that I have always found customers that were four to six times as large as what I went out to get. And I think it really does work in industry that we are a small business, and we sometimes don’t think big enough. So there’s your best customers, or somebody else’s worst customers, which mathematically speaking means that there’s another customer out there that’s four to six times larger than your best customer.

Steve: So Dana you said a lot of things in that last statement, and what kind of just put me up also was you mentioned direct mail campaigns; you are talking about snail mail?

Dana: Yes.

Steve: So I’m just curious, when you acquire B-to-B customer, like how do you attack that problem, do you snail mail, do you call them as well, reach out via email, like what are your strategies?

Dana: We will do, definitely we’ll do snail mail, we’ll do postcard campaigns. I think it’s very noisy online right now, as far as we just — we all have a lot of information coming at us when we are online. And then some of it depends on who your customers are, and where they are at. So for one area we are expanding on Home Health Testing is the specific small doctors’ office. And we have found the doctors’ offices while they may purchase online, they are not really online a lot.
They are not searching kind of people; they are a little more old school business. So a mail campaign, we do postcard campaign has proven to be excellent. And we did the same thing we started fishing for our target demographic was a customer that spends $400 a month. We’ve been mailing a list that we have for five or six months now. And last month we got an order for $4,000 for one customer.

Steve: Wow.

Dana: Like greatly exceeded what I thought I was fishing for, so…

Steve: Do you give them — like how do you track that, do you give them a special URL or a coupon code or something like that?

Dana: No, and then these customers are actually so old school they call.

Steve: Oh they call, okay.

Dana: Yeah, and they are like you sent me — they tell you, you sent me a postcard.

Steve: What’s a good conversion rate on like a postcard campaign?

Dana: I don’t know, I don’t track it; this is where I’m a little more into we live on this. So we haven’t been tracking it, and I’m not going to track it, because I know a minute for the long haul. And if I hadn’t seen any results at all, zero results in six or eight months, I would probably re-visit how we are doing it, I wouldn’t discontinue it, I would just revamp it. So I try to give everything a long enough a runway to work. And I think that’s part of why I’m successful is I don’t have to have a return metric immediately.
And I’m willing to learn from it, so we were taught — we found out in the first round that we sent the emails out we were trying direct — or the postcards, I’m sorry. We were trying to direct them to our website, and our phone number was really small on it. And they were calling us, and they said we want to get the prices. And I’m like why would they; I mean I didn’t ask them this, but why would they go to the website. So in our second printing of the postcard our phone numbers was big, so we try to learn and just listen to what response we get. And not give ourselves such a short leash that we can’t run with it.

Steve: Interesting so are you doing all the other things to advertise your business like Facebook, Google, comparison shopping engines?

Dana: We do adwords and shopping ads, we do Bing. We don’t do Facebook; drug testing doesn’t do well on Facebook, so…

Steve: I would imagine that scare campaign might work right?

Dana: It might yeah, it might, so we just try to — we have an issue of what type of expert we want to be. So we just pretty much try to — the biggest thing we do to set ourselves apart from other competition is to promise discreet shipping and no contact after the sale. That’s certainly not as much for the B-to-B customers, but for the individual customers. So our promise of total privacy pretty much prohibits us personally from being on Facebook, so…

Steve: I see and also email too, right?

Dana: Right, we don’t do any email marketing, and I think that’s been a good learning experience, because the product, the niche demanded, that — and when I bought the business he wasn’t advertising it that way, that was just something I learned along the way. Because the only comments we would get on order when they put something in a little comment field when they check out, is make sure there’s no return address, or make sure that the shipping is discreet. We had some comments never contact me again.
And that just struck me as funny, and I was just like well, we should — if people are asking for that, then we need to be upfront about it. So that’s what we try to do is like listen to every little thing customers are saying, because we know if one customer said it, then probably 10 or 20 or 30 felt it, but they just didn’t say it. So then we put that upfront and said it on the website, and that was one of our– that really spoke to people, and that was something that drove our growth.

Steve: That’s really smart, so you don’t ship them in a box that says drug test?

Dana: Yeah, here’s your drug test.

Steve: Cool Dana, well, hey, you know what, I have learned a lot from talking to you today and I want to be respectful of your time, we’ve been chatting for quite a while. If people want to find you online where can they find your various businesses and your blog?

Dana: So my blog is 44ideas.net, I’m not a very religious blogger, but occasionally I put some thoughts out there, but you can definitely contact me there. If you are in need of a drug test, you can go to homehealthtesting.com, and no one will know about it.

Steve: Yes, she will be very discreet about it. Are you on Twitter or any other social media platforms?

Dana: I’m on Twitter occasionally yes.

Steve: Okay.

Dana: So not a lot.

Steve: All right, Dana thanks a lot for coming on the show, I’m really happy to have you today.

Dana: Thanks Steve and thanks for all you do, and the great information you put out.

Steve: All right take care.

Dana: All right bye-bye.

Steve: I hope you enjoyed that episode. If you listened to one of my older episodes with Bill D’Alessandro in episode 48 you’ll notice that Dana and Bill took completely different paths when it came to purchasing an existing online store, which just goes to show that there are many different paths that can lead to profitability.

For more information about this episode got o mywifequitherjob.com/episode85. And if you enjoyed this episode, please go to iTunes and leave me a review. It’s by far the best way to support the show and please tell your friends because the greatest compliment that you can give me is to write a referral to someone else, either in person or to share it on the web.
Now if you are interested in starting your own online business, be sure to sign up for my free six day mini course where I show you how my wife and I managed to make over 100K in profit in our first year of business. Go to mywifequitherjob.com, and sign up right there on the front page.

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Thanks for listening to the My Wife Quit Her Job Podcast, where we are giving the courage people need to start their own online business. For more information visit Steve’s blog at www.mywifequitherjob.com.