00:00
You’re listening to My Wife Could Her Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. today I have my buddy Jerry Kozak on the show and we have a very interesting topic to talk about today. Jerry runs an eight figure e-commerce company called Ann Arbortese, but his business has been decimated recently by Chinese fast fashion companies and discount stores like Tmoo and Shien. So in this episode, we’re going to talk about the effects of companies like Tmoo and Shien

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with respect to small businesses, why they have an unfair advantage right now, and what you can do about it. But before we begin, I wanted to let you know that tickets for the 2024 Seller Summit are now on sale over at sellersummit.com. The Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, is a curriculum-based conference where you will leave with practical

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02:18
Welcome to the My Wife Quitter Job podcast. Today I’m thrilled to have Jerry Kozak on the show. Now, Jerry is the founder of Ann Arbor Tees, a world-class full-service print and embroidery company in Ann Arbor, Michigan, that does over eight figures a year in sales. And as you all know, selling t-shirts and personalized apparel is an extremely competitive business. But Jerry has done great over the years with his print on demand operation through excellent customer service and by taking on large clients.

02:45
like high schools, universities, and international renowned artists. But thanks to sites like Tmoo and Shien, he feels as though the market is turning. So in this episode, we’re going to talk about how cheap Chinese marketplaces and fast fashion are affecting the apparel industry in the United States and Jerry’s strategy for growth in the coming years. And with that, welcome to the show, Jerry. How are you doing today, I’m great, Steve. Thank you so much for your interest. So Jerry, I know that we don’t know each other that well, but

03:15
I watched your first YouTube video the other day. You guys are hilarious. Oh, thank you. Yeah, we probably should have done a few more. think it’s from like 2014 something like that. Yeah, it a while back. But I mean, you guys definitely have the the talent there. But then I was saddened to see that you guys didn’t keep up the channel. So I know I do regret that. And yeah, yeah, I have regrets. But thank you. Always nice to meet a fan. So we

03:42
Before we get into the Chinese companies and fast fashion, I am curious how you got into the printing business in the first place and how you scaled it to as large it is today. Like in that video, I took a look at your factory. You guys got lots of expensive equipment in there. Yeah, we had very humble beginnings in that I just started drawing on t-shirts with a marker in like middle school. Because my mom, I remember when

04:11
You came back from a summer one year and all of a sudden, you know, like the brand of shirts you had or whatever mattered. And it was like fifth grade. I asked my mom if I could have a an Abercrombie shirt and she said no. And so I just made one with a marker and went out. It’s a lot cheaper to be funny than cool. And so, then I just kept making those. My car got broken into my senior year of high school and they caught the guy and he had to like

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you know, pay for my window and my my everything he broke and rather than repairing most of that, I did repair the window, but the dashboard and everything. bought a little t-shirt press and brought that with me to University of Michigan as a freshman in my dorm room. We started making shirts there. My buddy Ricky, who’s my, uh, he’s the co-owner. He could do websites, which was kind of a unique skill at the time. Something like 2004. And, uh, we were most of me like bootleg.

05:09
Chuck Norris shirts and stuff like that. And we didn’t understand intellectual property at the time. But yeah, it just sort of grew. And we graduated into the recession in 08 and just figured what the heck, let’s let’s try this instead. And I had landscaped for a bunch of professors and kind of wealthy people around town. And we raised 15 grand at like 18 % interest or something crazy from them and bought

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little digital printer, which was a new tech at the time. My landlord didn’t speak a lot of English, but enough where we were able to communicate that like, I needed to shove this commercial printer into my apartment to pay rent. And he was like, fine, fine. And I think my neighbors thought I was a drug dealer, because like, we would sell stuff online, but it’d be for pickup. And so these cars would pull up at all hours to get the packages. And every year that we got a little 900 square foot end unit in a

06:08
the industrial district in Ann Arbor and put bunk beds up in the back there. So we went from illegally printing in a residence to illegally living in a workshop. But it was fun. mean, we were fresh out of college. Did you buy like a DDG printer or? Yeah, it was like those were brand new. So like that trade show that we got, that was just the Wild West. were like,

06:35
Everyone had the same Epson like carousels and it was called garage engineering and all this stuff. So yeah, it didn’t even have white ink. The white ink ones were so unreliable at the time. But you get in early with like iterative technology like that and you build a business model and then as the tech gets better, you can run with it quicker. Yeah, we just kept adding stuff. We added a manual screen printing press. We could do white ink. Then we added an automatic press. Then we added embroidery and

07:05
Now we have four or five giant, you know, automatic presses that are, you know, length of car. And yeah. So, yeah, it grew over the years and it wasn’t all Amazon and Ecom became the biggest part of it. But early on, we were doing a lot. What we still do live like.

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merchandise for artists. And at one point, we were the biggest printer for NATO in Afghanistan before the drawdown. They went through a lot of t-shirts more than you’d think. You’d get like a phone call. They’d be like, because Canada Airfield had like 50,000 international troops. And for the most part, a lot of times they were bored. So you’d get a call from like a colonel and you’d be like, I need 3000 shirts for a 5k on next Friday. You’re like, I can print them.

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over the weekend, but how long does it take to get to Afghanistan? You’re like, let me take care of that. Okay, you got it, sir. So, uh, how are you getting these deals? I’m curious early on. mean, it’s, really saturated. Selling t-shirts is tough. Oh, it’s awful. Uh, don’t do it. Anyone. Uh, that one, well, it’s just a lot of like wheeling and dealing. So like early on, for example, that particular account was because

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we had a random like ROTC, we’re in Ann Arbor still. So University of Michigan is, you know, the big institution here. And we had like a random ROTC senior come in to get PT like physical fitness uniforms for their club, or not their club, but for the ROTC program. And we just got talking, I had buddies and ROTC around the state and they all kind of knew each other a little bit from like, you know, their

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joint training and yeah, just sort of, early on it was just, you’re making friends with all your clients cause there’s two of you in the shop and they come in and it’s fun, it’s personal, you’re helping with art, what’s it for, you get talking and that guy, he ended up getting deployed to Afghanistan and was in charge of getting bids for like a morale and welfare event with that needed t-shirts and.

09:24
He asked us if we wanted to bid on it and it was a competitive bid. We just didn’t know that everyone else is like a pig at the trough with military contracting. We bid at normal plus the shipping to get it to Kandahar and we won it and we were floored. And then we did a good job and like found out, you know, the other guys and his, uh, his purchasing unit where they were from. And so we threw in some like, uh,

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you know, sports team stuff from like their hometowns just as a thank you and you build a relationship across the world and then pretty soon we were just getting orders left and right and especially if it was time sensitive they didn’t need to mess around with bidding. So are you running ads, doing any SEO, social media or anything like that or is it just kind of word of mouth? Mostly word of mouth. Yeah, like a lot of our early stuff was more brick and mortar and then because Ann Arbor is small but because the university

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has so many hooks internationally, you would, you’d work with people as students and then within a couple years, they’d, you know, be rising in a fortune 500 company and send the business back. So, I always liked about that part was it was just very personable and like, you still still matter the relationships matter. We were never the cheapest or anything, but you know, you’re dependable. So, amazing. everything you do is pretty much custom. And then

10:51
You have a brick and mortar outlet in addition to your online and it’s just a lot of repeat business. Yeah. So brick and mortar is our custom and that’s a lot of local. So we do a lot of the back end like uniforming and stuff for like the a lot of the university programs and local businesses, corporate uniforms. But 70 percent plus of our top line is is e-commerce. And that’s the majority of that is Amazon at that.

11:21
Oh, it’s at Amazon. Okay, got it. And those are fixed designs, right? Probably. Yeah. So those are, that’s, you know, B2C, like we’re making the designs, we’re mostly FBAing the shirts. That’s another thing in itself. I mean, do you find that there’s rampant copying of your designs and whatnot on Amazon? Oh, And are you, have like a dedicated team to take those guys down or? It’s not. So with apparel, people abuse trademarks and that like they’ll

11:52
Like literally the Lanham Act that governs trademark law says like they can’t be decorative. It’s supposed to mark your trade. And so there’s just a cottage industry of trolls who try to trademark decorative designs. But the reality of it is like anyone should be able to make an I’m with stupid shirt or, you know, we have a trophy husband shirt and there are 900 people with trophy husband shirts and that’s all fine.

12:17
It’s all legal. can’t say theirs is made by us. Like we have quality standards and things like that. But so no, I don’t do a lot of takedown notices. I actually like contribute to some trademark watchdog groups that specifically go after trolls because I don’t like I respect intellectual property. But I also I hate people trying to like fence off the comments and

12:47
So like we, yeah, we fought, it ended up costing us almost 600 grand years ago, a trademark troll. I can’t remember the terms of the end. I’m not gonna say it, but yeah, we took them to the ropes and we won and it was awesome. you know, we specifically did all of our legal filings publicly like the tobacco lawsuit so that the next people they want to hit could just piggyback on our legislation.

13:16
I do get a call about once a year from someone sweating bullets like, Hey man, I got half a million dollars worth of like research. know, nice. So, um, yeah, I mean, it’s, it’s, it’s an ugly little industry. You know, we figured out how to go about it. Um, and yeah, you’re constantly dealing with, with IP stuff. That’s when you’re constantly releasing new designs. I would imagine, right? It’s not like a stagnant business. Yeah. Yeah. Yeah. We’re always releasing new stuff.

13:45
you know, seeing how to iterate on old and we do more and more like licensing and stuff. Okay. The existence of merch by Amazon is, uh, you know, that means we’re competing with like literally anyone with an internet connection. So it’s a,

14:02
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14:32
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14:43
Do you guys do FBA or Merchant Fulfilled? We do both. Both. Okay. Well, Jerry, the reason why I wanted to have you on the show was because you posted this very sobering article in the ECF forums that the entire apparel category is down 30 % year over year, including Amazon. And you actually posted some of your own stats, which I’m hoping you’re willing to share, but you don’t have to share. What do you think is going on out there right now in the apparel industry? Yeah. So, I mean, I,

15:13
Specifically, all I know is that the t-shirt category under apparel is down 30%. And that was told to me by an Amazonian who was, I believe the quote was, 99 % sure that includes Amazon. So that’s as close as we’re going to get. But yeah, it was wild to me. So we all knew 2020 was going to be a high watermark, you know, for probably a decade. And so I expected I wasn’t surprised when 21 fell off a bit.

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But 22, we really kept going. were down like 30 % from 21. And then this year we’re down like 30 % from 22. You you look around and you try and make sense of it and you go, okay, gas is $5 gallon, know, groceries are a mortgage payment. And it’s like, you see the obvious macro factors and that’s the story you tell yourself.

16:08
It didn’t quite make sense specifically because I’d always heard from like older guys in our industry that like t-shirts tend to do well in a recession because maybe when you’re getting good hours at work, you get your kid a $70 video game and when you’re not, you get them a t-shirt. You know, like it’s a thing. It’s a product that it’s an affordable luxury that people drop into and we weren’t seeing that. And then talking to other people in ECF and just

16:36
looking around other industries, it seemed like nobody was having a great time, but nobody was down like 30 % two years in a row. Right. And so then, yeah, you’re like, well, so then we thought like, hey, must be Amazon is finally eating our lunch. And how would you prove that? That’s when I just started asking, trying to needle all my contacts at Amazon and heard no, they’re down to like, what what is going on? Because like, you can look at their corporate

17:05
you know, top line stuff, like they’re not down 30 % like everywhere. And yeah, and that was when I started. I don’t remember if you know, I saw an ad for Tmoo or saw an article about it, but I was like, that’s interesting. And so I started pulling the stats on Shein and Tmoo. And I guess, yeah, for listeners, it’s, um, let’s explain what those two things are, just in case people listening have no idea what it is. Yeah.

17:33
So she is a it started I think it’s still mostly targeted at women but it is a Chinese marketplace that sells direct to us consumers like they don’t even sell within China and I’d like to throw a caveat I’m gonna talk a lot about China and the Chinese and I hope we all understand I’m talking about International corporations in the state not the people Yeah, these things can have you know, jingoistic tinges, but it’s like I

18:02
I had a lovely week in Beijing with my friend Rose’s family. I probably put on 15 pounds. have nothing but nice things to say about the Chinese people and the factories that are undercutting me. I probably have more in common with them than anyone. So I don’t even fault them. anyway, yeah. So Xi’an, I think has been around since like 14 or 15, but really took off in 21 and ended 2010.

18:29
2022 I think is the most downloaded app in the US or something like that. And they’re all focused on fast fashion. t-shirts would fall under that, you it’s not exactly what you think about, but it’s all cheap stuff. When I think of Shien, I think of fashion, not so many, not so much t-shirts. I feel like Tmoo sells more of those types of things. Yeah, I agree. think Shien, Shien.

18:55
showed a new model and it’s not brand new. Like you had wish you had Alibaba before but she and really showed what those models could do with a proper social media strategy. They’re very savvy and they just gobbled up market share. So then that was happening all through you know 21 and 22 which correlated with when we started to see our sales slump. We went from two million units

19:23
sold at our peak in 20 to I think like 1.4 the next year and we’re back to our 2018 levels now. So Shein showed this successful strategy and then Tmoo just blew it out of the water. So like if you and I were talking, it’s late October and now 23rd, this time last year I don’t.

19:49
I don’t think we could have gone to team. Or if we could, was brand new. released in November of 22. I want to say, yeah, that’s when they launched and then they did a Superball ad which which destroyed it. Yeah. Yeah. So like this, if you and I were talking one year ago today, they didn’t exist or right. You know, long-term purposes. They have since I believe they just passed their hundred millionth download or something like that.

20:18
and did a billion dollars with a B in June for like a one month. People should fact check me, but these are. Let me just tell the audience real quick. So Tmoo actually shipped direct from China to the United States at ridiculously low prices. Think of it like a much better version of Aliexpress with superior marketing and virality in terms of referrals. Yeah, absolutely. And

20:48
So I started looking at that and I looked at their numbers and it’s like, if you add them together, they’re getting something like a third of the traffic daily of Amazon, but they’re focused in apparel. So, you know, that to me is like, they may very well be selling more apparel than Amazon. Like I can’t, I don’t know, I can’t prove that, but it’s certainly, for me in apparel, I feel like,

21:15
we are the canary in the coal mine on this issue where you’re like, oh wow, this is very, very significant. At least, yeah, if 30 % came off our top line, that makes all the sense in the world. There’s nothing else happening in retail that is a lever of that size. And so then you start looking and you’re like, okay, let me take one of my top sellers. What does that go for on Tmoo? It’s $6. Wow, that is a… How much do you sell it for?

21:44
Uh, 20 or 20 to 22. And you found the exact same shirt on Tmoo or something very similar. Same design anyway. Yeah. And, and again, you know, like I said, like if, it’s, know, everyone can sell and I’m with stupid, that’s not my intellectual property, but $6 is a wild figure because that is less than it would cost for us to get a blank shirt and send it through USPS next door. Like

22:13
with no printing, manufacturing, overhead, advertising, nothing. It’s untouchable for an American manufacturer. And so then you start reading about it and she in, so cotton is a plant and every fiber has a biological signature. So you can do isotope testing and look at the like carbon, hydrogen and oxygen isotopes.

22:42
and tell which region in the world they grew in. And CNN had commissioned a study or Bloomberg had commissioned a study and a German lab tested and the cotton and like nine pieces they took from Xi’an were from Xinjiang, which is under US sanctions because there a million Uighur Muslim minority Chinese who are in forced labor camps there. And it is

23:12
Specifically tied into the textile industry. That’s Xinjiang is that’s where Chinese cotton comes from. I think I saw a start It was like 90 % of Chinese cotton is sourced there. And so it is it is illegal to source to import products from that province or with that cotton into the US But it the only way that’s gonna get caught is if it gets inspected and tested by US Customs and Border Patrol which would

23:41
mean that the package would have to be inspected. And in the US, this is kind of what brings the full circle. We don’t inspect packages that are less than $800 and declared value. It’s called the de minimis loophole. And talking most historians seem to imply that the minimis was meant to be for like travelers returning home, like you could bring your souvenirs in. And it’s now 2 million packages a day come predominantly from China and predominantly from Xi and Timu.

24:11
Through the de minimis exception. So there’s there’s no enforcement of of our laws duties collected intellectual property of how like If you go to team right now and you just search Rolex It’s like the counterfeits are right there now. They don’t actually say Rolex they say Olev and has the Rolex crown and

24:39
What’s funny about Oleg is if you arrange the dials on the watch, it oops, sorry, I lost my window here. If you arrange the dials on the watch, it looks like Rolex the way that those letters play out. So yeah, like intellectual property and everything slips through the cracks when things are not being inspected. Let me ask you this. How is it possible for them to make the T-shirt printed?

25:08
and ship it for six bucks. Like how is that even feasible? Like the shipping alone for a t-shirt is probably like five bucks, right? Or- I would think so like a lot of people have, know, they’ll talk, there’s some outdated notions about shipping from China. Like there was the universal postal union. That’s when you had ePacket and all this like super, super cheap shipping that got renegotiated in 2018. And my understanding is it’s gotten more and more expensive. Like they’re trying to bring it up to parity.

25:38
I would expect I believe that they’re, you know, bulk freight forwarding and, and splitting the actual manufacturing. I think if, if you’re using forced labor and you’re using locally sourced cotton that has it’s, it’s hard to like parse out subsidies and stuff. Yeah. But, yeah, I think their manufacturing is probably

26:06
I don’t know. I would imagine they’re probably making everything for under a dollar. then, Tmoo, according to Wired, who I haven’t heard a lot of people like poke holes in their sourcing or the investigation. They claim that Tmoo is losing $30 per package shipped, which is wild. Like it’s, I think you could extrapolate to like a billion dollars a year. And so the

26:34
Easiest explanation would be like, wow, there that’s some like epic level predatory pricing to break into a market but that you know, that seems silly to me because it’s like They’re kind of chasing currently chasing junkie products and like as soon as it’s not dirt cheap Like why would people stick around if it’s gonna take ten days? So the more I guess conspiracy conspiracy minded explanation Grizzly reports at a short seller investigation

27:04
And they’ve declared that Tmoo is the most egregious malware, like spyware app for any like largely circulated product. And they did use reputable like security analysts who they source in the article. And amongst other things, the app can compile its own code on your phone. like they could, it could pass all of the

27:33
inspections from Google player Android or whatever, or Google Play or Apple to get on your phone. And then they could push code to it and write write code on your phone. So I actually just did a full article on on Tmoo. I didn’t read that anywhere. But I do know as an e commerce influencer, they’re reaching out to me almost every single day to make a YouTube video or tick tock or whatnot. And they’re paying top dollar for it.

28:01
and their referral program is very generous. I’m just wondering how they’re making money and based on that article that you were just mentioning, yeah, it makes sense that they’re losing money hand over fist just to break into the market. Yeah, it’s the the wired sources said like their their goal is to see I think the median shopper spend like $1,200 a year on the platform. It theoretically you could get to profitability but like

28:31
I don’t know, it’d be very difficult. their parent company, Pinduoduo, their PDD now, I think they’ve kind of been struggling. Like the Chinese consumer market has been anemic for the last couple of years. And so there’s speculation that this is like more of a desperation play. But then the data scraping is pretty egregious, like very egregious, even relative to other apps. And so it’s like on

29:01
a little unclear. You know, is it a play for data or is it a play for market share? Maybe a bit of both. Yeah, I feel like it’s like the perfect storm right now because of the economy and people just looking for cheap stuff, right? Yeah, yeah. I mean, I I’m pretty livid with Amazon. mean, every Amazon seller has their litany of grievances, but it’s like, did you have to keep

29:29
Do we have to do the fee hikes again? And I feel like there’s been no let up on the gas of like pressure for us to raise prices when they’re at least for our category. We can’t. There is a clear actual competitor now who is not on the platform and is, you know, eating everyone’s lunch. Like how much higher than $20 can I go when the same shirt is $6 somewhere?

29:59
Like, you know, and they’ll say like, oh, you can get it quick. Oh, you have returns. It’s trusted at six bucks. Who cares? They don’t know what’s even going to return it. Like most of that value prop goes out the window and like, yes, expediency and convenience. Like that’s all great, but it’s not the only thing. And 100 million people are showing that like, yeah, I can wait a week. How confident are you that it is in fact, Timo and Shia and that’s affecting your sales?

30:29
I mean, I can’t certainly out with any certainty. Of course. Yeah. I don’t know. I mean, I can’t see it not, I guess. And I don’t think it’s just that like, there’s these two new entrants. It’s like, they are dominating social shopping, where Amazon never really has. And so it may be that even if they disappeared overnight, that

30:58
social shopping, regardless of who the, you know, who would take their place that that’s just a new medium. But yeah, and like I have absolutely no idea, you know, what macro demand and you mentioned like 70 % of your business is Amazon, right? And if Amazon’s taking the hit, mean, a lower tide lowers all ships, right? Yeah. In that respect. You know, what’s funny is I was just doing a case study on true classic tease.

31:28
a couple weeks ago how they’re killing it with their ads and everything and they’re a hundred million dollar company and all they do is they sell plain t-shirts. And so I guess my question is how are you planning on fighting against this? Are you gonna go more D to C social marketing or like what’s your strategy to combat this?

31:52
putting a lot of effort internally into like our other lines of businesses. So we do like uniforming for Fortune 500 and things like that. And so what we found is a lot of the expertise we built out around rapid product design and drop shipping and whatnot that’s actually also can give you just a really high service level for this older business. So we’re looking at that.

32:22
We never really put a lot of attention, honestly, into our own website and stuff like that. like, shame on us. But yeah, think part of us, part of it, we’re gonna ride out, like we’re gonna be okay. I’m being a little overly dramatic. Like we still have. Yeah, you guys still do a ton of money. Yeah. But you know, it doesn’t feel good. No, no. Well, and it’s a thing where I think it’s worth everyone

32:52
being aware of because it’s a new… I’ve heard a lot of people when I’ve talked about this say like, well, they’re just wish 2.0 and it’s like, well, let’s agree on that. Let’s start there. What is to… So they’re implying like it’s just wish and it’s like, no, it’s wish 2.0. If you plot market penetration and speed of penetration and you put…

33:22
Wish 1.0 on the bottom left, Wish 2.0 is exponentially up and to the right. Like they did it a lot better this time. so you should be thinking if Wish 2.0 is still just apparel and fast fashion, know, if it only remained that, it sucks to be me, but everyone else is probably fine. But I would just point out that that’s not necessarily the case.

33:51
Wish 3.0, what’s different this time is they got 100 million people to try shopping from China directly. And it’s not all crap. And it’s not all a bad experience. That’s people just, that’s hubris to just say like, oh, it’s all garbage. A lot of it is the exact same stuff that’s sold on Amazon without 50 % fees. So it’s like, think about your own product.

34:19
Like especially if you make your product in China, what’s what’s to stop a more elegant, curated, sophisticated platform from approaching your manufacturer? And you might say, well, I have a brand brands. The biggest gate for a brand is intellectual property, and that’s not really being enforced when we’re not putting things through customs and border inspection. And you might say I have a great relationship with the the factory owner and he’s not that savvy. Well, his kid might be coming back from getting an MBA at Wharton next year.

34:48
and have other plans for the business. the Chinese industry is just like any other. Like it’s going to evolve. It’s going to get more sophisticated. And if we’re structurally getting American consumers used to just end running American retailers, you can make an argument for that. I’m not going to because this is my paycheck and I’m going to defend it. But it’s

35:15
Everyone should be a little alarmed at how fast Tmoo specifically penetrated the American market and wonder like, you know, and are you really that safe? I mean, I think a lot of this has to do with the cheap, relatively fast shipping from China, right? I’ve ordered from Tmoo a couple times. It came within, I would say, 10 to 15 days, which in my opinion is pretty fast from China.

35:41
And shipping was free, I think, for the first order or maybe I ordered enough for the first order for it to be free. And then there’s no, they don’t have to pay any customs duties or anything like that. And I can see if people don’t mind waiting for some of this stuff, they’ll probably just buy from Tmoo. I’m just wondering if the US is going to do anything about the de minimis level being at 800 bucks. Because, you know, I have colleagues that utilize this loophole also.

36:11
Oh, yeah, in importing stuff like to the border and in Canada or Mexico and then just slipping it in the US postal system. Yeah, yeah. Yeah, it’s um, well, I mean, we are really an exception. I think there’s like three. I could get this wrong. I think there’s like three countries in the world that have like, higher than a $500 de minimis. My understanding is that China has like a $7 de minimis. So

36:37
There is a lot of attention being paid to this in Washington. So in June alone, Senators Cassidy, there are two different bills, one in the Senate and then one by Kameral, both looking at closing the de minimis loophole. I think specifically the wording was around like non-market economy. So it would mostly apply to China, Russia, and I think you could interpret it as Vietnam.

37:07
And there was a letter from like 12 senators, bipartisan three weeks ago to the Biden administration asking on behalf of the apparel industry to close the loophole. And then all of the apparel trade groups are screaming about this. so apparel is a little interesting in that it is the lowest rung on like the industrial ladder. There’s a bunch of books about this. Like it’s always the first industry. It’s why the industrial revolution started with apparel.

37:37
Right. But it’s also so it’s not just a matter of like protecting American, you know, manufacturers or light manufacturer decorators like me. It’s also a trade a trade tool like a lot of our bargaining with Central and South America to get concessions on like, we’d like you to stop growing drugs in this region, like, well, these people need jobs. We’ll do a free trade agreement on apparel and then you can set up factories there. So we use apparel.

38:07
free trade agreements in our hemisphere as a bargaining chip to try and affect change. And so this is a thing like the textile industry is pointing out is like, if you think that we have border pressures now, you should see what what it’s going to look like in three years when all the factories in this hemisphere are shut down because they’ve been undercut by weaker cotton. And so it has these these geopolitical knock on effects. And that’s, that’s been making it into the conversation. So

38:37
I don’t know who’s on the other side of the argument. Like certainly UPS, FedEx, there are a lot of small businesses that I’ve heard of guys breaking their cargo shipment into fives to get them all in under the $800. But there is starting to be some concrete movement in Washington around this.

39:01
Yeah, you know, I guess I have different opinions on whether it’s going to affect I think if you’re selling cheaper trinkets, so to speak, and, and and cheaper, cheaper apparel, I guess t shirts kind of fall into that category, then you’re more likely to be disrupted by Tmoo. And then as you

39:22
I guess and we were talking about brand earlier. I mean, if you have a strong enough brand and quality matters, you know, it’s funny, I had a YouTube video on Tmoo. It has almost a million views and you should see the comments on this thing. Half the people are say it’s like cheap Chinese junk or they’re afraid like their information is getting collected. And then there’s this other half, which I’m sure a good portion of them are actually getting paid by Tmoo. I’m pretty sure of this because the comments are effusively good.

39:52
right about Tmoo. And I know that if they’re willing to pay me like, you know, $500 for like a one minute TikTok, then they’re probably paying commenters. But there’s generally like some cynicism, I guess, on the quality of the products, whether they’re even safe and that sort of thing. And stuff like that just takes some time to dissipate. It does. And again, like I’m not saying Tmoo is the threat.

40:21
I’m saying what comes next because like, I mean, Foxconn makes Apple in China. China can make everything up to the quality scale. So in that sense, it’s like, if, I don’t know, I’m sure there’s probably a factory that’s back-ending like,

40:45
I don’t know, Bosch or DeWalt or like some great course, What’s to stop them from being savvy and setting up like an alternative to Home Depot? That is it’s the same quality tools and they get backing from tradesmen and they’re half the price, you know, and maybe maybe we want that as a society. I get that but I’m

41:09
I’m saying that the new thing here is that people have gotten used to shopping direct on China and then there is a de facto one way free trade agreement that none of us voted for that would never pass Congress. You know, it’s a strange thing and until there is action, I think it’s going to keep moving forward and getting more sophisticated. I don’t see why it wouldn’t.

41:38
I guess the real question is what can you do to fight about it? And we didn’t really go into depth on what you guys are doing about it, but presumably you have all these relationships with all these companies and you get a lot of repeat business. I imagine that’s how your business is safe, right? Yeah, I think so. mean, and we have a lot like we do have a brand. We do have a reputation like that’s not that’s not for nothing. I’m not I’m not saying that at all. Of course. It’s just yeah, if you’re

42:05
it would be nice to have that 30 % back of your customers who weren’t that brand loyal. You’re just, you know, you were there. We’re specifically talking about the Amazon side of your business though, right? Yeah. Yeah. Yeah. So my, my custom side, like that’s all more of a, um, the value prop is more in the service than, you know, that. So, yeah, like we’re, we’re, we’re changing, we’re evolving, we’re going to be fine. Um, I’ve been doing a lot of like just promotion advocacy, this idea of just like,

42:35
It’s kind of a new thing facing American retail and American B2C manufacturers that it came on so fast and under the cover of inflation that I don’t think a lot of people, there’s no way to assess it and I don’t think a lot of people are even aware of the scope. I mean, arguably, it’s hard to even build a brand on Amazon in the first place. So I guess if anyone out there is listening and your main channel is Amazon, I think you’re probably more likely to get disrupted there.

43:05
I’m curious, I was on your site earlier, it seems like you have to get a quote, right? order to Yeah, you guys aren’t like a pure e commerce company. No, no. And again, think shame on us. never really put a lot of that’s not the point I was making. My point was like, it’s hard to tell how many sales you lost from like the direct quotes. Because you know, you’re not taking transactions on there versus your Amazon where it’s readily obvious, right? Yeah, yeah. And I think the

43:34
that end of the business where we’re custom making custom apparel, like I don’t think that’s in any danger because it’s so relationship and service dependent. But yeah, anything where it’s just the product is the product and then particularly an unsophisticated product where you can look at it and go like, well, it’s not, you know, diaper cream for my baby where I’m concerned about, you know, a rash.

44:01
So mean my views on that are even they go way beyond team and she and actually if you’re just making a product that Kind of blends in with the rest. I mean even even the Chinese factories have been listing their products directly on Amazon I mean that’s been going on for like the past five years which which have hurt everyone Team is just like an extra level beyond that. I think Yeah, I think to me the thing that’s frustrating with team is that? It’s an unlevel

44:30
playing field basically. If your business model is based on dumping, losing $30 predatory pricing, it’s very frustrating to be an American making a product in America, selling in America, and not being able to compete. And people point out like, Amazon used to do predatory pricing, and that was messed up too. I wish we had better.

44:58
case law. think that’s something the Supreme Court botched in the in the 70s. But yeah, it’s it’s like I don’t we’ve competed for years, we built a pretty big t shirt operation. That part was fine until we ran into. Yeah, one level playing field. And so but this can’t last forever because they’ll run out of money at some point, right? I think so. Yeah, I mean, and that’s where again, like my

45:28
my caution or what I see in it that I’m pointing out is more that it’s there. There will probably be another there will they’ll probably have to move up chain to make the dollars and cents work. But I would I don’t know how how team could hold on to this forever. think she and I believe just bought Forever 21 and like is investing in warehousing in the US. So, you know, they’re just going to be more of

45:57
they’re an international retailer and hey, if they’re paying taxes here and following labor laws here and everything, fine. Like that’s the game. But I don’t like, yeah, this other business model of just drop shipping from China under, I thought we got rid of sweatshops in like the 90s and stuff. Well, in the US for the most part.

46:24
But I know there was so much pressure like I have to do so much compliance for my like university licenses and stuff. And then I go on Tmoo and you’re like, Oh, I could buy a University of Michigan teacher for five bucks. I know, know, know. It’s it’s it’s wrong. Well, let me ask you this, Jerry. Let’s end it with what do you advise that people who are doing apparel? What do you advise that they do right now? Yeah, I mean, I So on the micro level,

46:54
build your relationships, build your brands like that. That is your best thing to do here because that is going to insulate you. And honestly, it’s just a better way to build a business. No one wants to sell a commodity. But at the macro, if I may, are these laws are going through Congress. Your brand is your micro-mote. I view political action as the macro-mote.

47:24
I’m sure you have plenty of international listeners. So apologies, guys, nothing personal. Yeah, I mean, I would contact your congressional reps and your senators. People really truly underestimate that. it’s like, you know, it doesn’t hurt. It’s easy. I think the de minimis level is something maybe we can do something about. But just coming in and taking losses and becoming a loss leader

47:53
is not really something that’s enforceable. I don’t think right. It’ll catch up to them at some point. Yeah, we have very weak laws around that. So that’s something you just sort of more ride out. But it would be much more difficult to do without the minimus. I think like apparel in particular would be like 25 percent. And you I imagine the packages would probably slow up and be harder at the border. But there again, like you can get around that by

48:22
opening a warehouse in the US, importing like the rest of us do paying duties like the rest of us do and following laws and selling like, I’m not I’m not actually an isolationist. I just think you should have to the same rules as the rest of us. I agree. I 100 % agree. And it’ll be interesting. Maybe I’ll have you on in like another five years and we’ll see what what’s going on then. I would love that. Or maybe even sooner than that. But Jerry, where can people get some really kick ass tease?

48:52
If they’re interested in what you sell. Currently, our biggest selection is on Amazon. We are we we we kind of went all in on FBA and we’re sort of working backwards now to build out our own site. So if it’s in the next few weeks, unfortunately, I probably can’t send you to my own website. We have more stuff on Amazon. But and don’t do that. I would. Yeah, you asked apparel people like.

49:22
It seems obvious to say like don’t put all your eggs in one basket that’s investing 101 and it is so much harder to do when you’re growing at four or five X to not just keep doubling or quintupling down every year. But in an inventory business that can bite you and I have a second 40,000 square foot warehouse full of T-shirts to prove it. Wow, that’s crazy. Well, Jerry, mean, you’ve done really well for yourself.

49:51
I just wish I just wish you had more of those YouTube videos. I that itself would make me buy from you over anything. You know, we will. We’ve you know, this last couple of years, like we’re doing a lot of introspection and like, okay, we got to change. We got to like get nimble and like, where do we want to go? And so but clearly what you’ve done has been good for these past several years. And I kind of know your numbers since you told me in private and you’re killing it. And even if

50:20
It goes down to just your personal business or the brick and mortar part. mean, still that’s like more money than anyone most people are ever going to make in their lives. So yeah, I can’t. We’ve been very fortunate. can’t. I can’t really get like. But. Yeah, well, I get back to some more creative marketing. Have fun with it again. Nice.

50:46
Well, Jerry, I appreciate you coming on the show and just being like an open book regarding your business and how Tmoo and these other Chinese companies have, you know, come in and I guess they’re playing by the rules, but the rules are kind of one sided. So yeah, I don’t fault them. Like that’s what we all do. But, you know, in a high, you know, I got in a bit of a debate with with

51:15
seller out of Hong Kong and saying, Hey, man, this is, this is what we do. This is our competitive advantage. And I was like, all right, no, nothing personal. But my competitive advantage as an American citizen, then is I’m going to lobby my legislators to close a loophole. Like, you know, it’s not personal. But and again, like I understand there’s a whole other valid side of the debate. People have been debating isolation or protectionism versus free trade for 300 years.

51:44
And so I am firmly currently in the camp of like you can’t convince a man he’s wrong when his pocketbook is on the line. It’s you I’m making a selfish argument, but it’s on behalf of my 75 employees and their families and I’m gonna do that. Yeah. Well, yeah, once again, Jerry, thanks for your perspective and maybe I’ll even link up. I think you had a link to to file a petition or something to your local congressman. So maybe I’ll link down the show notes as well. But once again, thanks a lot for coming on. Appreciate you. All right. Thanks, Steve.

52:16
Hope you enjoy that episode. Now, if you are worried about companies like Tmoo and Shien taking over, I also filmed a YouTube video about this subject that you can find in the show notes or on my YouTube channel. For more information about this episode, go to mywifecoderjob.com slash episode 509. And once again, tickets to Seller Summit 2024 are now on sale over at sellersummit.com. If you want to hang out in person in a small intimate setting, develop real relationships with like-minded entrepreneurs and learn a ton, then come to my event.

52:44
go to SellersSummit.com. And if you are interested in starting your own eCommerce store, head on over to MyWifeCoderJob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.

00:00
You’re listening to the My Wife, Quit or Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. Today, I have my good friend Chris Schaefer on the show. Chris works with Scott Volker over at Brand Creators, and he consults with dozens of other e-commerce companies. Now, what I like about Chris is he does the work himself and has low-level knowledge on how to do everything. As a jack of all trades, today, Chris and I are going to talk about how to grow your business as efficiently as possible.

00:29
But before we begin, I wanted to let you know that tickets for the 2024 Seller Summit are now on sale over at sellersummit.com. And the Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, is a curriculum-based conference where you will leave with practical and actionable strategies specifically for an e-commerce business. Every speaker I invite is deep in the trenches of their business

00:57
entrepreneurs who are importing large quantities of physical goods, and not some high-level guys who are overseeing their companies at 50,000 feet. Now, I personally hate large events, so the seller summit is always small and intimate. Every year, we cut off ticket sales at around 200 people, so tickets sell out fast, and we’ve sold out every single year for the past eight years. If you’re an e-commerce entrepreneur making over 250k or $1 million per year, we also offer an exclusive mastermind experience with other top sellers.

01:24
The Seller Summit is going to be held in Fort Lauderdale, Florida from May 14th to May 16th of 2024. And right now, this is the cheapest tickets will ever be and the prices are actually going up very soon. Also, if you haven’t picked up my Wall Street Journal bestselling book, The Family First Entrepreneur yet, it’s actually available on Amazon at 38 % off right now. My book will teach you how to achieve financial freedom by starting a business that doesn’t require you to work yourself to death. And you can still get my free bonus workshop on how to sell print on demand.

01:53
and how to make passive income with blogging, YouTube and podcasting when you grab the book over at mywifeclutterjob.com slash book. So go over to mywifeclutterjob.com slash book, fill out the form and I’ll send you the bonuses right away. Now onto the show.

02:14
Welcome to the My Wife Clutterjob podcast. Today I’m thrilled to have Chris Schaeffer on the show. Now, Chris is someone who I’ve known for a long time now, and he’s actually helped run the masterminds over at Seller Summit for as long as I can remember. And he actually spoke at my 2023 event last May. Now, Chris consults for dozens of e-commerce businesses. He’s got a bunch of his own brands as well. And what I like about him is that he always brings a unique perspective on what is working in e-commerce.

02:43
And he’s also the type of guy that gets his hands dirty. He actually does the hard work. So in this episode, we’re gonna talk about what’s working in e-commerce and what’s not, and maybe some of the trends that he’s seeing. with that, welcome to show, Chris. How you doing? Good, man. How are you? I’m good. I’m so glad that both you and Scottie V were able to attend the Seller Summit. Always makes me happy. I know. It’s always nice to see you. It’s so weird because…

03:10
You and I don’t interact that much. We’ll message back and forth on Facebook or whatever. So it’s nice to see your smiling face or hear your smiling voice, I guess, if we’re listening to the podcast. But it’s always good to connect, Well, I’m kicking myself because I looked in the archives. don’t think I’ve had this your first time, right? I think so. Yeah. Something wrong with that. It’s my bad. I should have you on over Scottie V any day of the week. So any time you want, man, just let me know. I know some of the people listening.

03:40
have probably seen you online through your association with your outspoken business partner. Are you two still doing brand creators together and how are you allocating all of your time with all the different projects that you got going on? So the nice thing is that a lot of the stuff that I do in the e-commerce world has set me up from a systemization standpoint and the fact that you can automate a big chunk of that, which I know you’re a big fan of, has given me enough time

04:09
to be able to do a lot of the things that I want to do with brand creators. We’re absolutely still doing it. We’re still cranking over at brandcreators.com, the Rock Your Brand podcast, all of those kinds of things. We do a live video at least once a week, sometimes twice a week, depending on what it is that we’re doing over on the brand creators YouTube channel. And the whole point of that is to help people take what is a side hustle stream of income and turn that into a full-time income, whether they want to replace their income, whether they just want more money to pay their bills, whatever that is. And a lot of that does revolve around.

04:38
but it also involves a lot of the things that make e-commerce tick like content creation, some of those kinds of things and a lot of the nerdier things like you and I were just talking about diving into the numbers to understand how different platforms like Amazon work. How does Etsy work and how can we leverage those to our advantage as either people who have an e-commerce business, which everybody listening to this podcast either has one or wants one or take an existing side hustle. have like a niche website, right? A website that is a contest.

05:07
content-based website and not just monetize with ads, but add e-commerce as a component to that to really shore up that income stream and start to grow that without having to constantly create more and more content. Now we both know that selling on the marketplaces like Amazon has just gotten harder and harder over the years. And I know you have some clients that are selling on Amazon, have their own brands and that sort of thing. What are you focusing your efforts on right now in helping those companies with?

05:36
What’s working versus not working right now? Yeah. So the biggest thing, and I think this applies to Amazon, it applies to Walmart, it applies to Etsy. People think mostly about traffic in those ecosystems because that’s the one number they feel like that they have control over. And what we’ve been able to do in the companies that I consult with is not increase traffic, but increase conversion rate. And as a result of that, we’re up

06:02
247 % just this year without having to spend any more on ads, without launching more products, without SEO-ing my brains out on a daily basis. I know I just use SEO as a verb, right? Like without going in and changing keywords all the time and trying to find that one keyword that’s gonna make us rank perfectly and do all of these things. We’re focusing on the thing that actually drives the highest quality traffic from our platforms. And that’s made a huge difference for us in the people that I’m consulting.

06:31
So interesting. So when you say traffic on these platforms, you’re specifically referring to keyword research, right? And ranking, right? Well, when people, when, yeah. So when people think about how do I get more sales on Amazon, how do I get more sales in the Walmart marketplace? How do I get more sales on Etsy? The there’s kind of two things people feel like they have control over. The first one is going to be how much traffic is coming to that listing, right? If I find a better keyword with a better keyword research tool,

06:58
then I will rank for that keyword and all of the people typing that in will come to my listing and I can get more traffic, which means I can get more sales. The other side of that is I can turn on ads, right? I can run sponsored product ads. I can run Etsy ads. I can run ads inside the Walmart marketplace. And that’s another way that I can drive traffic. And those are all fine and good. I love traffic, right? I’ve spent tens of millions of dollars on pay-per-click across Amazon, like every platform that you can imagine. But at the end of the day, if that traffic isn’t

07:28
the right person coming to your listing, Amazon’s not going to care. And if you really want to rank highly on these platforms on the organic side, which is really where everybody wants to rank, right? You don’t want to spend all of your money on Etsy ads, Amazon ads. You want to get that organic traffic coming in from Amazon, Etsy, Walmart to that listing. If you can get that, that’s what everybody’s after. And what they think they need to do is find that perfect keyword. But the goal of any search engine is to serve the user.

07:58
Right. And if you think about something like Google, if we’re creating content for Google, the best piece of content that we can create for Google is something that completely answers the question that the searcher has. Right. So if somebody types in Ken chickens eat cherries, they want to know obviously Ken chickens eat cherries, but they’re also going to have a bunch of follow-up questions. So if we’re creating a blog post to rank on Google, that’s the route that we need to go. The marketplaces, Amazon, Etsy, Walmart, they don’t function like that. Their goal is not to answer your question in that way.

08:26
Their goal is to show you as the person searching on the platform, the product that you are most likely to buy. Does that make sense? You know, what’s funny is what you said is people think that they can control the traffic or they believe they control the traffic. I have the complete opposite position. Like you have full control over your listing and making it and getting it to a high conversion rate. You have very little control over the keyword research and the keyword rankings. I mean, concrete. Yeah.

08:54
And yet what do you see people do every time you talk to somebody about selling on Amazon, selling on Walmart, selling on Etsy? What do you hear people asking about? They say, what’s the new keyword research tool that’s going to help me find that one keyword that’s going to help you rank higher on the platform. And what they’re missing is the volume, the demand for those keywords. One, any of these keyword tools, no matter how good they are. And there’s some really good ones out there. They don’t know that data, right? It’s usually based on estimates. And so it can give us good directionality, but

09:24
They’re forgetting that not all traffic is good traffic. That’s number one. And number two, if we think about the goal of the search engine itself, whether it’s Amazon, Etsy, Walmart, right? Somebody’s typing in to the search bar. That’s their search engine. What is their goal? Their goal is to show the product that is most likely to result in a sale. If we think about it that way, then what is out? What is the best way to do SEO on these platforms? It’s not.

09:51
to worry as much about those keywords. And I’m not saying keywords aren’t important. Don’t, don’t misquote me there. But if the goal is to show the product that’s going to sell and our product or our focus is then on conversion rate. And that’s what they’re looking at. Then if we can improve our conversion rate, we give them the signal that they need to say, Hey, Steve has red t-shirt in his title. Chris has red t-shirt in his title. Awesome. If we’re both equal in that.

10:21
Then that moves us down the chain to the other things that they’re looking at. Right. We both qualify to show for that. So then how does Etsy, how does Amazon figure out who to show? They’re looking at how many of those people are turning into sales. Some people refer to that as like traffic efficiency. The easiest way to think about that is conversion rate. If I get nine people out of a hundred to convert and you get eight people out of a hundred to convert for red t-shirt, I’m going to rank higher than you for red t-shirt because Amazon is saying Etsy is saying Walmart is saying

10:51
hey, this is the listing that’s most likely to sell. When somebody wants a red t-shirt, they want Chris’s listing. They don’t want Steve’s listing to the same extent. So when someone comes to you and says, hey, my conversion rate isn’t that great, what are the first things that you look at in order to fix that listing to increase that conversion rate? So the first question would be, what is a good conversion rate? And the answer is, in typical Chris Schaefer fashion, if you guys know me, it depends, right? It’s going to vary from platform to platform.

11:20
What I’ve seen on Amazon is that if you’re in that 10 to 15 % rage, you’re doing pretty good. Although I have some listings that are doing 20 to 25 % pretty consistently and hit 30 % plus last year. And if you guys aren’t familiar with where to find conversion rate on Amazon, they in typical Amazon fashion, don’t call it conversion rate. Like everyone else in the world, they refer to it as unit session percentage for whatever reason, because somebody that’s very engineering minded, I guess, was in charge of creating the analytics dashboard for sellers.

11:49
I don’t know. Etsy will refer to it as your conversion rate. Um, but you can also just calculate this by looking at the number of people that have seen your listing and the number of units that you have sold. Amazon will give you that. So on Amazon, you’re seeing 10 to 15%. I would say a really good listing is converting at 20 % plus on something like Etsy. 5 to 8 % is kind of that high end of average. The average that I’ve seen there is about three, but if you can get it above 8 % on Etsy, you’re doing pretty well. And Walmart kind of falls in between those two, at least in my experience,

12:19
Um, I’m a little bit less experienced with Walmart as a platform. I’m only about a year into playing with that, but I’m seeing it kind of falls somewhere in between those two. Amazon tends to be the highest converting then Walmart, then something like, like an Etsy. And so the question then becomes, okay, if we’re not in that range, we’re above that range, awesome. Like I’d say turn off this podcast, but I’m sure we’re going to get into some other things, right? You don’t need to worry about conversion rate, but there’s going to be some other nuggets that you’ll pick up out of this. If you’re below that range, then what is the reason?

12:48
that it is low and it really boils down to one of two things. The first thing is, are you getting the right traffic? So you’re getting traffic, but they’re not converting. And this is where it gets a little nerdy for a lot of people. And they will tend to just say, I don’t want to do that, but there’s a very easy way to understand this. You need to look at. If you’re on Amazon, your ads report, right? What keywords are driving traffic to that listing? And there is a search analytics report in your brand dashboard. If your brand registered.

13:17
I haven’t found that to be very useful, but it can at least give you some directionality. Like because they also include things like where you’re suggested as a product, as the keyword, it’s not quite as useful as what you’ll find on other platforms, but the ads data will tell you the keywords that are driving traffic. And so our very first job, go ahead. I was just going to say, you know, I think we’ve covered Amazon on this podcast plenty. Just curious how you do this on Etsy.

13:43
So it’s the same, the same process, right? So for Amazon, for Etsy, you’re going to look at your paid ads data. And on the Etsy side of things, they actually have a really in-depth dashboard now. It’s their beta search results report. I think it’s called beta search analytics. And that will give you the organic keyword data in the same report format type that you’re getting for the paid side of things. So if you’re getting organic traffic on Etsy, you get a little bit of a better glimpse.

14:11
And so whether we’re looking at Amazon, Etsy, Walmart, right? Walmart has what they call, I think it’s the search insights report is the name of it on Walmart. We’re going to look at that. And our very first job is just to say, is this keyword relevant? Right? Especially if we’re running ads, the, all of the marketplaces tend to open up a lot when we’re running ads to say, Hey, I know that this is a water bottle, right? This is an insulated water bottle, but maybe somebody would refer to this as a coffee mug, right? Just on the off chance. And if Steve is willing to pay for it,

14:40
Chris is willing to pay for it, then we’ll show it for coffee mug. And if he’s willing to keep paying us for it, then we’ll just leave that there. Well, do most people in your mind as the person selling the product think that a coffee mug, which I would type in for like a ceramic mug and a 64 ounce insulated tumbler that you could also use for coffee or the same thing, probably not. So our first job is to say, okay, if we’re running ads on these things, let’s turn those off. If those things are in our title, if we’re saying coffee mug and it’s not a coffee mug,

15:09
because we know that there’s search volume there and somebody could put coffee in our insulated Tumblr, then we need to take those out of the title, out of the description, out of the supporting keywords or out of the tags if we’re talking about the IT ecosystem. So if the conversion rate for that is, let’s say, 5%, would you keep it on there? Like, what are your thresholds for just keeping a keyword on there in the listing itself just for that traffic? And so the answer here is it depends. And it’s a little bit of a gut feel.

15:36
Right? So if we’re getting, if we have one click on an ad, one visit and one sale, I’m gonna leave it on, right? Like, I don’t care about that one visit. What we’re looking for are signs that it’s either well below our average conversion rate. And that’s why we need to know that number first. How well does our listing convert on average? And if it’s dragging down that average, then we need to say, is it relevant? If it is, then we leave it for now. And we can address that at a, at a later date. When we start looking at the listings, if it’s not like coffee mug for coffee Tumblr,

16:06
that’s converting at 5%. I think you said, and our listing converts at 10 % on average. I’m probably going to turn it off on ads or remove it because it’s not converting as well as the rest of the list. The only exception to that would be if that’s driving like all of my sales, right? That’s driving 80 % of my sales. Then I probably wouldn’t touch it. And I’d figure out how to make the listing more about a coffee mug. But the general rule of thumb would be if it’s dragging down the conversion rate, you at least want to seriously consider it.

16:34
Even if that 5 % is still results in a profit overall for that particular keyword? Potentially, right? And that’s why I said consider it. if we think about a different example, are you familiar with what they call flip-flops in Australia? In Australia? They’re different from flip-flops in the US? Yes. It’s another word for women’s underwear, right? It starts with a T, right? And so if…

17:03
That is driving traffic to our listing and that’s not the majority of the traffic. It’s not converting at the same rate. I’m probably gonna take that out if I’m a US based seller. Why? Because when somebody is typing that word in, that’s not what they’re expecting to see. And if I’m paying for that and it’s dragging down my conversion rate, I really need to take that out. Does that make sense? Yeah, yeah, that makes sense. Yeah. So the optimizations that you’re talking about for conversion rate right now is really just weeding out your highest converting keywords.

17:30
And then focusing on the keywords that are actually generating a high conversion rate for your listing, right? Yeah. So the first step there is, we getting the right traffic? Right. And so if we find something, if even if it is the right traffic, but it has low conversion rate. So coming back to the stainless steel Tumbler example, if that’s driving a lot of traffic, but it’s converting below our average conversion rate, that’s literally what the product is. And that then means we have a different problem. And it most likely means, and I’m, I’m bunching a bunch of issues into this.

17:59
But it means that we’re not meeting customer expectations. Right. So they get to the listing. They say, Hey, I’m looking for a 64 ounce insulated tumbler. That’s what it looks like in the photo. That’s what the title says it is. And then they get in and either it’s not 64 ounces or whatever, or there’s something that they don’t like about it. For example, the one that I’m holding right now has a plastic lid. Some people have a massive aversion to plastic, right? So they’d want only a stainless steel.

18:27
64 ounce tumbler. If that’s the case, we can’t really help them with that. But our job then becomes how do we craft our listing to more clearly explain and show what the product is and meet all of the customer expectations. And the biggest place where I see people struggling with this, there’s three main places. One is the title. And typically what we see, and I think, was it three years ago now where Amazon rolled out new guidelines and they said, Hey, can you please just write your titles this way? And they actually created a format.

18:57
where you were supposed to put things in a certain way. But yet it still says water bottle, insulated water bottle, tumbler, yada, yada, yada, yada, yada. And I don’t know if you know this, Steve, but Scott and I over at Creator, we actually ran a survey of buyers on Etsy. We surveyed a couple hundred buyers to get their opinions. And what I’ve noticed is this doesn’t just apply on Etsy because it’s e-commerce shopping behavior. It applies on Amazon, it applies on Walmart. And it corresponds with the changes that I’ve been making over the last year to the Amazon accounts that I work in.

19:25
to see that increase in conversion rate. And what buyers said on Etsy, 68 % of people said that they always look at a title and they rely on it to inform their click. So basically what they’re saying is I read the title before I click. And I think that’s what I want by the time that I get to the listing, 68 % of buyers. So they’re not just looking at the photo, they’re looking at the photo and the title. And if they can’t understand what the title is, or it’s confusing to them, they still might click.

19:54
But then when they get to the listing, it’s not going to match their expectations when they look at the supporting images, when they look at your product description, right? The other downside of that is if it’s not human readable, we’re writing it for the SEO robot, then you lose out on a huge portion of the people clicking through. So they don’t even make it to your listing to be able to convert because they go, I don’t know what an insulated water bottle, water bottle tumbler is, but I know what an insulated water bottle is. And even in 2023,

20:21
So many sellers make the assumption that Amazon is Amazon Etsy Walmart are operating on SEO from 1997 where you have to tell it everything and that they don’t understand plurals, that they don’t understand misspellings, that they don’t understand how to combine words. And I think a lot of that comes from the Amazon ecosystem where Amazon doesn’t really tell you how anything works. Right? Like all of this had to come out by trial and error. That’s how Scott and I met. We met in a, a S an FBA seller Facebook group.

20:50
back in 2013, 2014, um, because that was the only way you could figure out stuff. say, Hey, I did this test and this is what happened right now. There’s all kinds of podcasts that we talk about this stuff. Etsy on the other hand, if you read through their documentation, they very specifically spell out what’s in their search engine algorithm. They tell you what matters and we can then backwards engineer that to apply to everything else. And Etsy who is kind of the smaller player in this says, we understand plurals. We understand misspellings.

21:20
We understand that blue could be blue or any variation of blue, right? Cyan, like what I, I’m sure I just screwed up colors and offended everybody, but like any of the 900 variations of the word blue or shades of blue, they understand synonyms and antonyms. And so we don’t have to try to squeeze all of these things in to please the SEO algorithm. If we focus on creating a human readable title and a human readable product description, and we’re using relevant keywords, even if they’re not the exact same things we’re finding in keyword research tools.

21:49
as long as we’re selling well, we’re going to rank for all of the different variations of those keywords. And so the biggest thing I see or the most obvious thing comes up at the titles. And then there’s two other ones, but it sounded like you had a quick question. I think there’s different schools of thought here, right? So we were talking about ads and of course you don’t want to pay for keywords that aren’t converting, but then on the organic side and the order of the words matters on Amazon, right? Cause so recently I just- on Etsy as well.

22:20
I did an experiment with a data dive, which is Brandon Young’s tool. And I started entering in kind of titles like what you said, and it actually grew that listing almost 200%. Because it’s getting more organic traffic, I’m not paying for it. And maybe the conversion rate, who knows what the conversion rate is for those keywords are because Amazon doesn’t tell you unless you’re paying for them. But it did make a difference, right? Because you’re getting that traffic and you’re getting visibility, which you might not otherwise have gotten. Yeah.

22:49
The question in that case would be, all right, let’s look at your data, right? And see which of those keywords was driving that traffic if we can do that. And chances are, and I would be curious what it is, right? But if you look at Etsy, for example, basically what they do is they take the title and they break each word down into its own word, right? So instead of, if you typed in insulated water bottle, they treat that as two words because there’s a space in between them.

23:17
Which would mean if somebody typed in bottle insulated, you’d pass that test of qualifying, right? Cause you have both of those words. They typed in insulated bottle. You’d pass that test as qualifying. It’s then just a matter of how well you qualify based on the other factors. Does that make sense? And so with, with Etsy specifically, they talk, they have kind of a two tiered system. So the, the first way that it works. And I think I have a feeling just based on having sold on Amazon that they work fairly similarly.

23:45
where the very first thing is like a swipe yes, swipe no Tinder test of are you relevant or not based on the keywords in your title description and tags or title description and keywords, right? If we’re talking about Amazon and all they’re doing is they’re looking to say, do you have the words that the person typed in somewhere in your listing? If yes, then they move on to how much traffic do you have? What’s your conversion rate? What’s your average sell through? What’s your price point? What are all of the other, what are, are the personalization factors that we’re going to take into consideration?

24:13
Have they bought from you in the past? Where should we fit you in? If you pass that yes or no test, that’s when the rest of their algorithm kicks in. Amazon seems to work the same way.

24:25
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24:54
just sign up right there on the front page via email and I’ll send you the course right away. Once again, that’s mywifequitterjob.com slash free. Now back to the show.

25:05
So in your example that you just gave, insulated bottle, if someone typed in insulated bottle and your listing had bottle insulated, the insulated bottle listing would have a leg up over the bottle insulated listing. Potentially. So what Etsy says in their documentation, I, like using your- one knows, but yeah, yeah. Right? Etsy specifically says in their documentation, and it’s a very, you know, it’s a typical like tech company phrase,

25:35
half legal, half almost helpful. It says something to the effect of keywords towards the beginning of the title are weighted more. How close to the beginning of the title? Like how many, what is the beginning? Is it closer than the first half? We don’t know, but what is the most accurate way to describe this? And if we can use that, then as long as we have the other keywords or the other variations of those keywords in our title, description, tags somewhere, search terms.

26:04
then we’re likely to be relevant for it. And that’s when they really start to look at conversion rate and some of the other kinds of things. Yeah, yeah. Yeah, I would agree with that. All right, so we lost track. So we’re looking at the listing and it still wasn’t converting well, even though people were searching for insulated bottle. Yeah, so the first thing is to take a look at that title, right? Is it written in a human readable format to the extent possible, right? I’m not saying don’t include keywords, but.

26:33
Don’t just write insulated bottle, insulated bottle, insulated bottle, insulated bottle, thinking that that is going to be helpful. Right. If there’s 15 different ways to say insulate, you know, uh, 64 ounce insulated travel mug, uh, thermos, if it’s the thermos brand, right. Like any of those kinds of things, just write it in a human readable way where I could read it and have it make sense as a sentence. And then you’re 90 % of the way there in terms of SEO optimization for the title.

26:59
The other two things, and it’s weird to me that this is still such an issue, but Steve, what is the biggest problem with buying something online versus buying something in store? The being able to see it, touch it. Yeah. See a video. it up. Right. Like even, even people who are hyper, uh, aggressive about our future of e-commerce, which I’m one of these people says that you’ll never get rid of retail stores. The difference will be

27:28
Best Buy will stop being a place where you go to buy a TV and they will break it up into the Apple section, the Samsung section, the Sony section. You can actually see this in a lot of places outside of the U S where they have like a brand rep who’s it’s, it’s not the best buy guy. It’s the Sony guy and he stands in the Sony section and he explains to you all of the benefits of the different Sony stuff. And then they send you somewhere else to buy it. They send you to sony.com or they send you other places. Um, that will happen, but we’re also on the e-commerce side of this. And so how do we address that problem?

27:58
There’s two ways that we can address that problem. And both of these are, in my opinion, are criminally underutilized on the marketplaces because quite honestly, they’re kind of annoying when you’re creating the listings. The first one is your images and that same buyer survey that we were talking about on the Etsy side of things. So on a scale of one to 10, in terms of how much it influences the buyer decision, they were rated a 9.23 out of 10 in terms of their influence on it’s the number one thing that influences above price, above shipping costs.

28:28
Above pretty much everything else, that was the thing that drove the biggest influence on their purchase decision. And it’s the only way for people to experience the product online. So instead of just throwing up one picture or a bunch of lifestyle pictures that don’t really tell us anything or give us any more information other than, look, I can carry it while I’m jogging, right? Lifestyle photos are nice, but is there a way that we can use that to tell the story of the product? Can we show them?

28:57
in a product image that our bottle is 100 % stainless steel. has no plastic. Can we show them the inside? Why is that important? Well, what would you do if you were somebody who was very plastic averse and you were going to go buy a water bottle at the store? You’d take the top off and you’d look at the inside to go, this one’s lined with plastic. You’d screw the top back on, put their little product insert back in, and then pick up the next one and do it. I know because I’ve done it, right? The same thing applies to a t-shirt or handkerchiefs or whatever, right? They need to know

29:27
what it is and how it’s going to benefit them. And that translates both from the photos and the product description. And the biggest thing that I see people doing wrong on product descriptions is one, they’ll write like one sentence, right? Or two sentences, they’ll say it’s a 16 ounce insulated water bottle. They’ll basically repeat the title and the, you know, the product features, like the bullets from Amazon. And that’s pretty much it. The downside to this is that the only details you typically get about a product on an Amazon listing are like the technical details.

29:57
So Steve, could you explain to me fabric weights and how that matters? Probably. Do I have any idea what the difference is between two different weights of fabrics? No, unless I can pick them up, feel them and touch them. So too many people write feature driven copy. It has this weight. It holds 16 ounces instead of it keeps your stuff cold for 48 hours, right? Or

30:22
It’s made from this kind of fabric so that you can wash it hundred times and it’ll feel like the first time you ever put it on, right? It’s not that you don’t want to include the details about the product, but you have to include the benefits side of it as to why it actually matters to the customer. They’re not going to know what your special fabric weight is, but they are going to understand that they can wash it a hundred times and it’s going to feel like the first time they put it.

30:44
And if we can take those few small steps that can massively increase conversion rate because then they don’t go, I have no idea what this fabric weight is that they’re talking about. Or I don’t know what a cotton poly blend is. I don’t know what keep cool technology is, but I do understand it will keep my, my water cold for 24 hours. I do understand how it feels when I put it on and that’ll stay feeling like that. So there’s this popular water bottle. And the reason why it became viral was because in the listing, it said fits a full wine bottle.

31:14
and we’ll keep the wine cool all day. That was it. So when you mentioned like 16 ounces, I mean, this thing holds a bottle of wine, which apparently is what a lot of people want, I guess. I think I actually got one of those at similar someone. Did you? Yeah. And I like it. But then then the question becomes what size bottle of wine, right? Like a real wine person would say, well, does it hold a magnum? Does it hold a 750 milliliter bottle? Does it hold a you know, but

31:43
That comes down to what matters and how can we translate it to our customer? And what I see too often on all of the marketplaces, be it Amazon, Etsy, Walmart, wherever. And I also see this more on people’s websites, although it appears to be a little bit less of an issue on your own e-commerce store for some reason, is that they’re saying, okay, it has, you know, it’s made of this type of stainless steel. It will do this. It has this, whatever. And none of the benefits side

32:11
And if I can’t pick it up and feel the difference between yours that has one weight and the, you know, Scott’s that has another weight, which I would do in the store. I’d pick up both t-shirts and feel them. pick up both handkerchiefs and feel them. I’d rub them against my face to see how it feels. Right. Um, then I don’t have any idea what that means. And simply writing something like stain proof technology, right. Doesn’t tell me what that means. But if you show me a photo of somebody pouring red wine all over your handkerchief and then

32:40
you know, do a split screen on the other side of the photo with it coming out of the dishwasher, dishwasher out of the washing machine, perfectly clean. That explains the story to me, and I can then understand this isn’t something that’s going to stain and it makes it easier for the person to make the purchase decision. And that’s that’s really our job as people selling on whether it’s our own website or any of these marketplaces. Our job is to make it as easy as possible for somebody to buy from us. And when we’re not doing a few of these basic things, we’re making it significantly harder.

33:08
because then they have to go through the decision process of, this exactly what I want? And the answer is usually no. And that’s why we see even on e-commerce websites, well-optimized ones, abandoned cart rates around 70%. Why is that? Well, sometimes it’s because their cats build their coffee all over their keyboard or their baby’s crying in another room. But in a lot of cases, it’s because we haven’t answered all of their questions and we haven’t given them what they need to be able to make the purchase decision. And they’re worried that if they buy the product, it won’t meet

33:37
their expectations. What are you seeing in terms of the role of video in improving conversion rates? So that was something that was kind of interesting, at least in the Etsy ecosystem. They only rated that a four out of 10 in terms of importance. OK. I think the reason for that is at least within that ecosystem, it’s not very well used. And what we’ve noticed is when you have a video, at least in that ecosystem, they replace your thumbnail in search with the video.

34:07
which automatically draws some of these eyes in the search results and brings them to your listing. So as long as you’re doing the rest of these things, it’s not as important from a conversion rate perspective on Etsy yet, but it’s extremely important from a click through rate perspective, meaning the people who see your listing in the search results and click on it. If you’re the only one that has movement there, you’re much higher likelihood that they’re going to click on your thing versus just the standard boring product photo. In the Amazon ecosystem, I’ve seen video play a little bit of a bigger role. What I’ve noticed just on e-commerce in general,

34:37
is one of the things we added into our abandoned cart sequences for people who have their own websites are like FAQ videos. So instead of writing out all of the FAQs, which you can still do and you should do in that abandoned cart sequence, if you have a video about a specific product or just generally about your store, that’s a good enough place to start to down record three, four five frequently asked questions about what’s your return policy? You know, what’s the minimum order in the case of you, Steve, like what?

35:06
What are the things that people forget or don’t think about when they’re buying a product? If you have a specific product, then you can focus on answering some of the questions you’ve gotten specifically about that product. Like, look, you know, this water bottle keeps it cold for 24 hours or whatever it is and just reiterate that information. And we then just send that as a link in one of our abandoned cart emails. And we’ve noticed that’s our highest performing abandoned cart email, even over and above some of the like save 10%.

35:35
type coupon offers that you’ll typically see because what are we doing? We’re addressing the questions that people still have, which is the reason that they haven’t purchased yet. If we were standing together and I was looking at all of your, beautiful handkerchiefs, then we could have that conversation. You could say, Hey Chris, this is why it matters. This is why it feels this way. This is what will happen if you stain it. All of those kinds of things. have to figure out a way to have that conversation online and video is an extremely easy way to be able

36:01
So interesting, you use those types of videos in your abandoned card sequence? Huh, okay, I’m not doing that. Might be worth trying. What my suggestion would be, and I tend to see people massively overcomplicate email as well, they’re like, oh, I have Klaviyo or I have Drip and I can create all of these segmentation, start generic, right? Like start with return policies, start with whatever you think would be the reason that people are holding back, and then drill down to like the specific product level. If you have two or three products,

36:31
it’s really easy to do that at the product level. If you have 500 SKUs, it’s a little bit harder to do that at the product level. So for those people, I start a little more generic, just plug that into the sequence and see what happens. I’m curious what else is on the survey. So we talked about the image. Uh, we just talked about video now. Where did the title fall into that? So titles, uh, 68 % of people said that they always read the title and it’s one of the most important factors. I can pull up all of the, all of the data.

37:00
I’m just curious what the highlights are that survey, because it sounds like a pretty cool survey that you guys ran. Yeah. And we got a couple hundred buyers. One of the things that was the most interesting and it specifically pertains to Etsy, although I have seen similar behavior on Amazon, was one of the things that you’ll see is like, no one cares about your storefront because most of the traffic is coming from search to a specific listing. And one of the things that we noticed from that survey data was that actually people massively care.

37:30
about your storefront. It’s not where it’s not what’s going to drive the initial conversion, but if you have something that’s a repeat purchase or you are serving somebody with multiple products. So we have not only the water bottle we have, you know, let’s say it’s for a runner. have a, an armband. We have a bunch of other things that they can buy from us that they are coming to the storefront before they’re actually searching to see if they want to buy from that seller. And I want to pull up the number here. If I can find it.

37:58
just to see exactly what that data was. But essentially it was over 80%. And I think it was 96 % of the most frequent buyers said that that’s where they start. So one of the pieces of data that we asked for was the very first screening question was how many purchases have you made? If somebody said zero, they were screened out, right? If they said 14, I think it was 10 plus, I think is where we left off, which basically means one a month, maybe it was 11 plus.

38:28
Right? So they’re, coming and they’re buying on the platform once a month or more. Those people, the highest value customers were starting at the store front and saying, I’m much more likely to buy from somebody that I already know, because I don’t want to go through the process of trying to find that perfect product. I bought something from you and it’s perfectly logical. If you think about it, right? You’re, buy something for somebody, you know, your dad’s really into fishing, right? And you find a really cool fishing thing on Etsy. find a really cool fishing thing on Amazon.

38:55
something he’s talked about for the last six months since Christmas. Do you think you’re gonna go back to that store for his birthday gift? Probably, right? Do you think you’re gonna go back to that store the next time you need something fishing related? Probably, and that’s the same buyer behavior that we were seeing in the survey. There was a stat that I saw on Amazon, you know, with all the knockoffs and everything happening. It was like something pretty high, like 70 something percent of people actually look at the brand page outside of Amazon before making a purchase on Amazon.

39:24
So it’s pretty page, meaning their website, the website, yes, the website, they click into the brand. They actually check the website itself to see it’s legit before making a purchase decision on Amazon. I mean, I guess that makes sense. Um, yeah, yeah. It supports what you were just saying. And it’s, it really is a conversion rate issue then. Right. And it’s the same thing. They’re checking to see if it’s legit. And I I’ve seen the other thing happen as well. Right. Um, Steve, you’ve probably talked about like Lyft, Amazon associated Lyft.

39:51
where people run like national TV campaigns or they’ll get retail placement or they’ll run Facebook ads and all of a sudden their Amazon sales take off. It’s because they go to your website, they go, I’m not sure if it’s safe to buy from here. And then they go over to Amazon, they see that your product is on Amazon. I’ve even done this, right? Like, I’m getting a weird vibe from the website. You go over to Amazon, you’re like, I’ll buy it from Amazon because I know I can return it. I know I’m going to get it in two days. And I know that they’re not going to do anything weird or shady with my credit card. So it makes sense that that would happen the other way as well.

40:18
Yeah, there’s the halo effect for sure. Incidentally, this is why we always price our stuff cheaper on our own website though, because of that. So the hope is they’ll come to our page and maybe buy from our store, even though they feel more comfortable buying on Amazon. In most cases, people buy an Amazon, they just buy an Amazon, right? But sometimes, wait, Steve, you mean you don’t price it exactly the same on Amazon as you do on your own website and your cost restriction long ago. So I had a phone call last week with a pay with Amazon.

40:48
Yeah, with their team. Uh, we’re rolling that out on one of those sites that I consult for. And they were very offended that it was not priced the same. You know, like we can install this extension for you where it’ll, it won’t pull it from your website. It’ll just pull it from whatever the current price is on Amazon. They made it seem like it’s this big. like, it’s two clicks of a button people like it’s gotta be fine. Um, but you know, we, we do that just because of the difference in fees and the cost of fulfillment, right? Additionally, we offer subscription on most of the people that I, that

41:18
that I consult with, right? The vast majority of my day in the e-commerce world, at least, is spent with companies that operate on a subscription model. Yes, we sell one-time products, but we also have subscription products that people can buy. As much as I like Amazon and I like Subscribe and Save, I’d much rather they subscribe and save on my website. And so our standard pricing is lower than it is on Amazon, and our subscription pricing is lower than our subscribe and save pricing on Amazon.

41:43
And what we’ve noticed is there’s actually a lot of crossover between people who buy single purchase on Amazon and then end up buying and subscribing on the website. So what ends up happening for us is that people might buy one of our products on Amazon, but then they’ll buy bulk from our website because we give special treatment to them. But there was another question I wanted to ask you based on something you just said, why install that pan Amazon button? So we’re just testing it. There there’s three brands under that company. One of them only has two skews.

42:13
And so we figured, Hey, why not? They’re, bugging us about it. Like they’ve been calling us nonstop. I want to see because I’m a conversion rate nerd. Is it going to boost my conversion rate? And if it boosts my conversion rate from paid ads, from email marketing, from all of the stuff I’m doing on my own website, then we just have to make the decision of, well, is it worth it for the little bit of the extra that we pay on Amazon to have them fulfill it? Um, now, since you’re not paying the referral fee or any of those kinds of things, you’re just paying the fulfillment side of it.

42:43
It comes pretty close and we charge for shipping. We charge fixed rate for shipping. So it actually is essentially a wash, um, in terms of our cost. it’s, it’s at least worth the conversion rate test, uh, just to see. It’s been a while since I’d done this because, cause the new button is different than the old button. If you remember, there was a pay by, I can’t remember what it’s called anymore. Uh, did a test pay by Amazon or something. Now it’s a buy with prime or something like that. Right.

43:12
Buy with Prime, Yeah, now it’s Buy with Prime. Anyway, before, very few people were even touching that button. Because people who shop on Amazon, shop on Amazon. People who shop on your store, shop on your store. So I’m very curious what your experiment is like with the Buy with Prime button. Because it seems like, you’re right, from a cost perspective, it’s like a wash. But you are giving Amazon all your data. And it kind of makes them maybe go back to Amazon the next time. I don’t know.

43:40
I’m curious to see what potentially, but the upside of that is unlike somebody who buys from Amazon directly, I get all of that customer data. So they’re still going into my email database. They’re still able to be marketed to directly by us. Right. So to me, if it, if it increases our conversion rate slightly, it’s probably not worth it. If it increases our conversion rate, half a percent, 1 % from paid ads, that makes a huge difference. And then they’re in our ecosystem. And typically the reason

44:10
I can only really think of two reasons people would use that button. And it would be because they want to be able to get two day shipping, right? Or they just don’t quite trust your website, which I think would also be resolved with Google Pay, Apple Pay, right? Some of those kinds of things. But in a lot of cases, those only show on mobile unless you specifically set it to show on mobile and desktop. And all we’re looking at is, is there a way to increase the conversion rate? We know that when we added PayPal, a PayPal,

44:38
Single button option, which is essentially the exact same thing, right? It was the pay with PayPal button versus the pay with Amazon button or buy with prime. The naming at Amazon, you’ll need to you’ll need to figure out the buy with prime thing. You know, it’s essentially the same type of a thing. We saw a big lift like a 20, 20 % lift in our conversion rate with that. And it wasn’t that we lost people paying credit cards. We had essentially the same number of people buying with their credit card.

45:07
We just had a big chunk of people who didn’t feel safe giving their credit card information that said, I’ll do it with PayPal because I know I can cancel it at any point and it’s not going to be a problem. Especially with something like subscriptions, people are really weirded out. Even if you have in big bold letters all over the website, here’s how to cancel. We’ll cancel at any time. We really don’t care. Just let us know. We make it as easy as possible. We send you an email before your subscription is over that says, click this button to cancel it. We try to make it as easy as possible for people.

45:32
but people still have gotten burned once or twice. And they say with PayPal, I know I can just go into my dashboard and click the button and cancel it there. And I don’t have to jump through any hoops. I don’t have to worry about it. So if we see a similar lift with the buy with prime stuff, then I would roll that out to the other sites. But I don’t know that I’m expecting that it was really just to say, Hey, let’s try it. It’s like five lines of code and we have the product at Amazon anyway. Let’s see what happens. And then let’s see how our inventory levels are affected. If it does.

46:02
That is my biggest concern with it. Um, because as well as we are converting, we have trouble keeping inventory in stock at Amazon because there’s like a thousand units at any given time that are just floating around their ecosystem, not available to be sold. And so if we, if we do see a big jump in the number of orders from the website, you’re talking to another, you know, at 20%, 20, 30, 40 units a day that would be coming out of the Amazon inventory. That then becomes a potential issue that we would have to have to deal with. Cause

46:30
the last thing I want to do is run out of inventory on Amazon and have them not be able to buy it on the website where they already are looking to make the purchase. So it’s interesting. PayPal is actually a third of our sales, I would say, because people don’t want to type. But did you know, and I just kind of discovered this to hardware, I didn’t realize that PayPal charges three and a half percent when people pay by PayPal, unless you negotiate that down.

46:57
Which is not surprising. Yeah. They’ve always been high. I thought so they charge. Okay. Yeah. So commercial transactions is a 3.5, right? Yeah. And then if you’re just sending money, it’s the, the like two, two and a half or whatever. 2.9. Yeah. Yeah. Yeah. So you can negotiate all that stuff. I just went through this because I thought I had great rates with PayPal. It turns out like right before the pandemic, they raised the rates and

47:24
Apparently I didn’t get the email. I was thinking that, and I don’t audit my credit card reports all the time. I just negotiated a really good rate. Yeah. That is something that is hidden money for people. That’s something we did this year in two of the three brands that I was just talking about. And it was kind of a fluke because it wasn’t something we were thinking about doing. And then I started digging into the report and I said, these fees seem really high. And so we went to a bunch of different people and we’re now paying, I had to look at the number, but it’s less than, it’s less than 1%.

47:54
Um, and all it was pressing to a, yeah. Now when you, when you actually add it up, right. Because typically what you see is you’ll see like the Stripe, which is, know, 2.49 plus 20 cents or whatever it is. Right. When you go to break it out, there’s the actual credit card processor. And then there’s the merchant account fees, Stripe, uh, Braintree, like they’re all integrated. So you’ll see that as a flat rate, but I think with everything added in, it added up to like.

48:24
1.9 or 1.2 that sounds about right. You’re on interchange plus pricing probably. Yeah, and we’re just using Wells Fargo now because that’s who we had a business relationship with and it took an extra 30 seconds to set up because we already had a merchant account and so we’re just using them to handle the credit card transactions and they were even willing to negotiate on some of the things like charging you for failed payments. Right? So they

48:52
And want to say it was 20 cents, I think is what they were charging for like any credit card attempt. Is it well, like, okay. So we, run on a subscription basis. If you guys don’t correctly update the credit card information, when they have a new card, that’s going to run and that’s going to cost us 300 bucks a month. I know that doesn’t sound like a lot, but 300 that’s $3,600 a year. Like that’s a substantial amount of money, especially if you’re a smaller business. And I said, oh yeah, let us, let us look at that. And so we, you know, we weren’t able to get it to zero, but we were able to get it down on failed payments.

49:22
And on a few of the other things where we said, look, like there’s a chance that it’s going to run two or three times before they update it. If you don’t actively update it, like you can do in Braintree and Stripe, they’ll automatically update somebody’s card with your number when it’s issued. Wells Fargo wasn’t so sure if they were going to be able to do that. So we were like, that’s going to be an issue for us because that’s $3,600 out of our pocket plus the lost order. But a lot of that stuff was able to be negotiated. And honestly, it was probably an hour’s worth of actual work to do. And I don’t know about you, but I

49:49
I’d like to save $3,600 a year or whatever it is. I think in our case, we reduced it by almost one and a half percentage points overall. Yeah, we reduced it about a 1 % and that’s like, you know, that’s like tens of thousands of dollars every year. The only reason why I brought up this up in the first place is if you get a lot of PayPal payments because of what we just both talked about, go with Braintree because then you can actually negotiate your PayPal rates in addition to your credit card rates and they do offer interchange plus pricing.

50:16
which is hilarious because they’re owned by PayPal now, right? Exactly. It’s the same company, but they don’t talk to each other. But that’s, I like Braintree. I’m a fan of Braintree. I’ve used Stripe in the past. Braintree just seems to be a little bit easier to use. And you have some of the advantages like the built-in ability to use PayPal without having to have a separate account and worrying about that and the ability to negotiate some of those fees. So yeah, yeah. I’m a fan. Yeah. Chris, I don’t want to take up too much.

50:45
more of your time here, but that was great. Is there anything missing on that survey that you wanted to mention before we shut this down? So I’m scrolling through it right now just to see. Oh, so reviews. This is a big one on, uh, on Amazon, on Etsy, wherever they rated a 7.69 out of 10 in terms of how important it is for conversion. However, only 60 % of people say that they always read reviews.

51:12
41 % of people said it depends on the product. So if they really want the product, they’re not going to look at the reviews. If they’re kind of on the fence about it, then they’re going to do it. Shipping costs would be another big one, right? 70 % of people said that they would absolutely be willing to buy a product if they had to pay for shipping. So it’s not a huge deal. And what we’ve noticed, at least on our own website, is we’ve done the best with flat rate shipping. We charge a flat $5 for most of that stuff.

51:42
And we, we raised it. was, I think was 3.99. So it was $4 a year ago. No effect on conversion rate, no effect on anything. Not a single, we even sent an email to our entire, a transactional email, letting people know that the shipping costs were going up. Didn’t get a single reply to it. Nobody even blinked at it. And it hasn’t affected our conversion rates moving forward, even with brand new customers. And so if you’re afraid to charge for shipping, don’t be, just make sure that it’s part of the value of the product.

52:11
Right. You may see a slight decrease, but people are not that worried about it. Pricing, uh, 80 % of people said price is only one factor that they consider. So a huge mistake that I see people making is that they want to be the lowest priced option, or they do some price trickery, right? They’ll offer some variations and

52:33
They’ll put in a low price variation that they know no one’s interested in just to have that be the price that shows up in the search results, right? Where it’ll say from $4 and 99 cents. And then you get in to buy your t-shirt and you realize it’s a, it’s a baby small or whatever that no one is actually ever going to buy because it’s a t-shirt about drinking beer. And that’d be a really weird thing to buy for your toddler. But they do that. You don’t need to do that. Only 13 % of people said it’s one of the most important.

53:01
And about 5 % of people said that they’re not worried about it at all. Um, we had, we, we did talk about the likelihood of visiting a seller page, 73 % of people, uh, or sorry, it was, uh, yeah. How likely are you to visit was 73. So 7.35 out of 10. Um, that’s just the, like the, generic about page, right? So your shop, but then if they had purchased from you, that jumped to an average of 85 % where they were coming in, looking at the shop.

53:30
So 8.5 out of 10 on how likely they are to come visit a shop they have previously purchased from. Where that gets really interesting is where you and I started talking about this and I wanted to pull up the data. I wasn’t just making it up. It was 96%. So people who bought one to five times on the platform were 80.2 % likely to purchase from a shop they had purchased from previously. If they made six to 10 purchases, that jumps to 89 % likelihood. And 11 or more purchases in the last year, 96.3%, right?

53:59
So if you don’t have more than one thing that somebody can buy from you, you’re making a huge mistake. it is that you’re selling. think the, uh, I think Bain and company did a similar study. If they bought once, they’re like 65 % more likely to buy again, which is kind of in line. Your, your, your stats are higher, but it seems to be in line. Yeah. And again, it could be sample size. could also be how generic the question is. Right. And if you’re talking about something like Etsy,

54:27
The shops are either very generic, right? Where they sell every t-shirt ever made or they’re very niche specific. And if they’re very niche specific, there’s a higher likelihood that somebody can come back and find the thing that they’re actually looking for. And that’s one of the reasons I think it is, it probably skews a little higher on Etsy than it would somewhere like Amazon or just market in general. But you’re talking well over 50 % of people who buy from you want to buy from you again and want to buy other things from you. And if we can

54:54
offer those, then that’s automatically going to increase our conversion rate and our sales because they’re coming back and they’re starting by looking at our storefront. And I’m just going to say this is kind of conclude here. I think in the way you make an e-commerce business profitable is through your repeat business and cross-selling of the products because it costs a lot of money to get that first purchase. And it’s through getting that first purchase and just, we’ve been doing this for years. Most of our sales actually comes from people who who’ve already purchased from us. So

55:23
You’re doing yourself a disservice if you’re just selling a single product and not keeping track of your customer’s info. Correct me if I’m wrong on this to you, but didn’t you a few years ago, go back through your entire database and just try to figure out who your best customers were. Yep. Yep. That was us. Yeah. To figure out how and why these things matter. Yes. I know there’s a way to do it in Klaviyo, but Drip just rolled out something a couple of months ago that I think is really cool in their analytics tab. And I actually moved.

55:53
I’ve moved a few people from Klaviyo to Drip specifically so I don’t have to dig around. like another one in itself. For the metric. Um, because they have really good analytics that are actually human readable now, which is like mind boggling to me. Um, and I know you can get it. Let me see if I can find it. Uh, uh, and they call it, uh, they call it champions. And so they give you a breakdown inside of your, your Drip dashboard now of exactly.

56:24
how many people are driving what percentage of your revenue and how like what the breakdown of your database is in terms of top customers versus average customers. And it gives you a really good baseline to say 80 % of my revenue is dependent on 2 % of people or, whatever it is. And that was one of the realizations that I have, you know, our, our customer champions, which were the top customers were, I think it’s, 7 % of the database. And that was like 80 % of the revenue, which is, wow. It’s a little skewed, right? Yeah. And

56:52
But it’s because it’s subscription, the longer they’ve been in the database, the more revenue that they contribute. So I was like, okay, I feel a little less weird about that. Right. Cause the people who have bought from us once probably haven’t had even a chance to subscribe yet. We just ran a massive promotion that brought in a whole bunch of new customers, all of these kinds of things. But the, the analytics inside of drip give you a really easy to read breakdown of that for people who aren’t numbers people where it says, here’s how many orders they have. Here’s how many orders a regular person has. Here’s how much revenue they’ve generated. Here’s how much revenue.

57:22
an average person generates. And here’s the percentage of how that makes up for your store. And that gives you at least a baseline to operate off of. So I thought that was kind of cool. Nothing against Klaviyo love Klaviyo, but the fact that it’s that easy to see in a very easy to understand dashboard format inside a drip, I thought was, was really cool. Um, and it makes my job a lot easier cause I don’t have to go build reports and do any of those kinds of things. Yeah. Just focus on the thing, which is making more people high value customers and keeping fewer people as one off orders.

57:51
Cool. Well, Chris, man, thank you so much for coming on the show. I learned a lot actually from talking to you. And the stuff that we talked about here really applies to all marketplaces and all stores. So thank you for that. Absolutely. And I did want to ask you one last thing. Where can people find more about you, the work that you do, the content you create, or if they just want consulting from you? Brandcreators.com, the Brand Creators channel on YouTube or the Rock Your Brand podcast are all great ways to get in contact with me.

58:21
support at brandcreators.com. If you have any questions about the data, any of those kinds of things, or if you’re just trying to figure out what’s going on on Etsy, you’re interested in that. If you’re trying to figure out what’s going on with Amazon, you have a question. More than happy to answer it there as well. Cool. Well, thanks a lot for coming on, Chris. Appreciate you. brother.

58:39
Hope you enjoyed that episode and I hope Chris gave you some tips on how to make more efficient use of your time and how to maximize your marketing dollars. More information about this episode, go to mywifequitterjob.com slash episode 507. And once again, tickets to the Seller Summit 2024 are now on sale over at sellersummit.com. If you ever want to hang out in person in a small intimate setting, develop real relationships with like-minded entrepreneurs and learn a ton, then come to my event. Go over to sellersummit.com.

59:07
And if you are interested in starting your own eCommerce store, head on over to mywifeputterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.

00:00
You’re listening to the My Wife, Quit or Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. today I have my good friend Mike Jackness back on the show, and Mike is the founder of EcomCrew and he owns many e-commerce brands. But one of these brands Mike and I own together and we recently had an exit. So in this episode, we’re gonna talk about this brand and the painful details of the exit.

00:26
But before we begin, want to let you know that tickets for the 2024 Seller Summit are now on sale over at SellersSummit.com. The Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, mine is a curriculum-based conference where you will lead with practical and actionable strategies specifically for an e-commerce business. Every speaker I invite is deep in the trenches of their e-commerce business

00:55
entrepreneurs who are importing large quantities of physical goods, and not some high-level guys who are overseeing their companies at 50,000 feet. Now, I personally hate large events, so the Seller Summit is always small and intimate. Every year, we cut off ticket sales at around 200 people, so tickets sell out fast, and we’ve sold out every single year for the past eight years. If you’re an e-commerce entrepreneur making over $250k or $1 million per year, we also offer an exclusive mastermind experience with other top sellers.

01:23
The Seller Summit is going to be held in Fort Lauderdale, Florida from May 14th to May 16th, and right now, this is the cheapest the tickets will ever be, and prices will be going up after the holidays. Also, if you haven’t picked up my Wall Street Journal bestselling book, The Family First Entrepreneur yet, it’s actually available on Amazon at 38 % off right now. My book will teach you how to achieve financial freedom by starting a business that does not require you to work yourself to death. Plus, you can still grab my free bonus workshop on how to sell print on demand

01:53
and how to make passive income with blogging, YouTube and podcasting when you grab the book over at mywifequitterjob.com slash book. So go over to mywifequitterjob.com slash book, fill out the form and I’ll send you the bonuses right away. Now onto the show.

02:14
Welcome to the My Wife, Quit Her Job podcast. Today, I’m thrilled to have a regular back on the show, Mike Jackness. Mike and I, we’ve been good friends for a very long time. He’s spoken at Seller Summit practically every year. I think he’s only missed one year. He’s been on the podcast many times, and we were even investors together in an e-commerce company which recently had an exit. And in today’s episode, we’re actually going to talk about this company that we recently sold and more importantly,

02:42
What’s in store for Mike going forward because he recently sold a number of his brands, laid off some members of his team. We’re going to talk about the future of e-commerce and AI. What’s up, Mike? I don’t know, man. I had some of that sweet, sweet Steve Chu money for a while and I had to give it back. So I’m a little sad over here. Yeah. Well, see what the people listening do not know is that you’ve had a really rough life these past couple of years.

03:12
trying to sell this company. Relatively, right? mean, like I’m not digging ditches and not living life for poverty, but yeah, it’s been, it’s been really stressful. mean, uh, and nobody wants to hear about it. So you got to kind of like, you you keep it to yourself and, and fight through it. I think this is what we sign up for as entrepreneurs. Like, uh, it’s, it’s not a straight line up until the right. It’s a roller coaster. Um, and yeah, I mean, the last year and a half particularly was, was really tough on me. I mean, it just, uh, you know, things happen.

03:43
one thing happens after another. just we got in this situation that especially from a business life standpoint, things were kind of like an all time low. I would say over the last 20 years, I quit my job 20 years ago, almost exactly now it’s kind of crazy. My anniversary for 20 years is coming up in January in 2024. And so, you know, look back at the last 20 years and yeah, I this was one of the one of the harder ones for sure. Yeah, because I was thinking to myself, it’s all about timing.

04:13
Right. If this had happened or we wanted to sell just a year before we were being golden. I mean, really just a couple of months, which is crazy. Yeah. So, uh, you know, without being a elusive, we can kind of talk a little bit about exactly what happened, but, uh, you know, you and I, like you mentioned, kind of, bought a business, um, with a bunch of other people. it was, guess we can kind of talk about the people that were involved, but Andrew Darien over at e-commerce fuel, he had put together like an investment group.

04:40
And we knew a mutual person that was selling a business and I was looking for something to do with the time. And so we all agreed on was I would run the thing for one year and then put in a new CEO to kind of run out the clock. We had a three year timeline. So the idea was like, I would go in there, do some discovery, kind of put together a plan, work on some initial stuff, put together a playbook for a young hungry kind of CEO person and mentor them. And then I would move on to another thing and they would

05:10
uh, take the baton and run it for the rest of the time. Uh, when it was happening was after the year was before you go on, when I heard about all this stuff, how you’re going to be running it and transitioning. I didn’t, I didn’t tell you this, but I knew that that wasn’t going to happen. Right. That was like way too optimistic. mean, looking back, or, know, it’s tough, right? Cause we, we, uh, made a decision to sell it and not even try real.

05:38
not really even try to find somebody else. I we started trying to find somebody else and then very quickly thereafter decided to go ahead and sell it. And I was like, well, if we’re going to sell it, like I’ll stick around. so it’s hard to say what would have happened. Yeah. I mean, it’s probably, you know, realistically, probably optimistic to find somebody that’s going to do as good of a job, you know, for a salary or whatever. Yeah. I don’t know. Like it’s, you know, if you were to ask me the question point blank, would I ever do something like this again? The answer is just.

06:06
No, absolutely not. And so, you maybe that means in my heart of hearts, I feel like it would have been tough. yeah, regardless, you know, after that first year, we were like maybe 14 months into it, we had just put the job posting up, we were kind of exploring that. And then we had our little board meeting and we started talking about things. basically, what ended up happening was we were like, look,

06:31
We have already increased this business so much in this last year, increased the enterprise value of this business that we can sell it right now for what we were hoping to sell it for in year three. And the conversation basically was like, look, we’ve all been in business for long enough to know, like never look a gift horse in the mouth. There’s investors involved in this thing. There was a SBA note involved as well. Why not take the win? Book the win. Go back to all the investors, like cheering and celebrate.

07:00
And then maybe move on to the next thing. Maybe there’s another, another deal on the horizon. And so like getting an early win was important to all of us. And it made a lot of sense. And for me, was like, yeah, this is, this is great. We can, uh, you know, sell this thing now. It was a really good meal. The timing basically was you put it up in, in February of 2022. And so coming off, uh, you know, we had, we didn’t have any COVID let downs or, it wasn’t any, you know, issues with that. So we put the thing up for sale and, uh, and I thought I’d be done.

07:29
by the summertime of 2022 is kind of what, that looking back at it, I would still believe because normally that’s what happens, right? But we just ended up going through just a really crazy chain of events that I don’t think will ever happen in my life again. I mean, it was just really hard to predict. And so what ended up happening was we ended up getting under LOI with a strategic investor was kind of the dream, right? It was a strategic investor. They offered us above market value.

07:59
The only downsides really was that A, we knew the due diligence process was going to be very difficult because they hired four separate companies to do due diligence because it was a private equity firm that has rules whenever buying a business, no matter how big or small. We were like a little aunt to them, but they had to still do the same due diligence process as if it was a $100 million or a quarter billion company. So we went through that kind of due diligence. We knew that was going to be difficult and they weren’t.

08:27
willing to waive that process no matter what. So that was like a downside. The other downside was they wanted me to come work for them for a period of time after closing the deal. But for the amount of money they were offering, I was willing to do it. I mean, I was like, you when I signed up for this thing, you kind of take other people’s money and you’re taking on some responsibility of having to be fluid and things in life, right? Like, it’s just like, if it was just me, I’d be like, hell no, I’m not going to go do that. But like, when you have a bunch of other people

08:56
that you’re trying to produce returns for. was worth it for me to go do it under those circumstances. And it was going to be financially rewarding as well. Like it wasn’t like I was going to take $5 to go work for them. were offering a good package and I was willing to go do it. I was like, this is awesome. I’m going to make a bunch of money. Investors are going to make a bunch of money. You know, I’ll have to go do this for a period of time, six months to a year afterwards. And I was good with that. But what I’m happening was the economy started taking a dump. Yeah. Like right in the middle of all this.

09:25
So we did the due diligence, get to the end. They signed off on everything. They’re like, we accepted the due diligence, but we’re not putting any money to work anymore. know, interest rates are up, stock market’s gone down 40%. A lot of our money’s in the stock market. We’re freezing all investments. And basically too bad on all the effort you put into it to this point. So, you know, it’s tough. It’s a tough spot to be in. And for me personally, the thing, this is where like the year kind of

09:54
timeline of things getting just kind of dark for me personally. Um, you know, first of all, going through due diligence sucks. was the one that had to go do it all. Um, you know, you think you like mentally you’re like checking out of this business. You’re already thinking about like, are you going to spend the money on? You it’s like, it’s just, these are all like human nature things. Like I’m going to go do this or that the other, next business I’m going to do whatever it is. And, uh, and the investors we’ve already communicated to all of them, like this was about to happen. And then you got to go like back and be like, Oh, sorry, the deal didn’t happen.

10:24
you know, and retrace all your steps. And it was just, it sucked. mean, so we put the business back up for sale and now it was like, okay, now I’m like, now what do I do? mean, now I’m six months further into this thing than I was supposed to be. And just in a bad, you know, in a bad spot, like I didn’t want to walk away, leave everybody in a bad spot. And so was like, well, just put it back up for sale. Like the next person’s going to buy it. So we went back to the same buyer poll. They were an SBA buyer. got under LOI relatively quickly.

10:53
got through due diligence, got all the SBA deal approved and the, you can’t make stuff up category. The SBA bank that was funding the loan got acquired the week that we were supposed to close and they couldn’t close in the deal. So they passed it off to another bank and it was like, it was all done. So was like, it was just going to be a week or two. We got to like get through the paperwork and the other bank will fund it in a week or two. It’s like, okay, whatever. I’ll be done with this thing by the end of October, beginning of November.

11:22
The guy that was buying the business was super frustrated, went out for a hike, got bit by a tick, got Lyme disease, ended up in hospital, really, really ill, couldn’t close on the deal. How random is that? Right? How random is that? Like all of it’s so random, right? Like the bank getting bought at that exact moment, him getting bit by a tick, getting that sick. Cause I mean, Lyme disease obviously comes in a variety of different, you know, levels of sicknesses and stuff. And he was just in really bad shape. Yeah. I mean, it, it sucked. Cause like now.

11:51
Now it’s November. I’ve been through due diligence twice. There’s things I wanted to do in other parts of my business, which we’ll talk about here in a little bit. was starting to get frustrated with some other things. I wanted to make other moves in my business. But the danger of having commingled resources is that now you’ve tangled things up and that’s kind of what happened. Even though they were completely separate, they weren’t really commingled. They were working out of the same office building.

12:19
you know, and they knew each other. And when I went to the Philippines, the visit, which I did usually about once a year, we’d all kind of hang out together because you’re only there so often. And, you know, I look back at that and look at what a mistake that was because, you know, it made things more sticky for me personally. do mean by that actually sticky? Well, just well, I mean, again, if you have people talking, let’s just say like, you have something going really bad in one part of the business. So you want to fire a bunch of people or make a change with like benefits or do

12:48
anything, they’re all going to talk to each other. And so it’s just like, whatever one set of people does might affect the other set of people. And the other set of people that you have, the people that were working for the business that, that we own together were actually my favorite people. They, they did a great job. Um, you know, and, uh, I liked working with them and also, you know, I had on my back and, know, the, things to think through for people out there listening. You, don’t think through all these things, but, um,

13:18
I was always just really worried that something that I did on some other part of my team could affect this other team and cause people to quit and cause a riff over there. And it was an extra stress point that I certainly didn’t need to put myself into. just to be clear for everyone listening, Mike runs a bunch of his own e-commerce companies. And then this one that we bought together had its own team, but they were all living under the same roof.

13:44
Is that record? Okay. mean, they were physically living under the same roof. We weren’t sharing, know, they were, used the employer of record to hire everybody. So we were a registered company. So they were hired under a separate contract. They paid separate rent. know, they had all their separate, everything was paid separately. There was nothing completely coming, but they physically worked in the same building because it actually just made things a lot easier. We already negotiated a lease and you know, all these different types of things. so,

14:13
Yeah, I mean, I guess the problem is the thing that’s like really tough, you know, when I, cause I do like to look back at things and learn lessons. Um, you know, if not for my existing team, I don’t think that this deal that we did would have worked out as well. Cause the way that it started is I put my best team members like on this thing on day one, right? Like, Oh, I have the luxury of having this other team that already exists. I’m going to have my best three people.

14:38
start on this business with the intention of within three to six months, getting them off of that, right? It was basically, we don’t have any employees yet. We’re going to hire some people. We’re going to have my existing employees train them and kind of supervise the whole thing, do some work in the beginning so we can hit the ground running really quickly, which we did. It worked out great. And then eventually I’m to take all these people back and by the time we sell, like there’ll be a, it’ll be a distant memory that we did that, which it was, and we’ll have our own team. And so we had what seven people that had been

15:08
working just for this business when we sold it, that we’re separate. But again, they all talk to each other, like they all knew each other. And that’s where, and that’s where things got complicated, you know, and, and, know, I don’t know how I would fix that moving forward. just would never do it again. mean, period, but, uh, it was something that I just didn’t quite think through. And I didn’t think that this, uh, circumstances was going to come up either. It was kind of a weird light. You know, I thought, Hey, after a year, I’m going to be out of this thing. The new CEO will be.

15:37
talking to them will separate it even more like Mike won’t even be involved anymore. And that like never materialized. And so yeah, it definitely it definitely made things a little complicated. then the final offer that went through was that the one that was wrapped through the Lyme disease guy. So we ended up that thing fell apart in November, like late mid late November. And we’re like, well, we’re not going to put this thing back up for sale now in December. mean, right, talk about an awful month to put it up for sale.

16:05
We’ll just put it back up in January. So January of this year, 23, we ended up actually listening it in 20 or February 23, got under LOI again, went through due diligence again, and that buyer fell out as well. don’t even know if I had- By the way, in case any of guys are listening, I didn’t do any work. was just a passive investor. Man, it’s pretty much typical Steve Chil. Didn’t do any work.

16:31
driving his kids around the volleyball, playing pickleball, playing tennis, going to the gym. And I’m skinny and fat or, know, skinny arms and fat belly and he’s got skinny belly and big arms because he lifts every day. Yeah, so I was just like, listening to all this on the sidelines. And, you know, just cheering you on basically. So I didn’t realize there was another deal that fell through. Yeah, yeah. And it’s, know, I mean, this is kind of like where things obviously start to turn better, but

17:00
Uh, got through due diligence. Um, and the buyer just basically was like, this business is too complicated for me. Like I, he was wanting to buy it because he was located in the same state as the business, like just close proximity, but you know, this was like the perfect e-commerce business for him to get into. He had already been in e-commerce before and sold it and wanting to get back into e-commerce and thought this was like a perfect, uh, like real estate plus business play. Cause he wanted to also try to buy the, uh, the warehouse, which the landlord was, was willing to talk about.

17:30
And so, but at the end of the day, he was just like, it’s too many skews. It’s too many moving parts. This is just too much for me and I’m backing out. then like three days, within the next couple of days, it like, where things like turned the corner really, really quickly. We got super lucky. The SBA banker for the deal was like, look, I already put a ton of work into this thing. Like this business is a great business. Like instead of being 20 % down, which is what we originally thought I was going to be, he’s like, I can do

17:59
guaranteed we can do 15%. Most likely we can do 10 depending on the buyer. So we now open up to a bigger poll of people. Again, super strong financials, lots of long history, great solid business. It was never a problem with the business. was always just like, again, that’s what’s front. It’s one thing if you got a bucket of bolts and you know it, and you’re going through this because you know what’s gonna be hard. It’s another thing we have a really solid business and this is happening, which is what our case was, which is just truly bad luck.

18:28
And the banker was like, look, I know somebody that I think that will buy this business. Like I sold him another business. He’s looking for another one right now. And this meets like all the criteria that he’s looking for. And he referred this guy and this was like March now of 23 by Tommy. Maybe it was even April. And we closed shortly after seller summit. We almost closed, but actually, think we actually signed the paperwork at the final talk. As you were talking about you being on the New York times best seller.

18:58
I was doing the docu-sign to sign the paperwork and we closed officially a couple of days after that. Dude, that’s nuts. That’s like the fastest close ever. It was really quick. Right? It was really quick. mean, for an SBA deal, it was super quick. But again, remember, due diligence was already completed. He accepted the due diligence of the other buyer because it was already done. It had just been done and it was by a reputable due diligence company that we all know and have used in the past. So he’s like, I’ll just use that report.

19:26
Like I don’t need to go do due diligence again. I mean, it’s three days old. And he had some other questions and things that he wanted to follow up on obviously, but like the due diligence process was days, not weeks, not months. The banker had already done all the paperwork. He had already gone through the financials and got the, you know, all the whole packet done for the bank and to get qualified for SBA. So we were able to just basically hand off the baton. You know, we lost a couple of weeks as the buyer had to do all his paperwork and

19:56
Um, you know, so that it did take some additional time, but yeah, I mean, it closed really, really quickly from there. And, know, finally it was like just this gigantic breath of fresh air. Cause the guy is like, awesome. Like, I mean, I hope to continue to remain friends with them. Um, you know, would run in the middle of traffic for him and do anything I could to help him out. And he just, uh, his, his fall through on every promise done a really great job. He’s kept all of our employees. seem to enjoy working with him, which was important to me. Yeah.

20:24
Again, he bought a really solid business and I think he’s going to do very, very well with it. Like I think, you know, we, had our set of circumstances while we wanted to sell it, but it didn’t mean that it wasn’t, we weren’t looking to sell it because we’re like, Oh my God, like this business is about to fall apart and it’s a bucket of bolts and trash. And like, we need to sell it before anybody figures it out. It had nothing to do with that. It was, it was a solid business. We had bought it as an investment. We met our objectives and it was time to move on. Like I wanted to move on. You know, it’s who knows what you’re going to get an unknown quantity of

20:53
a quantity of another CEO to put in place. And it was just like, it was time and it ended up working out finally in the end, you the disadvantage for me and why I would probably not do something like this again, unless it was like the only thing I was working on. Cause like, I will talk about that. I’m kind of like getting to that point in my life now, but you know, it really stuck me in a bad spot of like not being able to start something new.

21:20
Cause I knew I wanted to go do something new, like, you know, I wasn’t making any extra money out of the deal by staying on for extra time. So it was kind of like, I’m getting diminishing returns on my time, which, you know, as you get to be closer to 50 is kind of a terrifying prospect. And there was other things I wanted to do on my other businesses, like desperately wanted to like make some big changes over there and felt kind of tied up and not able to do that. so,

21:45
But in the end, I’ve had some time to reflect. We closed on June 2nd. We’re recording this at the end of August. It’ll probably go out in September or something. I’m really thankful. Again, 20 years of being in the business, this could have worked out way worse. It could have been like, our Amazon account got suspended in middle of all this, or things started having a huge downturn.

22:11
We, we couldn’t even return investors money or we had to return partial investor money, like at a loss or, who knows? Like there’s all kinds, or we could have got, you know, I could have gotten in a big fight with like Bill and Andrew or something and just like, you know, whatever that would have happened. I mean, you just never know. Right. I mean, there’s a whole bunch of unknowns, right? You think you know somebody, but like, there’s been, there’s been times in my past where you think you know someone and they steal a million dollars from you. So, I mean, it does happen. Right. And so, you know, I think.

22:40
you all in all, like I’m super thankful that, and I, I’m glad I did it. Like, you know, if I had to pick, you know, God, I was a mess and I really wish I never did this thing or, you know, I’m happy in the end, you know, I can only pick one of those two things. Yeah. You know, it’s weird to say like, I would never do something like this again and also be happy with the outcome. Cause, you know, it’s exactly where I’m at. Cause I think, you know, without

23:08
experiencing some of this stuff firsthand, it’s hard to ever make decisions moving forward. And I think we’ve developed some good friendships and other things. never, you never know where things go in life from here. Right. And, we did okay. Like, I mean, we actually still returned above. was happy with the exit as someone who’s put so much time into the, to the deal. Right. All that hard work. And it was during a time where the S &P 500 was like 2 % return over that time. Right. mean, annualized. And so we, did,

23:38
you well in it well in the double digits returns. So yeah, I mean, I don’t know, like, again, I’m happy the way things worked out in the end, I know it could have been way worse. And, you know, move on to the next thing. Let’s talk about the aftermath, because you end up laying off your entire team practically almost in the Philippines, and then you sold all of your e commerce brands except for one right? Yep, that you’re holding up. What’s going on in your mind with that move?

24:10
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24:39
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24:50
Yeah, I mean, it’s a bunch of things, man. I mean, it wasn’t any one thing. It was kind of like just stacking things, right? And so, you know, I think in general, you know, I’ve learned a lot about e-commerce over 10 years and the types of products and brands and things I’m going to be running. And the ones that I had were not, they didn’t really meet any of those criteria. you I made some decisions in years past to buy things or start things.

25:21
with the best of intentions and actually got lucky. mean, all of those brands did well and made money over those years and I sold them for good money. But not what I want to be doing moving forward. I love the old like Wayne Gretzky quote of like, should be skating to where the puck is going, not where it is. And so I think in terms of what, so what does that mean? Like what’s going to change in e-commerce? Well, like, you know, I think that these me too products, like the things you just find off of Alibaba or the Canton fair and sell them on Amazon, I think that

25:50
like the walls are closing in on that like relatively quickly. If you don’t have some sort of moat or defensibility. And so like you look at what you’re doing, like this is perfect example. Like you have moat and defensibility, like you have the equipment and the manufacturing like they’re like locally, you can make things on demands, I think that that’s a great business, right? I mean, like something that I would want to get into and do the business that we sold actually, I think is another great business. had its own warehouse and facility doing some light assembly and final assembly stuff to get it into Amazon.

26:19
really builds a mode around the business prevents other people around the world from doing the same business. Even though it was kind of commoditized products, having that final assembly point and being nimble is really what made the business very successful. The other types of products, the businesses I sold and the things I’m looking to sell, I think that you look at what my mode’s been to this point, why are those businesses been successful and being able to sell millions of dollars with the products over the years? Well, mean like,

26:48
we were first to market or close to first to market that helps. So we have like a review note. We put up really awesome listings. Like we take really great photography. We write really good copy. I optimize the listings really well. And that that’s actually been a really big differentiator for, for multiple years. But then you look at AI and you know, it’s not that I like it, but again, I, I, I, another book I love is who moved my cheese. And so like, think

27:16
you know, the reality is as things are changing, people in China or Pakistan or India that don’t take really great photography and don’t have the ability to write really great copy are going to be able to do that now as good or better than me with these AI tools, right? And so the note that I currently have is there’s dump trucks just doing backfill every day and slowly filling that thing in, right? And so what can I be doing moving forward that

27:43
that just pure listing, copying, imagery alone, you know, doesn’t give me that advantage. So I gotta be thinking about other things like intellectual property or some, again, manufacturing or things that you and I have talked about a couple of things that I’m really interested in doing moving forward. And so, you know, that’s also been coupled with the idea and just realization, you I think, again, you see patterns in life. I mean, the reality is, that the same pattern happened in the poker space. I did online poker affiliate marketing.

28:12
You know, as when I first quit my job, that’s what I was doing in 2004. And so, you know, I did the same thing then that I did in e-commerce. I started a site. I was the only person doing all the work. It started taking off. I hired a few people. We ran that for a couple of years and had immense success and started, you know, having a mid to high, even low seven, mid to high, six figure, low seven figure incomes for those years. You know, and I think that, you know, the success is, can, you know, can be also

28:41
your enemy because like then you think you can just repeat this really easily. so we went out and started a bunch of other things and bought other things and ended up with this conglomerate. And, we were successful kind of in spite of ourselves. Like, I mean, it was one of these things where there was so much money to be had and it was such a lucrative industry. And we were at the right place at the right time. All these things that I didn’t really take any, you know, give any credit to at the time. Now I look back and I’ve really realized that that was such an important factor. Same thing happened in e-commerce, by the way, years later.

29:11
But now you have all these different things and it’s like, can’t manage all of them at the same level that you did just the one thing that you had to start with, with the same passion and focus. Now you’re managing people instead of doing the work and the things that made the business successful to begin with, you’re no longer doing and relying on other people to do. And it becomes like just your job is can you manage a team and people? And some people are really good at that. I’ve kind of just realized, I think over the years that

29:38
It’s really not my specialty. you’re pretty good at it, but it does take a lot of and it takes a lot out of me. It takes a lot out of me. You know, it’s, it’s, um, cause I am a people person and I’m always thinking everybody else first and trying to make them happy. And that’s getting harder and harder to deal with employees. mean, it’s, know, one of the things that kind of led me where I’m at. So anyway, I got to have seen the same thing happen in e-commerce. You know, I started a site, started doing very well, bought another one, started another one, sold a couple. Like we’ve had a lot of success and still same thing in spite of ourselves. We’ve been.

30:08
able to be successful, but like the margin for error is much smaller in e-commerce, right? The profit margin’s much lower. And, you know, the, the, the gravy train times are gone. You know, that the times where you could just list anything on Amazon and not even try, know, 2015 and be successful that that’s gone, right? You got to excel at what you’re doing. And even then that might not be enough because there’s so much competition. And so, you know, it just really got me.

30:37
you know, rethinking things like, you know, I should kind of just mention these employees and just, I mean, and, you know, I’m kind of just burnt out. Like the, all the stuff I’d mentioned before with trying to sell this business and run all this stuff and keep everything, you know, the wheels on the bus, um, through all this, uh, was just, was just really taxing on me. And so it just really kind of came down to, am ready to make some massive changes. And it came down to getting rid of everybody. I know I just like, I don’t want to be in meetings every day anymore. I don’t want to be begging people to come to work and do their job.

31:07
Um, you know, hear about how, you know, you know, they’re, they’re relatives having a problem. They need money or just all these different things you got to deal with every single day, how they’re out of vacation time or, you know, don’t blog, their keystrokes or they find them doing a second job or, know, all these, just like all these things that just happen like nonstop. I just didn’t want to be hearing about any longer, um, and being in meetings for, and, um, and so we sold all the brands except from one. I would have sold them all quite frankly, uh, just the one brand that’s left.

31:37
is still worth quite a bit of money. And I think I can leverage my time over the next year to make it worth significantly more than it is right now. so unless somebody comes along in the middle and wants that and will buy it in an environment where like my trailing 12 months isn’t as strong or I don’t really have a good tax return or it’s not SBA qualified yet.

32:02
You know, it’s possible that could happen, but like my goal is to basically make my trillion 12 months the year of 2024. Um, put together a really good tax return that I can hand over for SBA financing, um, as a sell, uh, in, early 25 and sell it hopefully for your multiple seven figures is the goal. If you look back on all the companies you’ve started, would you say that color it, which was your coloring book company? You think that one had the greatest moat? I do.

32:30
Absolutely. Which is why I want to do something similar to that moving forward. It won’t be coloring books, by the way. So if the new owner that’s listening, don’t worry about that. the properties of that business is what I liked. It’s it’s a consumable business. So anytime people are using my product, they got to then buy more. It had really defensible intellectual property. Artwork and drawings is very copyrightable in the United States. And so if anybody tried to copy that, which some people tried,

32:59
You can shut them down really, really easily. We had a moat on the manufacturing process and there was actually several moats built in that business that still exist to this day. And the new owner has been very successful with it. so, yeah, mean, that definitely is what’s on top of mind for sure. I’m just curious why you sold that business first. Yeah, I I had that partner. He was my cousin.

33:25
Okay, so there are other issues. wasn’t the yeah, we’ll just kind of leave it at that. So I mean, okay, sure. Um, you know, they had full time jobs and just didn’t really have the time and they also, you know, I think at the end of the day, they needed the money. And so like, it was, we were at this kind of inflection point of like, the business wasn’t paying us anything because we were growing so darn fast that we actually had to keep on borrowing more money. Not only not only we were able to pay ourselves anything or

33:52
distribute any money out of business, but we’re having to borrow more money because we were growing at more than 2X per year. so, is nuts. When you’re in that space or position in e-commerce, you’re buying more inventory ahead of future sales that you haven’t made the money for yet. Right. And so like you’re constantly behind the eight ball in terms of getting more, your hands on more cash. And so really the only, the only way to meet the objectives of everybody was to sell it.

34:21
and get the cash out and we sold it for seven figures. there was, you know, a decent truck of change for everybody to, to, be happy. Um, although, you know, just from a pure selfish, uh, vacuum. Yeah. I would have preferred to have kept that, that business and got rid of everything else except that one. Right. All right. So a lot of time has passed at this point and we’re looking back on this. Uh, what would you have done differently these past several years? I mean, you mentioned a couple of those things already. Yeah.

34:50
Yeah, that’s interesting. I wasn’t really prepared for that particular question. as you said, I mean, it’s probably just rehashing what we’ve already talked about. mean, I think I’ve really just kind of, think everyone learns in their own way, right? I mean, some people do really well by being coached. Some people do really well reading. Some people have to do it themselves to learn. Some people have to make the same mistake more than once before they learn.

35:19
I’m kind of in that group. I’m the dummy, right? Like I don’t listen to people very well. Someone tells me I can’t do something, then it makes me want to just go do it more. A lot of times that’s helped me be very successful actually. I so that is a good trait in some ways, but a bad one in others. But the thing that I’ve seen over 20 years, realistically, I will see, this will be a good podcast to come back to and reference, but I feel like just doing one thing is like kind of the thing now, right? Like I really just kind of my lesson.

35:49
And it’s been a combination of making the same mistake myself more than once, reading books like The One Thing, reading books like Essentialism, but probably more importantly, besides just making the mistakes myself. And again, being lucky in terms of being successful in spite of all that, but I do know that, or, you know, there’s no way to know for sure, but I suspect that my success would have been even bigger if just sticking with any of the one, any of those things and just doing one of them.

36:16
Cause you’re just focused on that one thing. And you think about, you know, people in our lives that we know, like all the, all the ones that have had the 50, a hundred million dollar, whatever exits, they have one thing that they were working on, right? They aren’t the people that are, that are scattered, that like come into the masterminds at seller summit that I host and have like 17 things going on are usually people that were in a similar position to me, where it it becomes very difficult to juggle all those things.

36:45
And one of my favorite stories, you know, Spencer from Solstoke, who was a speaker at the Selerson, but this year he tells that exact same story, right? Of how he had seven or eight of these different Amazon brands and they were all kind of chugging along. They were making money. They were doing okay, but they finally decided like, got to get rid of all of these except one. We’re going to focus on this one. And that’s now a publicly traded company worth. I mean, those other brands that he ditched were making millions of dollars. Right. So it’s, you know, I’m in a similar spot, right? I mean, like it isn’t like.

37:14
These are brands that are doing nothing. mean, some of these are seven figure brands, but it just comes down to you have to focus on one of them. The theory that I had, right? So if anyone’s listening, will tell you ahead of time exactly what you’re thinking as you’re getting ready to go start the second thing. I’ve already done it once. I’m really good at it. I’ve learned it’ll be easy to just go start a second Amazon account, start that second website, whatever. It’ll be super easy. I’ll just cookie cutter the process.

37:44
twice as easy, 10 times easier the second time around than it was the first. But what actually happens is it’s like literally the exact opposite of that. It’s like twice as hard or five times harder because the first time you’re doing it, it’s new and exciting and you have like this motivation behind it. And you pay, I think a much keener attention to detail as you’re setting up that first Amazon account, doing these things that become.

38:08
very like an annoyance in business. You it’s like something new and exciting. So you set up the newest Amazon account. got to get a new insurance policy. I got to open another bank account. got to get another, yeah, I got to file another tax return. I got to get more credit cards. What do I do with this employee that, you know, and so like, got to make more social media accounts. got to, you know, create. And as you’re doing now, you got to like post twice as much stuff on social media. And then you got to like send out twice as many emails. And, and now instead of putting sending out twice as many emails from one brand, you’re sending out half as many as you really could be doing because there’s only so much time.

38:38
And you’re probably not, the end result is, you know, for me, I don’t want to cast dispersion on everybody else, but like for me, and I think the luck of experience, the same thing is eventually over time, one of the brands starts to do better. God forbid you end up a spot like I did with like five of them. So now you have one that’s doing better, maybe two that doing okay. Now you have like your bottom two and the middle one, like those other three get like almost no attention, right? Cause like you’re focusing on the other thing and even

39:03
The thing that you are focusing on isn’t getting anywhere near the attention that it should, so it’s not even doing as good as it could be. And so, yeah, we were successful making money doing good and everybody’s like, oh my God, you’re doing all these things. I think in the end, the end result, to just really look back at it, is that if it was, I could pick any of the brands, think just picking one of them and focusing on just one of them, whether it was Colored or Ice Wraps or the thing that we bought, it doesn’t matter which one it was, because they were all.

39:31
successful in their own right and could have done better. And what I tell people now is like, as an entrepreneur, you look at things through a different set of glasses, right? Like I look at my desk and there’s glasses, you know, that I’m drinking out of, there’s pens, I’m holding a pen right now, just filled in and fiddling with it, a mouse pad, this riser stand for my, my computer. Somebody made money off of everything. One of these things that I purchased, right? There’s, plenty of opportunity to make money. Anywhere you look, you can own a franchise. can, mean, whatever there’s zillion different ways, but you can.

40:01
drown yourself in opportunity, right? If you focus just on any one of those things, your chances of success are probably going to be significantly higher. It’s funny. I don’t know if you get this question a lot running e-comm crew, but I often get asked, Hey, why don’t you just start a bunch of other brands and e-commerce? Cause you know what you’re doing. You didn’t ask that before. Yeah. And here’s why I’m telling you why it shouldn’t do it. Well, yes, I do. mean,

40:26
Yeah, or just consult for them or go work, you know, do whatever invest in them and you know, whatever it is, it’s a it’s a fractioning of your focus, right? And that’s why you shouldn’t do it. I mean, the answer I always give is why would I want to do another brand? I’d much rather just maybe even launch a new product with the existing brand. 100 % to do that. Yeah, because now you’re not doing you’re not building another email list. You’re not making, like I said, like new social media accounts, you’re not having to like set up new ad accounts, you know,

40:56
a new store, whatever, blah, blah, Like all you gotta do now is create one more listing and market that to your existing pool of customers. Now that makes a lot of sense. mean, launching your products, of course, you want to do that to the point where, you eventually you’ll exhaust the catalog depending on what bit, like we’re kind of at this problem with ice raps right now. There’s only so many things we can really launch, but you know, we still have room. We actually are about to launch a new product here next month in September, which I’m excited about. But yeah, I mean, I think that

41:25
you know, if you had to answer that question of what I change, that would be it. And that’s my my North Star moving forward. It’s just so hard because you get bored of what you’re working on. Yep. You know, and then you want to go off. I mean, that’s why I started my wife quit her job. I don’t regret it at any point. But I guess if I just focused all of my efforts on Bumblebee, or all of my efforts on my wife, okay.

41:52
Conceivably, they’d be a lot bigger now, but I don’t regret the decision. Yeah. I mean, you’re absolutely right. It’s so funny that entrepreneurs have this exact issue of getting bored. You get bored of the thing that’s making you all this money. It’s so ridiculous. And you want to go start something else that’s going to probably take that good money and throw it after bad without a second thought. It’s wild, but yes, that’s exactly what happens. That’s exactly what’s happened to me because like,

42:23
Once it’s already figured out, that’s just my personality. I like to figure things out. I like the excitement of the new thing and taking something from zero and making something out of it, whatever it is, all through my life. doesn’t matter whether it’s an e-commerce or affiliate marketing. did a computer consulting business beforehand. I did other stuff as a kid. It was just anything that was new and exciting and I had to go figure it out against the odds just is really lights my fire.

42:50
And then once it’s all figured out and it’s just turning along and making money, I’ve already figured that out. I’ve already had that win and proven that I can happen. just, for some reason, I mean, it sounds stupid saying, oh, wow, but it is the truth. It becomes boring.

43:10
All right, so what’s in the future for Mike? So you’re probably going to sell ice wraps, it sounds like. That’s the hope. mean, hopefully by 2025. So I’m kind of committed to the next year, you know, kind of seeing this through. Maybe, you know, maybe it’s six to nine months to where like I have a transition period because there is a new thing that I want to get into. if like once, you know, I feel like the ice wraps is on autopilot and, know, it’s just kind of like, I know what’s going to sell in

43:38
three, six, whatever more months, there’s nothing left to do except let the trailing 12 months clock run out. Then I’ll go maybe start transitioning that other, whatever that next thing is. But yeah, I mean, for right now I am steadfast in that I’m not going to think about starting anything new, buy anything new, you whatever it is. I might invest in something new that I would my past investor in like, like you’ve been, but that I think is perfectly acceptable. But like the things I’m spending my time on will be.

44:07
ice wraps for the next many, many months. And then after ice wraps, you’re going to start another e commerce type of business with a huge deal. Okay, yes. I that’s the thing that I’m definitely working on. Like you and I have talked about it. mean, I’m not really ready to talk about that on a podcast. Yeah, of course. You know, other people can go off and do that. And, you know, but once it has started and I have some some traction and I will be talking about that just like everything else. Cool. Well, I look forward to that because I know it’s gonna do well.

44:36
I think so. think, I mean, I’m pretty excited about it. That’s, that’s the thing, but I mean, it’s, it’s, it’s a good coaching thing for myself right now to like, be excited. I’ll be thinking about a little bit, but not do it. You know, I’m trying to like actually have some discipline and it’s tough. It was like, I want to go buy the machinery to go do it and go lease the building like right now. Like I would love to go do it tomorrow, but you know, I have responsibility right now and I’m committed to, you know, living this life and experiencing what it feels like to just do this, this one thing. And.

45:06
I feel like a completely different person. It’s only been a couple of months, but it’s just the feeling is just night and day. Like the feeling of like being tugged in a million different different directions and you’re having my life run me instead of me running my life or you can replace life with business as well is kind of gone. Like it’s taking some time because like there’s still some trickle out stuff that that’s happening. Got to wrap up some loose ends here and there of other things. But you know, it’s just I wake up and

45:32
And I’m doing the work and focusing just on this one thing. And I’m not thinking about the brand that you and I were in. I’m not thinking about while baby, which I just saw, I’m not thinking about tactical or the other thing that Dave and I just got started. And so I think about some e-comm crew stuff cause I’m still doing that, which I’ll continue to do. Um, and then, you know, in ice rubs. How much of this, uh, de-stress do you think is attributed to not having the large team anymore versus just having one brand to worry about? I think it’s probably.

46:01
two factors, it’s the team and then the investors. I don’t have a sense of if something goes wrong, there’s going be a lot of people really disappointed in me. Even though I know realistically, these are all adults, they’re all business people themselves, they all trust me, otherwise they wouldn’t have invested to begin with. And most likely if something went wrong, it wouldn’t have been something that was my fault.

46:29
Amazon suspends the account or like some manufacturer discontinues selling to us or the economy crashes or you know, one of these things are just like legitimately like out of my control. I know that everybody’s they’re all big boys and and we forgive that and wouldn’t like I would have never talked to you again, but except for you obviously, but which would be good. I mean if that’s all I had to do to make this happen, I should have I should have pulled the plug a long time ago.

46:58
I only knew it was that easy. Well, cool, Mike. Yeah. I mean, I’ve never wanted a team. I don’t like talking to people, managing people, and it is much easier to just do one thing or just a small number of things. So a focus, Mike Jack is going to be scary though. Yeah, it could be. I was just going to say like it is, it is one thing that’s actually disappointing to because I actually do like the team, right? Like I do like working with people. Um, and I think back to like,

47:26
yesteryears, now it’s like grandpa Mike when I was a kid, people, but it’s true. I mean, I’ve had long periods of my life working with other business partners and or employees that were really good at what they did, never complained and were fun to work with. And for me, I would much rather work in that environment than just kind of wing it on my own.

47:53
You know, either, either again, it’s another series of really bad luck or they’re legitimately as a very big cultural shift, which I actually think is, is really where we’re at of, you know, it’s just, it’s just a different dynamic. People aren’t held accountable in the same way that they were 20 years ago. Like, I mean, quite literally there have been employees that have said something to me or done something in their job that, employees of mine and an e-commerce business that if I did that,

48:23
back in my old corporate job in the 90s, I think I literally would have been hit, like physically hit. And it would have been like completely, you know, acceptable in that day and age to just open hand bitch slap somebody across the face for like saying or doing something like that, right? And, and get the hell out of here. And without any repercussions to that. And now it’s like, you have to apologize to the person for, you know.

48:50
And that same situation, things have had a big shift. so it is very difficult for me to work in that new environment. And I’m not sure how to deal with it. Cause I do hope that this new business that I start at some point will need to hire somebody. you know, if we’re producing at some point X number of units per month or per year or whatever, I’m going to need some help. Right. And I hope to get to that point, like, what do I do? Like, how do I go higher in this new environment?

49:20
It’s, I don’t know, but I’ll deal with that when the time comes and hopefully by then I’ll be mentally refreshed. Right. think that that, that will help as well. I think the landscape is going to change also, um, just given where the economy is going to where people are going to be more appreciative of their existing jobs. Yeah, I hope so. It’ll happen soon. I’m pretty sure. I hope, I hope you’re right. Cause like, I mean, I look back again at the corporate gig I had, I worked in a job for seven years.

49:49
for the man, know, whatever, I wore a suit and time went to work every day. Was super appreciative of that job. Like I worked my ass off, you know, I was in all these just like, was appreciative. Someone took a chance, gave me the job, you know, paid me a salary. And I never had an attitude like this isn’t my job. Like I was just like, I’ll do whatever is needed here. If I see something dirty, I’ll go clean it. Like that’s not my job. I’ll go clean the freaking.

50:18
sink. don’t care. mean, take out the trash. there was nothing, like it didn’t matter. And I think it is one of the reasons why I excelled in that job and did very well and kind of rose up to executive level. wasn’t like everybody was like that in that position, but I was very, very thankful for that job. And it’s why, and when I did leave, I ended up giving them like four months notice. I didn’t want it be that long. It kind of got a little bit carried away, but like I wanted them to be left in a good spot. It was like, know, the seven years up to that point,

50:48
Again, I was just very appreciative of having the position. And not the other way around. Like I didn’t feel like I was entitled and like I was God’s gift and like they should be lucky to have me, which is like think how a lot of people are these days, which is just really bizarre to me. don’t know. It’s the pandemic that did it really. I think so. But that’s a topic for another another discussion. Mike, where can people find more about this? I know you did an extended episode on the Ecom Crew podcast about all this, right?

51:18
Yep. mean, very similar actually what we just talked about, but there are other episodes, but yeah, EcomCrew, ECOM, CREW. Yep. On the podcast, ecomcrew.com, EcomCrew on all the socials. Support it, ecomcrew.com if you want to email me. Yeah. If you want to know what Mike’s up to, you’ll be the first to know if you listen to the pod or follow his blog. Or you can just keep on listening to my wife put her job podcast and every six months or so I come do an update with you. Thanks a lot for coming on Mike. Appreciate it.

51:47
Be good, Matt.

51:51
Hope you enjoy that episode and it’s just a reminder that things rarely come easy and timing can often play an important role in your success. More information about this episode, go to mywifecluderjob.com slash episode 506. And once again, tickets to the Seller Summit 2024 are now on sale over at sellersummit.com. If you want to hang out in person in a small intimate setting, develop real relationships with like-minded entrepreneurs and learn a ton, then come to my event. Go to sellersummit.com.

52:19
And if you are interested in starting your own eCommerce store, head on over to myyprocutorjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.

00:00
You’re listening to the My Wife Quitter Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. Today, I my good friend Bill D’Alessandro back on the show. And in this episode, Bill is going to teach us how we can make an extra $100,000 per year with just a couple of small changes to our financial stack. Now, I didn’t know about one of these tips and it’s already made me over $40,000 this year. But before we begin,

00:27
I want to give a quick shout out to Chase Diamond for sponsoring this episode. Chase is my go-to guy when it comes to email marketing and he runs a successful email marketing agency over at Structured Agency, which caters to many eight and nine figure e-commerce brands. Now for those of you who can’t afford to hire an agency, Chase offers a pretty good email marketing course if you want to learn how to do email yourself. This course can be found over at mywifequitterjob.com slash chase. Once again, that’s mywifequitterjob.com slash chase.

00:57
I also want to thank Emerge Council for sponsoring this episode. If you sell on Amazon or run any online business for that matter, the most important aspect of your long-term success will be your brand. And this is why I work with Steven Weigler and his team from Emerge Council to protect my brand over at Bumblebee Linnens. Now what’s unique about Emerge Council is that Steve focuses his legal practice on e-commerce and provides strategic and legal representation to entrepreneurs to protect their IP. For example, if you’ve ever been ripped off or knocked off on Amazon,

01:26
then Steve can help you fight back and protect yourself. The students in my class have used Steve for copywriting their designs, policing against counterfeits and knockoffs, vendor agreements, brand registry, you name it. So if you need IP protection services, go to emergecouncil.com and get a free consult. And if you tell Steve that I sent you, you’ll get a $100 discount. That’s E-M-E-R-G-E-C-O-U-N-S-E-L.com. Now on to the show.

01:56
Welcome to the My Wife Quarter Drop podcast. Today I’m thrilled to have Bill D’Alessandro for I believe the third time. He’s the founder of Elements Brands where he acquires and sells consumer brands. He is also the host of the Acquisitions Anonymous podcast. Does a bunch of consulting and coaching and he’s spoken at my annual e-commerce conference, the Seller Summit, a bunch of times now. I can’t even keep track. I’ve known the man for about nine or 10 years at this point and he always has a ton of knowledge to share.

02:25
And in this episode, we’re going to talk about managing your finances as you run your e-commerce business. And I thought I knew a lot of these things just to be upfront with you guys until I chatted with him recently. And I wanted Bill to share his knowledge with all of you. And with that, welcome back to the show, Bill. How are doing, man? I’m great. I’m glad to be back. I said that at Seller Summit, I had lost count of the number of times I’d have attended. And I’ve also lost count of the number of times I’ve done your show. So good to be back for the who knows how manyth time.

02:54
So, how’s it going? I’ve noticed you’ve been just popping out a lot of kids lately. Yes, we’re working on our third at the moment. So I got two. So I my first kid in March 2020, like right when the pandemic started, and then we just went for it. So now our third child will be born in January 2024. Thank you. You guys done a three or are you going to put up basketball? I think so. My wife is lobbying for four already. We don’t even have three. That’s enough for me.

03:23
So it seems to me, and I’ve known you for a long time, it seems like the bill of just maybe four, three or four years ago has changed dramatically since having a family. How have things changed? Yeah, well, when you have, before you have a family, it’s just you. And I know that sounds obvious, but you can go really hard before you have a family, right? You you can work nights, you can work weekends, you know, you can have an erratic schedule, but once you have kids, you can’t, that’s a luxury you just don’t have anymore. So I have gotten much more structured. So I have like a really,

03:53
blocked week now, which is awesome. like Steve, you scheduled this with me. This is in like my external meetings block. This block is for meetings with people that don’t work at elements brands. And it’s like just today and tomorrow. And that’s it. Otherwise, wait till next week. So I’ve been much more structured with my time. And we’ve also sold a bunch of our brands. I simplify my life a lot. So we have kind of one one big brand now in natural dog company. We kind of 80 20 the whole portfolio. So life is more chill now.

04:23
Yeah, so just one company to worry about not like you had like five or six before, right? Eight, in fact. Eight. Oh my God, that’s crazy. Yeah, it was crazy because like, I mean, a lot of people listen to have ecommerce businesses and Steve, I you have an ecommerce business in any ecommerce business. Something goes catastrophically wrong, like once a year, right? Like your Amazon, your main Amazon listing gets suspended. Your Facebook ads go completely off the rails. Something happens like really bad once a year. And when you have eight brands, that means something happens like

04:53
catastrophically bad like every six weeks. It’s terrible. It was terrible. Right. And so like it was a it was a tough life. And we can talk a lot about whole Co’s and why whole Co’s are tough and know, multiple brands is tough. But that was what my life was. And then in 2022, we basically just said this is bananas. We have one one brand in natural dog that can be really, really big. Let’s just go all in on that. Nice. Nice. That’s like Spencer Jans philosophy.

05:21
He sold off all his other brands except for the main one, Solo Stove, and then he turned that into a billion dollar business. Yeah, that would work for me. So I am curious, just the environment still isn’t that great in general with the economy. How are you putting your business’s money right now? Are you just T-billing and chilling? T-billing and chilling, yeah. I mean, I use money market funds. I don’t buy the T-bills directly, but yeah, mean, and I haven’t like, just to be clear,

05:51
like bailed out of the market. haven’t like sold everything or anything like that. I’m just kind of accumulating excess cash in T bills and interest yielding instruments. I’m doing a friend of mine also raised a debt fund that invests in like fix and flip homes across the whole portfolio yield like 10%. So I’m invested in that. So I’m looking for more kind of interest bearing stuff.

06:15
Yeah, so one thing you said at seller summit was you were going to guarantee that everyone listening was going to make $100,000 after listening to your talk. That’s right. And there was one thing that you mentioned, which I want you to talk about, where I was just sitting on like a pile of cash just sitting in like a checking account. And then you said something I was like, Okay, well, he just made me maybe $40,000 right there. You want it? You want to share it? You want to share it?

06:43
Cause I thought that’s cool. didn’t even know these existed. Yeah. So, uh, several people, by the way, Steve came up to me after my talk and said that I did legitimately make them a hundred grand. So I’m the stellar summit next year. Uh, so, but I’ll, no, I’ll the beans here. Also, you don’t, you don’t need to come to seller summit next year for this, but you should. Uh, so the big thing that everybody’s gotta be doing that people have kind of taken their eye off the ball for the last 10 years.

07:10
is earning cash, earning yield on your cash, on your business’s cash, right? So for the last decade, interest rates have been effectively zero. So you didn’t have to optimize where you parked your business’s cash. But now, interest rates are in the high fours, as we record this in July 2023. And if you park a million bucks in an interest-yielding account, you’re going to make 50 grand a year just for doing nothing. And there’s these new banks that have popped up that will let you earn yield on your operating cash.

07:40
There’s two of them I really like. One is called Mercury and one is called Highbeam. Mercury’s been around for a while. They were focused on SaaS companies, but they’ve recently started pushing the e-commerce and then Highbeam was founded, I think last year or two years ago, and they specifically focus on e-comm. But both of them will give you like 4.8 % yield on your business’s idle cash, just straight up free money. So here’s the thing, Bill. During the whole bank scare, my wife became paranoid.

08:09
And what she did is she started opening bank accounts like crazy because of the FDIC limit. Yep. And so now we were the proud owner of like a bunch of bank accounts, which I hate keeping track of. One thing you left out was the insurance limit on these companies that you just named. What? Yeah, it’s cool. So right. Everybody’s freaked out. We don’t want to keep our cash over the FDIC limit. The FDIC limit is two hundred fifty thousand dollars. If you more than two hundred fifty thousand dollars in account, your bank goes belly up. You may not get all your

08:39
But the cool thing about both Mercury and Highbeam is what they actually do is spread your money around what’s called a sweep network. So it looks like you only have one account with them, but behind the scenes, they open accounts for you at lots of different banks and distribute your cash and make sure each individual kind of phantom account is always below $250,000. So no bank, you’re always fully FDIC insured. So both of them, Highbeam and Mercury,

09:05
have $5 million of FDIC insurance because they divide your money across 20 different accounts. And that is the bomb. So we are closing those, a bunch of those accounts now and consult, you wouldn’t, don’t know if you’ve ever tried to do this, but keeping track of all those accounts is a pain in butt. have this spreadsheet down. Yeah, whenever I want to log in, I don’t even know how much money we have. My wife could just run off right now and I would have no idea.

09:32
And if you lose one, that’s 250 grand. Oh, we forgot about, you know, the, Steve Chu community bank in Mississippi. Oops. It reminds me of Bitcoin. Like you lose your wallet. It’s gone. Yeah. It’s also gone. Even if you don’t lose your wallet in crypto. That’s true. Uh, the other value add that I had a number of people come talk to me about regarding your talk was just optimizing your spend. One of the biggest bonuses of running an e-commerce business.

10:02
or any business for that matter, is that you can get points and that sort of thing. But a lot of people aren’t optimizing that. what is your, what is your strategy there? So yeah, so the first half of make a hundred grand by listening to this podcast is park your business cash in an interest yielding checking account. The second half of make a hundred grand by listening to this podcast is optimize, optimize your fricking credit card spend. If you are running, if you own an e-commerce business like

10:28
I know everybody’s read all the blogs about points and you go, Oh, this sounds so complicated. Maybe it’s not worth dealing with. I’m here to tell you this absolutely worth dealing with. Um, you know, myself and other people I know take home six figures a year just on credit card cash back and points, um, based just on points. I fly first class pretty much everywhere I go. Um, I don’t pay a penny for it. It’s just points from the business. This is absolutely worth figuring out. So here is like the

10:56
80-20, the simplest possible e-commerce credit card stack so you don’t have to like do all the points brain damage. So you need two credit cards. So first start with an Amex Gold. It earns 4x points on advertising and shipping. And if you’re an e-commerce, know, advertising and shipping are basically the whole cost structure. So you get an Amex Gold, the first $150,000 you rent with that Amex Gold are going to make 4x, you’ll get $450,000.

11:28
Then any ads or any spend that’s not ads or shipping, put it on a Capital One Spark business card. It earns 2 % cash back on everything. If you just do those two things, right? That’s like the most basic e-com stack. If you are spending more than $150,000 a year on ads and shipping, and here’s the big secret, you can have more than one Amex Gold on the same EIN. So you just apply for another one.

11:55
and that one has a separate $150,000 cap. You can have up to 10 Amex golds. So you can earn 4X Amex points on up to one and a half million dollars a year of ad and shipping spent. So that’s like, and then everything else besides that and shipping put on a capital one spark. That’s the simple like 80 20 econ credit card stack. I don’t really spend money on flights or hotels anymore because of this.

12:22
But I don’t fly first class. guess that’s the only difference. You could. I could. know, we’re sitting on like millions of points. Actually, we could. We’re just, I’m just a, I’m just a frugal guy, Bill. Even if it’s imaginary, imaginary, but they’re a point. But they do disappear. The value of them does depreciate. They devalue them over time. like the kind of the strategy on points is like earn and burn because they’re, they’re not a good investment. holding them.

12:51
The credit card companies are just looking for ways to slowly make them worse and worse. Yeah, I think the philosophy though is unless the points that we’re getting is a good deal for the ticket for the points, we tend not to use them, which requires a little bit of planning, right? But are you planning your trips so that you can take these first class without blowing a bunch of points or? Yeah, I tried. So for example, my wife and I just went to Italy for 12 days. We flew first class both ways on points and I.

13:17
Don’t remember how much it was in points, but it was not. Well, first of all, I would never pay cash for these. Like let’s just be quick. I would have never flown international first class. It would have been like $20,000 or something insane. So no, I would have never done that. But on points, was like the equivalent. I got like something like five to 10 cents of value per point, which is like, you know, base value on a point is like one to two cents. Right. So when you redeem for first class international, the points just go a lot farther.

13:46
I just wanted to let you know that tickets for the 2024 Seller Summit are now on sale over at Sellersummit.com. The Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, mine is a curriculum-based conference where you will lead with practical and actionable strategies specifically for an e-commerce business. Every speaker I invite is deep in the trenches of their e-commerce business

14:15
entrepreneurs who are importing large quantity of physical goods and not high level guides who are overseeing their companies at 50,000 feet. I personally hate large events, so the Seller Summit is always small and intimate. Every year, we cut off ticket sales at around 200 people, so tickets sell out fast and we’ve sold out every single year for the past eight years. If you’re an e-commerce entrepreneur making over $250,000 or $1 million per year in revenue, we also offer an exclusive mastermind experience with other top sellers.

14:44
The Seller Summit is going to be held in Fort Lauderdale, from May 14th to May 16th of 2024. Right now, this is the cheapest the tickets will ever be. For more information, go to SellersSummit.com. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com or just Google it. Now back to the show.

15:05
Okay, so now that we’ve put out the candy for this episode, let’s talk about the guts that are gonna really make the big difference for an e-commerce business. One of the, I guess the downsides of running an e-commerce business is that it’s a cashflow heavy business. So I wanna get down to the nitty gritty now and just talk about how to manage cashflow, because you’ve done this for so many, eight e-commerce brands at one point, and it can get into a headache. So what are some of your main principles? Yeah, so the…

15:34
The problem, right? And I think everybody running an income business has felt this. Even if your business is doing well and growing, you know, my business is doing well, and then it’s time to buy inventory again. And you’re like, I need to buy $200,000 worth of inventory and I have $100,000 worth of cash. Where is all my cash going? My income statement says that my business is profitable, but I never have any cash. Why is my bank balance not going up? What the hell is going on? But I’m sure a lot of people listening have felt that.

16:01
And what the hell is going on is that all of your cash is tied up in inventory. It is all on the shelves that you’re 3PL. Because as your inventory balance goes up, that is a use of cash, right? So if you had, you know, $500,000 of inventory last year, and this year you have a million dollars worth of inventory, you have plowed in an incremental half a million dollars into inventory. So if your business made a half a million dollars, well, guess what? You don’t have any more cash. You have a bunch more inventory, but you don’t have any more cash.

16:31
So I’ve seen so many entrepreneurs get pinched by this. And then what do they do? They go for one of these quick cashflow loans, you know, like the Parkers or the eight figs or the clearcoes or Wayfly or all these things, right? And they pay absurd interest rates. And it’s just a tax on people who can’t forecast their cashflow. So I’ve got a couple of kind of like easy rules of thumb to make sure that you have enough cash to buy your next inventory order.

16:59
Okay, it’s really, it’s really only two. For one, it is maintain a weekly cash flow log. And I don’t mean an income statement, I mean a cash flow log. mean, when you think about an income statement, right, so like, you sell a product for $1, you have 20 cents of cost of goods in it, you have all the other expenses down the PNL, and you’ve got maybe 20 cents of profit, right. But there’s a couple expenses in that PNL that are not cash. And the biggest one is cogs.

17:27
cost of goods, like yeah, you had 20 cents of cost in it, but when you sold it, you didn’t pay 20 cents, you already paid the 20 cents, it’s been on the shelf, right? So you generated as far as cashflow from that order, whatever your net income is, plus your cogs, because the cogs is a phantom cost. So when you build a cashflow model, you need to build it based on deposits. And the deposit that you get from Shopify is gonna be, know, doesn’t have cogs taken out.

17:55
So build a cashflow weekly cashflow log. And then in the future, you can start going, when do I think I’m gonna have to buy more inventory? And you put a bogey out there, you know, in two or three months of, it’s gonna cost me a hundred grand. And then I go, how many days between now and then do I have of cash coming in? Am I gonna have a hundred grand? And you go, well, okay, how much money should I save to make sure I have a hundred grand buy whenever it’s time to order inventory? Easy rule of thumb.

18:23
put away in a separate account on the side, whatever your daily cogs were, right? Because that phantom cogs expense, it’s phantom, you’re getting that cash. If you blow the cash, you won’t have it to buy inventory again. So kind of think of it as replacement costs. When you sell a unit that costs you 20 cents, right? You’re gonna need to replace that unit, essentially, eventually, right? So take 20 cents and put it aside every time you sell something.

18:52
you know, that cost you 20 cents. And then when it’s time to order more, you should have cash in the bank to do it. This sounds just like profit first, kind of, but for inventory, but for inventory. Exactly. So exactly. Are you implying then that there’s literally separate bank accounts for each of these things? Like for Yeah, okay. Yeah, I find it super helpful to have a separate bank account. just call it reserve cash. And it’s basically I, you know, I we move money into it every week.

19:19
And we that’s what we save up and we know that reserve cash is going to get spent down to zero. You know in three months and four months or whatever when we have a big inventory bullet right, but then we know it’s there and so then we’re basically we borrow from ourselves our reserve cash rather than having to go borrow money from a lender. So this happens every week or every month. We do it weekly. I find if you do it monthly your it’s too late like you will have spent three weeks of the cash right right right?

19:48
You know, because business owners tend to operate on what’s in their bank account, right? They’re like, oh, wait, the bank account has a lot of money in it. And then they’ll spend the money or they’ll take it out of the business. But then a month later, the big bill shows up and they got to order more inventory. They don’t have the cash. It’s funny how that psychology works. Someone just gave me an analogy the other day, like, you know, in the beginning, when you have a big fresh tube of toothpaste, you slather your toothbrush. But then when it gets down the little bit, you’re just putting this little tiny dot on there. Humans are like that. When there’s money, they spend it. So yes.

20:18
100%. So it’s really important to build a cashflow forecast. So what happens if you’re doing this forecast and there’s no way in hell that you’re going to actually make enough money to pay for your next inventory order? What are your options? So, well, so you have lots of options, but before we get into the options, if that is the case, you need to fundamentally change something about your business, right? Your margin profile is not good enough.

20:45
If you are running your business and it’s not generating enough cash to pay for your next inventory buy, there’s something wrong with your business, right? You’re either spending too much on ads, your gross margin isn’t high enough, you have too much overhead, something is fundamentally broken. So first, let me just say, you know, don’t just put a bandaid on the thing and figure out how do I get the cash to pay for the next inventory buy? Because that’s what everybody does. And then they call me and they’re like, Bill, we’re totally screwed.

21:11
And I go, yeah, but it could be you’ve been just looking for the next hit and you didn’t fix the thing that was wrong in your business. So first thing, fix what’s wrong with your business. What if you’re growing just so fast though, and you want to just keep fuel to the fire and that if you really have the, the math and the spreadsheets to show that you’re profitable, you have good margins and it is simply because you’re growing too fast, proceed to the next step, which is what we’ll talk about. Can you throw some numbers out there? Like what is a healthy company in order to throw fuel in the fire?

21:41
Yeah. So I mean, first of all, are you net income positive? Right. I mean, if you are not venture backed, you need to be net income positive. Right. Period. That’s like the lowest bar. Right. Right. The higher bars, I think, and I’ll credit this to Taylor Holliday on Twitter. He basically says that your returning customers should pay for your overhead and your new customers should be breakeven. Right. So you can basically run your ads at breakeven.

22:11
and then look at how much money you make from your recurring customers. And that should cover the overhead of your business. If you do that, you can’t possibly lose money, right? That’s a break even business, right? Another way to describe a break even business, right? The returning customers pay for all the overhead. So that segment breaks even. And then the new customers are break even because you spend on ads to acquire them. And that part’s break even. You can’t go out of business. You’re break even. I would think sort of a, so if you’re running a really fast growing econ business, you know,

22:39
low single digit EBITDA margins are OK because you’re probably plowing money into ads. But if you’re doing that, you better have frickin good cash flow forecasting because one or two percent the wrong direction and you’re losing money. So you got to be focused on it really, really tight. So that also implies then that you have more than one product, right? Because if you’re one and done, you’re pretty much screwed with one product is tough. mean, hero products are great. Like successful companies have hero products.

23:06
power skews that push big volume and you can order in big quantities. And you know, mean all else being equal, right? I would love to have one product that does $100 million versus a million products that do $1 or you know, whatever. So if your products is obviously easier in every way. So you want to cultivate power skews. There’s nothing wrong with the power skew. But if you are a single skew business, you probably have a massive opportunity to build a product family around that single skew.

23:34
Okay, I like that. I never heard that before. Maybe I should follow this guy on Twitter. Yeah, Taylor’s really right. He runs ComFed Collective. He’s a really smart, smart guy, tweets a lot too. So lots of good content. So if you feel comfortable that you’re not spending on ads irresponsibly, and that your business is structurally okay, but you need money for growth, you have a couple options from best to worst.

24:01
One of the cheapest ways, if you sell on Amazon, the Amazon Marcus lines of credit are really, really inexpensive. They’re like 10 % interest. They’re true interest. We’re talking about the difference between true interest and a fee in a minute. But they’re true interest. If you go for the Amazon Marcus loans, the Amazon paraffin loans, they have partnerships with Marcus and with paraffin. The paraffin ones are phenomenally expensive and avoid them like the plague. The Marcus ones.

24:31
are reasonably priced. Another thing you can do is go to your local bank and get a line of credit. A line of credit is basically like a big credit card that you can draw down on and then pay back. And they’re usually priced in today’s interest rate environment. They’ll be in the low teens. They’ll be 10, 11, 12, 13 percent, which is pretty cheap money considering that T-bills are paying five percent.

24:57
the bank’s only making a 7 % ish risk premium to lend to you. Very reasonable. They charge true interest. When you pay them back, it stops charging interest, right? You pay them to zero and it stops charging interest, which is different than some of the other products we’re gonna talk about here in a minute. So a line of credit to your bank is a great place to start. Can we go back to the Amazon loans real quick? I’ve actually never taken money from Amazon before. What is the difference between a Marcus and a Paraffin just logistically? Yeah, so these are…

25:24
Just to be clear, Marcus and Parafin are third party companies that Amazon has partnered with. Okay. Like on the loans and then Amazon like facilitates you getting the money. Got it. Okay. So you’ll see a Marcus logo or a Parafin logo inside of Seller Central. Okay. The Marcus one, the terms will be something to the effect of like it’s a hundred thousand dollar loan. It’s 12 % true interest, you know, and it’s due in a year. Okay. Something like that. Right. And you will

25:52
The key though is if you borrow the hundred grand, it’s 12 % interest. If you pay it back tomorrow, you you only kept the money for one day. You would only pay one 365th times 12%. You would pay functionally no interest because you only have the money for a day. Okay. Right. And because it’s a true line of credit that shows there’s true interest. And that’s how it would be too. If you went down your local bank, um, it reasonable. This is the way money should be lent. This is way money is lent all the time to large businesses and, uh,

26:21
Normal. Let’s now go to the next, the other type, which is these merchant cash advances, the way fliers of the world, the paraffin side of Amazon lending, eight fig, like all these and people will invariably tweet you after this episode comes out and me and they’ll go, well, what about this one? If they frame it as a fee, if they use the word fee and what they’ll say is borrow $100,000, pay a 10 % fee and you’ll pay it back as a fraction of sales.

26:51
or you’ll pay back $1,000 a day or whatever until the loan is paid back, run the other way. And here’s why. If you borrow that same $100,000, what will happen is they will immediately just increase your loan balance to $110,000. They will just put the fee right on your loan balance. If you try to pay it off tomorrow, you will owe them $110,000. You would have paid the full year of interest and only have the money for one day.

27:21
And that is the huge difference between these merchant cash advances and a true line of credit is that the merchant cash advance charges you all of the interest for the entire duration of the loan right upfront. And then on day one, you pay back a little fraction. On day two, you pay back a little fraction. On day three, you pay back a little fraction. Well, the problem is that money you pay back on day one, you had it for one day and you paid the fee on that money for the whole time.

27:48
Right? You had the next money on day two, you had that money for two days, but you paid the full 10 % fee on that money and so on and so forth. I have a whole calculator and article about this. If you go to buildda.com, B-I-L-L-D-A.com slash debt, I kind of spell it all out because verbal math is hard on podcasts. Right. buildda.com slash debt. And you can kind of break down the math. And so what is the effective APR then on one of these loans, assuming you’re paying back? Yeah, the way these loans work,

28:18
I guess for people listening is they literally take the money out of your revenue directly from your Amazon account, and then pay you the difference after subtracting their fee. So how does the math work? What does it end up coming out to? So let’s say you get a traditional loan, and it’s 10%. But a 10 % fee from one these companies, what is the equivalent? So and this is sort of what these companies are based on. You can’t is very hard to do the math without a spreadsheet, right? front.

28:45
But I will tell you, having done the math on a lot of them, they usually pencil out to between 40 and 60 % interest. Wow. Even though it looks like a 10 % fee, they usually pencil to about 40 to 60 % true interest because you pay the money back so fast. So you’ve paid a 10 % fee on money you had for days or weeks. So think about this way, if you pay a 10 % fee and you have the money for a month, what’s the real APR?

29:14
Right, it’s 12 times 10, 120%. Right? So that’s why these things are so they’re hidden expensive. But people can’t do math because math is very complicated if you don’t have a finance degree. And that’s kind of what these companies are relying on. I was always wondering why so many of these popped up all of a sudden, like I get emails from these types of companies, probably like every other day, wanting to sponsor something or or or whatnot. So I guess they’re just making a ton of money hand over fist then.

29:44
Well, that should tell you, right? If somebody is like desperately trying to get you to take their money, you should be asking, why am I so lucky? Right? Like if they have, if they can afford to email the crap out of like, does Bank of America email the crap out of you every day? Does Chase Bank, you know, does your local credit union like no, because they’re lending money at reasonable rates of interest, right? These guys who are lending money at insane rates of interest.

30:11
What are they? They’re actually sales and marketing companies. They call Steve Chu every day and say, we need to sponsor the podcast. We need to sponsor seller summit. We need to be in front of all these sellers. They have huge marketing budgets because they are trying to get their money out because when it goes out, they get 50 % APR on it. It’s the best deal going. So I guess one of the, one of the value adds that they advertise is that you get approved in like a day and you can get your money the next day. Whereas if you apply for a

30:40
a line of credit at a bank, for example, what do they need from you? A full proctology exam. Yeah, a lot, right? And so this comes back to my strong recommendation for a cash flow forecast. Spending paying a really high interest rate is a tax on not realizing you need the money until you need it tomorrow. Right? When you realize that, oh, crap, I need the money in 48 hours.

31:09
your only option is expensive money. And by the way, that’s why the money is so expensive, because they don’t fricking underwrite you. They’re like, Oh, hi, Steve Chu off the street. Here’s $200,000. Does that sound normal to anyone? Like, no, they’re taking a ton of risk. They don’t underwrite very well. And so as a result, they have to charge really high APRs to the people that do get the money because it has to cover defaults because when they lend that fast, they can’t underwrite.

31:39
So that should be another tip. If someone is just trying to shove you the money and doesn’t even know you, you should start asking questions. Plus, you know, they’re taking it directly from your Amazon earnings and they look at your track record. I mean, they get access to the money first. They’re intermediary between your earnings and your bank account, actually. So they always get paid. Yeah, they go pay it first. Yes. And I’ve seen businesses just choked by these things. You know, they’ve got two or three of them and they’re none of the money’s making it to their bank account.

32:09
And then they got to buy inventory and what they don’t have any cash. So what do do? They get another one. It’s, it’s a horrible slippery slope. I’ve seen it kill businesses. All right. So let’s talk about, uh, logistically keeping track of your inventory. And I mean, you mentioned a separate bank account, but I’m just thinking like cost of goods. It’s, kind of complicated because, you know, it comes in at different times. You’re getting everything at different prices. Like, is there a nice logistical way to organize all this? Yeah. So this is hard. Um,

32:39
And it’s kind of like much in accounting. If you guys have ever done tried to do accounting for your business or talk to your accountant, you will pretty quickly realize that all accounting is a trade off between speed and accuracy. Like so many things in life, right? Of course, you in the inventory side, you could keep track of literally every unit. And you could keep them all in little piles based on how much money you paid for them, right? If your cost from your supplier is changing, and you could

33:05
keep them all in little piles because the freight is different each time you bring it all in. Right. And then you could be very sure which pile you sold each one out of, and you could make an entry for every single one and your accounting would be perfect. Right. But that’s just not reasonable. Right. Like we all use three PLs and three PLs won’t keep inventory in little piles. You know, it’s just, it’s not feasible. Um, so I find sort of the, the best, like 80 20 for most econ businesses.

33:34
is what’s called landed average cost. So let’s say you’re make our math really easy. You’re going to buy 100 units from China and they each cost a dollar a piece. Right. So that’s $100 in inventory, right? 100 units, dollar piece, $100 in inventory. You’re also going to pay $20 to ship them. Right. So many businesses will expense the $20 that they paid to ship it.

34:03
and then stick $100 of inventory in the balance sheet and debit it $1 at a time as they sell everything. I think the better way to do it is to take that $20 you pay for shipping and what’s called capitalize it. Put it on the balance sheet in your inventory account as well. So you have $120 of inventory because that’s really what it costs you to get it to your 3PL, a landed cost. So you got 100 units at a dollar of hard cost and 20 cents each of shipping cost, meaning

34:31
the landed price of that unit is $1.20. And by doing it this way, like think about the $1.20 is also essentially the replacement cost of that unit, right? If when you need to buy another one, it will cost you $1.20 all in to get it to your 3PL, right? To get it landed in the state. So you should be putting away to the side, $1.20 per unit, right? So when you buy again, you pay $100 to your factory and $20 to your freight forwarder, and you have

35:00
100 more units. So that is what’s called at landed cost is the dollar 20 versus the dollar. So that’s landed cost. Then average cost is if you pay, you know, 90 cents this time and $1 10 last time, you just carry it at $1. Like you put them all in one giant pile. And the value of everything in the pile is the weighted average of everything that’s gone into the pile, right? If that makes sense. Yep. Yep. Yep. And that’s just the easiest

35:29
80 20 way to do it. And then once a year or twice a year, depending on how much you care about, you count everything and you revalue it. So basically, you know, if you’re if your prices have gone up and now you’re paying your supplier, you know, $1.20 or whatever, you just count how many things are in the pile. You multiply by $1.20 and you go, that’s the new cost. And you take a charge or a benefit on your income statement one time and you revalue your inventory. I find that’s like

35:57
the easiest. So you use average landed average cost and then like once or twice a year, you just give it a sanity check and say, I holding this at the proper value? So I had Kevin Steckow on the show a while back and he does this for everything. He calculates overhead per unit advertising cost per unit and he lumps that all into one, one cost that he subtracts out when he makes a sale. Is that something that you guys do also?

36:26
I think there are limits to this. So like I take some issue with putting advertising cost in the cost of goods in the per unit, because like, for example, for us, we can sell a unit on the dot com. We can sell you an Amazon or we can sell a unit through Petco. And, you know, the advertising cost is very different right through all those channels. So and also the advertising cost hell even on Facebook changes day to day. So like things like that that are so dynamic are not cogs items. There are different.

36:56
Okay. for you, it’s just basically whatever you paid to get it in the door landed averaged across a bunch of different orders. And then you change that number of once a year. Yeah, once a year. And it shouldn’t change that much. Or you change it when your supplier emails you and goes, this is your new price. You’re getting a price increase. Yeah. You know, so logistically, is there like a plugin that does this? Or yes. Yes. With Asterix. So there’s a million different ways to do this.

37:26
The biggest iron way to do it is to get an ERP like an ERP and enter enterprise resource planning piece of software, right? Worst acronym of all time. This would be like a net suite or like an SAP or like a fulfilled at IO and these things are really good if you care about accuracy and you’re a bigger business, but they’re expensive costs like 100 grand a year. Yeah, but if you’re a smaller business, the best way to do this is you should use either QuickBooks or zero Xero accounting. One of those two.

37:54
And then there is a service called a 2X a 2X accounting.com a letter a the number two letter X accounting and they will connect to your Amazon and your Shopify and your QuickBooks and we’ll see what you sold every day and then you will tell a 2X what your average landed cost is. You you keep track of that in a separate spreadsheet and then you just plug the number $1.20 in the case of the example we were using into a 2X and every time you sell one.

38:22
it will recognize the proper cogs in your accounting. It’s pretty slick. They’ve been doing it for like 10 years. It’s a good piece of software. Okay. And as for the bank account, is there a way to automatically divvy up the revenue that comes in to all your separate accounts? Well, not if you have 250 of them like you and Jim. You get what I’m saying, right? If we have a separate account just for cost of goods, ideally when that dollar comes in to Shopify, let’s say part of it goes into your tax account, part of it goes to your cogs account.

38:51
part of it goes into your own account. Is there an automated way of doing that? Not that I’m aware of. know Mercury Bank who we use actually has some some cool rules about, you know, routing money between different accounts at Mercury, but we just have an SOP every week. Our account does it. Yeah, I was just thinking like stuff like that I wouldn’t be good at. Even with an SOP, you got to still follow it, right? You do have to follow it, but I found I take it out of my hands.

39:21
Right? So it’s our accountant that does or my COO does it. I see. Okay. And they’re just moving the money around for you. Yeah. So it feels automated to me. Yeah. Yeah. Okay. And then in the event that you find out that you don’t have enough money to fund your next inventory, where like walk me through the process of finding out what the hell is wrong. I know that’s a loaded question, but we’re just some common places to look. So complex to look, I mean, just sort of walk your income statement.

39:50
Right. So number one, has your revenue fallen off a cliff? Right. So that’s number one. Right. If your revenue is falling off a cliff, you know, it’s hard to fix a lot of problems if you’re not selling anything. So number one, look at your revenue. I mean, everyone checks their revenue. So chances are that’s like the obvious. So walk down the P and L your cost of goods is your cost of goods more than 30 % of your revenue. If so, you’re going to have a hard time.

40:20
In my opinion, this is maybe a hot take, but I believe that gross margins below 70 % are in e-commerce are not workable. It’s there’s just not enough room to pay for ads and shipping and profit. So if your gross margin, if you’re paying 50 cents for a thing you sell for a dollar, you got a problem. So you need to renegotiate with your supplier, launch some higher margin products. You got to get that gross margin up to at least 70%.

40:49
Then, you know, keep walking the PNL. If your gross margin is about 70%, what else might be the problem? And then this is always the other thing that’s a problem. Mark Zuckerberg is taking all your money, right? Or Jeff Bezos is taking all your money in the form of sponsored product ads, depending on what channel you’re selling on. So if your ads are more than, say, 40%, even 30%, like if your ads are more than 33 % of sales, you’re going to want to look at that. Yeah. You know, you might need to grow slower.

41:16
or even shrink, you might need to do less business, but more profitably and slow down those ads. And then the last thing is you walk to PNL is you got to at your overhead. Do you really need all those employees? And like, it’s a hard thing to say, but people are the single biggest. It’s usually cogs, ads, people on every PNL. It’s like almost that simple. So you just got to look at cogs, ads, people, and those are the only three buckets that I mean, canceling software and stuff doesn’t move the needle.

41:45
You want to move the needle cogs adds people period. So you mentioned 70 % margins. Does that imply that just selling wholesale, which is traditionally 50 % margins, it’s just not going to work these days. Wholesale is not traditionally 50 % margin wholesale for the retailer, right? So for the retailer will make a 50 margin. So like, let’s just give you an example, right? So let’s say a thing sells for $1 at the store. The retailer is going to want to buy it from you for 50 cents, right? Right.

42:14
you might make it for 15 to 20 cents. Right. That’s not what I meant. I meant you as the online retailer with the 50 % margin. No, if you’re, if you’re honestly, and this, I’ve been saying this for a couple of years and people always get mad at me, but like retail arbitrage and retail selling of the people’s products is dead. I mean, like this is a, it’s a tough business. It’s you create no incremental value. You know that these, if you’re buying from brands and selling

42:43
buying wholesale and selling on Amazon, they’re just waiting to cut you out. Yeah, I know they might, you might think that you’re so good at selling on Amazon. I’m sure you are, but tons of other people are too. This is not a sustainable business. Either your business partner, your brand is coming for you to cut you out or other sellers are coming to compete your margin away to zero. If you’re not selling your own branded products, the clock is ticking. I love it. I’m glad you said that because I’ve been saying that for like the last almost decade now.

43:12
But maybe people will listen to us eventually. Well, here’s what I think. Like the price always erodes to the bottom, right? You got a whole bunch of sellers, especially on Amazon on wholesale, right? Not only you have to fight for the buy box, the only way to get the buy box to keep dropping your price for the most part, right? Yeah. Yeah. And then pay more for ads also to one penny more for ads than the next guy who’s selling the exact same thing. It’s a it’s a zero sum, zero margin game. All right. Let’s wrap this up, Bill. So OK, so just switching to a bank account, assuming you have

43:42
a sizable sum of cash will make you between four and 5%. Right? Yep. If you like traveling and luxury, I think I saw the picture of you and Natalie on Emirates. Was that was that Emirates? Couple years ago. Yeah. Well, there’s like a private bar in the back. And then if you don’t want to ever pay for hotels or airfare ever again, get what was the MX gold, get an MX gold or multiple of them and then get a capital one spark. And I mean, you can get way more complicated than that. But that’s like the 80 20.

44:12
What I didn’t know actually what I learned from you was that you could get multiple MX goals. did not. Yes, that’s the secret. I guess you just had to be diligent about switching it out and keeping track, right? Yes. So it’s very easy if you just only put ad ad and shipping spend on the card. So it’s very easy and MX to just go on their website, you just go year to date spending. And so if you spent more than $150 on $150,000 on the card, you know you’re over the limit and to roll to the next card.

44:40
Yeah, but it’s way harder if you’re like putting all kinds of non bonus spend on the card and you got to parse it out. So I just put only bonus spend on the golds and everything else on the capital one spark. Okay. And then the other nugget was your repeat customers should fund your business and then you can break even on new customer acquisition. Correct. And then the other takeaway was do not do these fee based loans. If something sounds too good to be true, it probably is.

45:11
Yep, and do cash flow forecasting so you don’t have to so you can see your cash need coming three to four months in advance and borrow cheap money from a bank rather than three to four days in advance and borrow expensive money from one of these merchant cash advanced people. Right. And the way you do that is you calculate your landed cost of goods and then just put that money into a separate account and that will fund your next inventory purchase. Yep. That’s the easy way to think about it. I love it, Bill. Where can people find I know you

45:39
coach on this stuff? Where can people find you? Yeah, so this is complicated. I was trying not to do too much air, Matt. If you would like this, you know me to help you implement this type of stuff in your business, I do do coaching. It’s buildda.com slash coaching or just buildda.com and you can find the coaching link. So I will only work with like three or four businesses at once so I can get really deep with just a couple people and kind of help people implement a financial operating system at their econ business. So I’ve been doing this for 10 years. I’ve done

46:09
finances for e-comm based on my whole career. So I help people install financial operating systems in their business. Yes. So billda.com slash what? It’s just building slash coaching. Okay. Yeah. Well, Bill, thanks a lot for coming back on the show, man. I should have you back more often. I think you’ve only been on three times. I should have you back more often. Whenever you want, you know where to find me. I’m glad to come on and just run my mouth and tell me about your podcast actually, because that’s relatively new, right?

46:34
Oh yeah. Well, actually we’ve been doing for two years, believe it or not. Oh, has it been two years already? Good Lord. Yeah. Okay. Yeah. So the podcast is called Acquisitions Anonymous. If you are interested in acquiring a business, you know, be it another e-commerce business or even a business in another industry, what we do is twice a week, we break down businesses that are for sale and we say kind of what’s good about this business. What’s risky about this business. If I were buying this business, what are the questions I would ask in diligence? How would I value this business?

47:01
How would I finance the acquisition of this business? So if you’re looking at buying a business or for the first business of yours, or if you wanna add on a business, maybe do a business you already own, build a mini holding company, on Acquisitions Anonymous, we talk about how to do that. Dude, love it Bill, thanks a lot man. Thanks for coming on the show. Go check out that podcast. All right, thanks for having me Steve.

47:26
Hope you enjoyed that episode. Now if you haven’t done so already, make sure to optimize your bank accounts right now and start using the right credit cards and avoid predatory lending practices that charge ridiculous interest rates. For more information about this episode, go to mywifequitterjob.com slash episode 495. And once again, I want to thank Emerge Council for sponsoring this episode. If you sell on Amazon FBA or your own online store and you want to protect your intellectual property from theft and fraud,

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head on over to emergecouncil.com and get a free consult. Just mention my name and you’ll get $100 off. That’s E-M-E-R-G-E-C-O-U-N-S-E-L.com. I also want to thank Chase Diamond. Chase is my go-to guy when it comes to email marketing. And if you want to learn how to run your own successful email marketing campaigns, check out his class over at mywifequitterjob.com slash chase. That’s mywifequitterjob.com slash C-H-A-S-E. And if you are interested in starting your own e-commerce store,

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Head on over to mywifequitterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.