196: How Ian Schoen Built And Sold His Design Firm And Started The Tropical MBA

Podcast: Download (Duration: 48:07 — 55.4MB)

A B2B ecommerce business beats consumer ecommerce on customer lifetime value because once a purchasing manager buys from you, they keep buying with no further marketing spend. Ian Schoen sold to the same valet companies for seven years off a single initial sale.

Ian built Two Tree International to $4 million in revenue selling valet parking podiums and portable bars, then sold it in 2015. He now runs the Tropical MBA blog and podcast and is behind Dynamite Circle, a community for location-independent entrepreneurs.

This episode covers how he picked two deliberately boring B2B niches, the first production run that arrived structurally broken, how he used replaceable parts as a competitive moat, the pricing strategy that squeezed out a US competitor, and why he sold a business that only took five hours a week.

Key takeaways

• Sell to customers rather than clients. A customer pays and the transaction ends; a client is an ongoing obligation.
• B2B buyers tell you exactly what to build, which makes product development far easier than guessing at consumer preferences.
• Design flaws only surface in the field. The first container of podiums was destroyed within two months of real use.
• Replaceable components turned a manufacturing disaster into a seven-year competitive advantage.
• Drive the price down on the entry-level product and up on premium variants your competitor cannot build.
• Never sell below a 2x markup, with premium products carrying 3x to 5x.
• Sourcing agents take kickbacks from factories, which makes switching suppliers harder than it should be.
• Physical products in public places advertise themselves, since every unit carries your logo and phone number.

Why sell customers rather than clients?

A customer pays you, receives the product, and the transaction closes, while a client is a continuing relationship you must keep satisfying. Ian built his entire business model around preferring the first.

He formed that view watching his employer do client work. The hoops the team jumped through, measured against what the work actually paid, made the tradeoff obvious.

What he wanted instead was to make a product and push it out. No ongoing conversation, no scope creep, just a transaction that completes.

Why is B2B easier than consumer ecommerce for product development?

B2B buyers call you and tell you exactly what to build, while consumer buyers leave a review and say nothing useful. That feedback loop is what made it easy to build the best product in both categories.

The dynamic works because of who is calling. A middle manager at a valet company gets real influence over a product line, which is genuinely motivating for them and free R&D for you.

Retention is the other advantage. Once you are in with a company you stay in until the purchasing manager leaves or a better product appears, which in a small niche rarely happens.

Ian was still selling to first-year customers seven years later with no additional marketing cost against those accounts.

How do you find a B2B product niche?

Look at industries you have worked in, because the equipment gaps are only visible from inside. Ian valeted cars in college, noticed the key boxes valets use, and concluded he could build a better one.

He was a trained product designer with a job he disliked, commuting to an office park in a town he had no interest in. The business started as an exit rather than an opportunity.

He is candid that little of it was intentional at 26. The intentionality came later, once he understood which parts of the model were actually working.

The connection that made it possible was his employer, who became his first business partner and had a direct line to Chinese manufacturing.

What happens when your first production run has a design flaw?

Design flaws that look fine in CAD surface immediately in real conditions. Ian’s first container of valet podiums had casters that were not structurally sound, and units were being destroyed within a month or two of use.

The economics made it serious. These were $550 items with roughly $150 shipping, so replacing them was expensive on both ends.

Valets are not careful with equipment, which is the part CAD cannot model. The podiums rolled over cobblestone, gravel, and whatever else, by people who wanted to finish their shift.

The fix came from an unrelated design decision. The units were built to knock down flat for cheaper shipping, which meant they already had replaceable parts.

How can a failed feature become a competitive advantage?

The knockdown design failed on its own terms and succeeded for a reason nobody planned. Valet companies did not want to assemble products and would rather pay the $150 shipping.

What survived was serviceability. Because the units came apart, individual bases could be replaced rather than the whole podium, and that became the value proposition for seven years.

It also raised the manufacturing bar. Replaceable components across factories require tight tolerances and jig-based production, so a part from one factory has to fit a unit from another.

How do you build redundancy across factories?

Assign each factory a product line rather than splitting a single product between them, because interchangeable parts across suppliers is harder than it sounds. Ian ran multiple factories this way.

He did test runs to build the relationship, sometimes giving a new factory 50 units or splitting an order in half. That establishes capability before you depend on it.

The tolerance problem is the reason for the line-based split. If factory A builds the podium and factory B builds the replacement base, B’s part has to fit A’s unit exactly.

Should you use a sourcing agent in China?

A sourcing agent finds factories quickly and takes kickbacks from them, which makes switching suppliers harder than it should be. Ian’s agent found his factories and complicated every attempt to change one.

The upside is real. Chinese manufacturing clusters geographically, so once your agent locates one metal fabricator, a dozen more are nearby.

Ian also spent significant time on the ground, living in China for weeks at a stretch to source and visit factories. Remote management of custom manufacturing has limits.

How should you price against an established competitor?

Undercut them on the core product and outbuild them on everything above it. Ian entered a market where the standard valet podium was $549, made in Los Angeles, and came in around $499.

Manufacturing in China made the initial discount easy. What came next was the actual strategy.

Volume let him drive the entry-level price to $399, low enough that no competitor could match it. That product made little money and it locked up the category.

Margin came from above. He built products the LA manufacturer could not: double-sized units, wooden versions, and weather-resistant stainless steel.

The market told him what to optimize. It was somewhat price sensitive and cared more about durability and new products, which is exactly what the premium line delivered.

What markup should you target on manufactured products?

Never below 2x, with premium products running 3x to 5x. Ian held that floor across everything he sold.

The reason is operational overhead. With a team of 15 and real marketing spend, anything under a 2x markup does not survive contact with the cost structure.

The entry-level product sat at the floor deliberately. Its job was market share rather than profit, and the expensive variants carried the business.

How do you market a B2B product with no advertising budget?

Cold calling first, then search. Ian started with a spreadsheet of valet companies and called them one at a time.

The lead generation was cheap and manual. He paid freelancers roughly $50 to scrape the internet and had a list of 200 valet companies the next day, then called every one from a conference room.

The pitch was concrete: replaceable components you can service, at a lower price, so give us a try.

Search became the multiplier. While competitors spent their time at two or three industry trade shows, Ian and his partner skipped those entirely and taught themselves SEO.

Two years later they held three or four listings on the first page of Google. Nobody else in the category had invested in internet marketing at all.

Do physical products market themselves?

Products deployed in public spaces are continuous advertising. Ian’s podiums carried his logo and phone number and sat outside hotels and restaurants in Los Angeles, Chicago, and Dallas.

In a category with four or five players, that visibility compounds. Anyone in the industry recognizes the equipment.

Paid search filled a narrow gap. It mostly reached people new to the industry who had not heard of anyone yet and were searching from scratch.

Why sell a business that only takes five hours a week?

Ian sold because he no longer wanted to solve those problems or carry the mental overhead, even though the workload was minimal and the risk was low. He had it down to about five hours a week with a team of 15.

He is direct that it was not the best financial decision. The business was profitable and defensible.

The reasoning was about attention rather than money. The liability was small and the mind share it occupied was not, and that was enough.

Frequently asked questions

Is B2B ecommerce better than selling to consumers?

B2B customers reorder for years off a single sale and tell you directly what to build. Consumer buyers rarely give actionable feedback and require ongoing marketing spend to reacquire.

What is the difference between a customer and a client?

A customer pays, receives the product, and the transaction ends. A client is an ongoing relationship you must continually satisfy, which is why Ian deliberately built a customer business.

How do you find a good B2B niche?

Look at industries you have personally worked in, since equipment gaps are usually only visible from the inside. Ian noticed the shortcomings of valet key boxes while parking cars in college.

What margin should you target on manufactured products?

At least 2x on any product, with premium variants at 3x to 5x. Below 2x the margin does not survive team and marketing overhead at any real volume.

Should you use multiple factories for the same product?

Assign each factory its own product line rather than splitting one product, because interchangeable parts require very tight tolerances and jig-based production across suppliers.

Do sourcing agents take kickbacks from factories?

Frequently. That relationship makes switching factories harder, which is a cost to weigh against how quickly an agent can find suppliers for you.

How do you compete with a domestic manufacturer?

Undercut their core product using lower manufacturing costs, then build premium variants they cannot produce. Ian drove the standard podium from $549 to $399 and made his margin on stainless steel and oversized units.

How do you get first customers in a B2B niche?

Cold calling from a scraped list works, and it costs almost nothing. Ian paid freelancers about $50 for a list of 200 companies and called every one of them himself.