362: How To Grow A 7 Figure Dropshipping Business With Pat Haggerty

Podcast: Download (Duration: 52:41 — 60.6MB)

Growing a dropshipping business depends on adding value the marketplace cannot, which for Pat Haggerty means technical product expertise on complex, incompatible parts. He bought Right Channel Radios at a 3.1x multiple in 2016, grew revenue 47%, and recorded his first $200,000 month in January 2021.

In this episode I sat down with Pat Haggerty, who acquired the CB radio dropshipping business from Andrew Youderian of eCommerceFuel and has run it since.

Below is the whole picture: real dropshipping margins, how order routing automation works, what he changed after the acquisition, and why he deliberately limits his catalog.

Key takeaways

• He bought at a 3.1x multiple and grew revenue 47% in under five years.
• Target 30% margins. Shipping cost increases pushed it to 25% at times.
• Technical complexity is the moat. Customers cannot assemble a compatible system alone.
• Being $10 more than Amazon is fine. Being $50 more is not.
• Duoplane routes orders to whichever stocked distributor is closest to the customer.
• He deliberately caps the catalog around 500 SKUs to protect expertise and limit support cost.
• Growth came from availability, not tactics: longer phone hours, live chat, faster email.
• 20% to 25% of traffic is direct, which is the real insurance against a traffic loss.

What dropshipping margins actually look like

Pat targets 30% margins and has seen them compress to around 25% when shipping costs rose.

Shipping was the biggest squeeze. Order volume across the whole US pushed UPS and USPS to raise rates, reduce delivery guarantees, and generally perform worse.

The margin structure is why the business model demands genuine value. Throwing products onto a page and expecting sales does not work at these margins, because there is nothing to absorb inefficiency.

Why technical complexity makes dropshipping work

Right Channel sells products that are genuinely hard to buy correctly, which is what justifies the price premium.

A customer outfitting a new Jeep Gladiator with a CB system needs to know which mount fits their vehicle, what cable runs from the mount to the radio, and which antenna is appropriate.

CB antennas then have to be tuned after installation, which is unusual in a world where most products are plug and play.

That complexity produces a specific customer behavior. People call, say they are new to this, and ask to be told what to buy. Most of the time a prebuilt kit already exists and they simply want reassurance they are ordering the right thing.

How to price against Amazon

Pat prices at the higher end deliberately, and the gap has to stay small enough to be worth the service.

His framing is that roughly $10 above what someone could piece together elsewhere is acceptable. At $50 above, real problems start.

The value that justifies it is concrete. Assembling a system yourself risks missing a part, which costs another order and more delay, and nobody can call Amazon to ask which antenna fits their truck.

He does still get undercut. A customer recently told him one of his top antennas was cheaper than Amazon, which he took as a signal to raise the price.

Some people will take the advice and buy elsewhere. Pat’s view is that most customers prefer to buy from whoever actually knows the product, and someone hunting the last few dollars was never really his customer.

Can you train staff on technical products?

Yes, faster than expected. Pat’s newest hire was handling customers competently in his third week.

Customers were already commenting by then, praising his product knowledge and patience walking them through the process.

The realistic split is that support staff can communicate about 95% of what matters and resolve roughly 99% of problems, with the owner covering genuinely deep questions.

Phone sales are under 10% of revenue, closer to 7%, which understates the phone’s role. Many customers have a phone or email touchpoint and then complete the purchase themselves online.

How dropship order automation works

Duoplane sits between Shopify and the distributors, routing each order to whichever stocked supplier is closest to the customer.

The workflow: orders arrive in Shopify, upload to Duoplane, get evaluated by SKU, then route for the shortest shipping distance. If a distributor turns out not to have the item, the order reroutes to another.

You can configure it differently, including always choosing the lowest-cost supplier or splitting shipments. Pat optimizes for delivery speed.

Tracking numbers flow back into Shopify automatically. Under the previous owner, a VA manually copied and pasted every tracking number, which was a primary job function.

The system accommodates unsophisticated suppliers. Duoplane emails the order, and the distributor either uploads a CSV to their inventory system or replies by email. Pat has one supplier where Duoplane extracts the tracking number from the body text of an email.

How to handle inventory you do not own

Pat does not sync inventory counts automatically, because his distributors overlap heavily and stockouts are rare.

When something genuinely goes out of stock, he marks it manually because it is the kind of thing he knows about.

Scale is what makes this viable. At roughly 500 SKUs you can track what is happening. At 20,000 SKUs it would be a completely different problem.

Shipping is charged as free above $75, with three weight-based tiers below that.

Returns go back to the distributor rather than to Pat. Defective products get an immediate replacement plus a return label, while a change-of-mind return goes through an RA process at the customer’s shipping expense.

One practical trick: he lists Bozeman, Montana without a street address anywhere public, specifically so products do not arrive at his house. He still has $2,500 to $3,000 of CB gear in his garage.

Why he limits the catalog to 500 SKUs

Adding products is nearly free in dropshipping, and Pat still restricts the catalog because support cost and focus are not free.

He has tried expanding outside the core. High-end LED headlights did not sell, because organic traffic arriving on his site is looking for radio equipment rather than lighting.

The second cost is support. Obscure products generate more questions than profit, pulling time into helping hobbyists assemble unusual systems instead of serving the core business.

The third cost is expertise. A catalog stuffed with things you do not know well dilutes the exact advantage the business is built on.

Expansion happens within the niche. He added roughly 30 SKUs in GMRS radios as that category grew, and is building content around them.

The private label plan is similarly narrow: vehicle-specific mounts for new body styles, since manufacturers lag when new vehicles launch.

What changed after the acquisition

Growth came from making the business dramatically more available to customers rather than from any new tactic.

Under the previous owner it was a half-day operation. Pat made it his full focus, which changed everything downstream.

The specific changes: extended phone hours from four or five a day to a full business day, added live chat, and became far more responsive on email.

Pat is direct that there was no secret sauce. Being reachable was the strategy, and return customer rate rose measurably as a result.

His honest explanation for the intensity is ownership. Watching revenue arrive in your own account changes behavior, and so does a large acquisition loan and five children.

Where the sales come from now

Organic search still dominates, supported by much heavier email marketing and a meaningful share of direct traffic.

Email went from occasional to weekly, with segmented flows for win-back and retention through Klaviyo.

Content continues to compound. A recently published article on CB frequencies and what each channel is used for now outperforms their long-standing SWR tuning article, which had been the top page for years.

The recent Google algorithm updates helped rather than hurt, which Pat attributes to a decade of writing for humans rather than gaming search. That approach came from Andrew originally.

Paid advertising is nearly absent. His Google Ads budget is around $500 a month, which he acknowledges he should probably scale.

What the lifestyle actually looks like

It ebbs and flows, and 2020 was the hardest year Pat has had in a long time.

The good period came after hiring contractors for phones, when he was barely needed day to day.

That arrangement degraded. Details started getting missed, and by December 2019 his read was that the business was performing at about 80% of what it could be, which is not good enough in a niche built on giving the best recommendation.

He let the contractors and his long-time VA go, intending to rebuild. Then COVID hit, demand exploded, and he ran the business essentially alone from March through August.

He describes working harder that year than in years, in the worst shape he had been in for a long time.

The current team is two part-time stateside customer service employees plus a contractor doing project management, with Pat covering high-level questions and moving to extract himself from support entirely.

What to do if organic traffic disappeared

Direct traffic is the real insurance, and Pat’s runs 20% to 25% of total.

That is people typing the domain in, built from thirteen years of operating since Andrew founded the business in 2008.

His recovery plan beyond that: lean harder on email, start outbound sales calls to corporate buyers like mining and construction companies that use the equipment, and turn content production back on with more video and product photography.

The structural advantage of dropshipping shows up here. With almost no inventory and fixed costs concentrated in SaaS subscriptions, a downturn compresses margins rather than threatening survival.

His point about the failure mode is that a business like this rarely goes to zero. It gets slower.

Is dropshipping worth starting?

Pat’s answer depends entirely on whether you can identify how you will add value, which is the same test as any business.

Buying an existing dropshipping business with visibly happy customers is straightforward to evaluate, since those emails are evidence the value already exists.

Starting from scratch is significantly harder and still possible if you can genuinely serve the customer better than the alternatives.

His view on the model versus branded products is measured. Owning a brand gets you better margins, and what actually matters more is whether the customer is better off buying from you.

Frequently asked questions

What margins can you expect from dropshipping?

Around 30% as a target, dropping toward 25% when shipping costs rise. Carrier rate increases and reduced delivery guarantees were the biggest margin pressure Pat faced, which is why the model requires genuine added value to survive.

How do you compete with Amazon as a dropshipper?

Sell products that are hard to buy correctly and provide the expertise to assemble them. Pat prices at the higher end and finds roughly $10 above alternatives acceptable, since nobody can call Amazon to ask which antenna fits their vehicle.

How do you automate dropship order routing?

Software like Duoplane sits between your store and your distributors, evaluating each order by SKU and routing it to whichever stocked supplier is closest to the customer. Tracking numbers flow back automatically, even from suppliers that only send email.

Should you add as many products as possible when dropshipping?

No. Pat caps his catalog near 500 SKUs because obscure products generate more support questions than profit, dilute your product expertise, and attract traffic that does not match what your site actually ranks for.

How do you handle returns when dropshipping?

Send them back to the distributor rather than to yourself. Defective items get an immediate replacement and a prepaid label, while change-of-mind returns go through an authorization process at the customer’s shipping expense.

What grew Right Channel Radios after acquisition?

Availability rather than tactics. Pat extended phone hours from roughly half a day to a full business day, added live chat, and became far more responsive over email, which lifted the return customer rate and drove 47% growth.

What happens to a dropshipping business if traffic drops?

It gets slower rather than collapsing, because there is almost no inventory and fixed costs are mostly software subscriptions. Direct traffic from returning customers, which is 20% to 25% for Right Channel, provides a floor.