RMRB 14: Getting Repeat Customers

Jake Davis

October 3, 2018

This business is an eCommerce, dropshipping, and wholesale business has been grown by Israa to over $5k/month in just a year and a half. Something interesting about this business is the loyal fanbase, over 20% of the revenue for the business comes from returning customers. 

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Speaker 1:           (Music)

                                What if you could cut through the noise in the online business world and learn from someone who has built a real business. We verified the numbers and combed through the P&L. This is not only a real business, but a real asset that people want to buy. We’re going to pull the curtain back and give you the insights this entrepreneur has discovered that you can use to level up your knowledge. Whether you’re looking to buy a business, or looking for inspiration to take your current business to the next level.

                                Hey listeners welcome back to the Real Money Real Business Podcast. Today, we’re gonna be looking at an e-commerce and dropshipping business that’s making about $5,500.00 every single month in profit. Something really interesting about this business, is the fact that a lot of the revenue for the business comes from repeat customers, it has a very loyal fan base here. I got the chance to sit down with the owner of this business to figure out what makes this business tick. [Isra 00:00:56], thank you for coming on here today. How are you doing?

Isra:                       Thank you for having me.

Speaker 1:           It is my pleasure. I am looking forward to hear about how you successfully built a six-figure business, very excited to dive into your story. And before we get to the questions that I have for you though, I want to go ahead and run through a little quick summary of the business.

Isra:                       Okay.

Speaker 1:           The business was built in February of 2017, has a monthly revenue of $45,098.00, expenses of $39,577.00, to make for a net profit of $5,521.00, which is generated on a six month average. Included in the sale of this business of the primary domain and also add content and files, email list, Facebook, Pinterest and Instagram accounts, Shopify account, supplier contacts and a digital domain. Please note the inventory is not normally included in the list price. Further details can be provided to active depositors.

                                Isra, can you tell us a little bit about your background in building and running online businesses?

Isra:                       All right. So, in February 2017, I actually had no idea what e-commerce was. So I did do some research. I was interested in the whole business model. And I did research and I actually found a mentor, which I followed and I started it, you know, I [inaudible 00:02:17] into the business idea of dropshipping. From February 2017 till June, I was basically learning all aspects of marketing, setting up shop, contacting suppliers, you know, the basic background, the usual business.

                                About July 2017, I had some time to actually do a good product research after I got down the concept of how to do research and how to market. And that’s actually when we found our first product line that was, you know, it was booming. We are in a very competitive niche, it’s a very competitive niche. It took a while for me to learn the Facebook ads in that niche just because there’s so much competition from the niche and from general stores competing as well.

                                So, we launched our product. It went well, but from August 2017 to about December, I was still learning the marketing aspects. So, we couldn’t scale it as well as we liked, and I was also learning how to know my numbers and how to calculate the customer value point and like the break even points, and the lifetime and all that. So, that took me awhile. But once I got it down, I went from creating a customer value, it was around I believe, to acquire customers, around like $12 which was nothing, you know, if you’re spending on Facebook. And I was able to bring that all the way up to $31 now. So our average order value went from $17, $19, to $45, $50 right now.

                                And then from December on, I actually started testing with ads. There’s a lot of add spend in there. And the reason for that, I was going through a testing phase especially in December and January, being the end of the last quarter, the CPMs on Facebook were pretty high, so I was competing. I was spending a little bit more than I would have liked. But we were able to basically narrow down what was working, and that’s when you saw the spike between February and April of this year. We started scaling pretty quickly, and we saw a huge spike in revenue and also profit, and we were able to reduce our ad spend.

                                Unfortunately, I had signed on for a different project a couple years ago and it’s going to be taking off soon, and because of that my time is gonna be basically spread thing. And since this business is just growing, I’m not gonna be able to help it grow to its full potential. So that’s why I’ve been looking for somebody else to take over and be able to continue the great success, you know, bring in three months time from a negative standpoint to a positive profit.

Speaker 1:           It’s interesting because, when you look back over the last year, you see this huge upward trend when, as you said, you started putting marketing efforts behind the business and really kind of figuring out what works. And I want to touch on that in a little bit. But before we get to that, something else you said was that, this is a very competitive niche. So, can we just take a minute and talk about why you chose this niche if it is so competitive?

Isra:                       So, that was another thing. When I first started I didn’t understand the whole research part of niches very well. I did my due diligence, I actually used Audience Insight on Facebook to calculate the monthly searches for the different niches. And basically what my biggest goal was, the scalability effort. So I found a niche that was, you know, in the millions. Because you need something like that to scale. And if you can take the store and advertise on different platforms, it would be successful as well, but I just started with Facebook just because that’s where I put my effort into. So my research was through that.

                                So I chose the niche because it was very scalable, it’s very easily scalable, and it also encompasses a large group of the population that are spenders. And it also has an emotional appeal, a lot of people are emotional buyers, and I think it was a good decision even though it was competitive. Because a lot of my competitors, what they do is, they choose a product from this niche and basically try to sell as much as they can from the product and move on. But with our store, what we did, what we actually created is like basically a family that’s behind a purpose. So that is why we also have a huge repeat customer rate, we have about 20% repeat customer rate now, because people just love the concept behind our products, as well as the cause that we support. Also, we’ve created connections from the beginning with our customers.

                                When I realized it was competitive, I was about to leave it, but then I said, you know, it’s better to do my research and know exactly what these people want and outdo my competitors and succeed at a higher level in a competitive niche, then, you know, just quit and move onto something easier. And that’s what we were able to do with this, so.

Speaker 1:           And the other thing to mention, when talking about competitive area, is that since there is so much money going around in this space, if you get even a small piece of the pie, you’re gonna have a successful business.

Isra:                       Right, I mean it’s about a 30 billion dollar a year niche. So, you have a lot of space to profit. And like I said, a lot of competitors, they come in, they just choose a product, they scale it and they leave. With this, we were able to basically establish a foundation for a growing brand. I fully believe that this could become a full brand in the future.

Speaker 1:           So why did you choose to set up your own e-commerce store on Shopify, rather than going on another platform like Amazon FBA, for example.

Isra:                       Well the first thing I wanted was the email list. I know Amazon does not allow you to access your customers emails, which I thought was kind of hard, you know, to be able to scale and brand your store very well. They also limited me to be able to access my customers and know exactly what they want and cater to them. And I also wanted to build my own store. I didn’t really want to rely on Amazon or eBay, and you know, deal with their rules and regulations and all that. I wanted to create a personal business that you can call your own and be able to basically brand it under your name instead of somebody else’s.

Speaker 1:           When looking back at the last year, as you mentioned, there is a spike in March. So what are some ways that you feel someone, whether it be you who keeps the business or a new owner who keeps the business, could go ahead and flatten that out and make that upward spike be constant throughout the year?

Isra:                       So, I believe that you need to be able to scale it and keep it scaled. I’m gonna admit that my shortcoming is that I don’t have the time to put into it. It does need a little bit more time. I’m only putting about 10 hours a week in it. It’s still at its beginning, so it needs about 15 to 20 hours of solid commitment. Especially bringing on new employees and training them to do the business. Right now we have about two virtual assistants. But I literally expect them to be able to scale the actual employee system inside the store to get it to scale the way I foresee it. We have so much data on this store that, I know what works, like I said, I don’t have the time to do it. I need to learn a lot of platforms. I know that Bing and Yahoo and even Google, but Bing and Yahoo being the top ones, where our customers come from, our conversion rate from them is between 10% to 15%, and advertising on those platforms would be a gold mine, just because it’s easier traffic as well that’s not competitive.

                                So, we started maintaining our Instagram pages, and they’ve become extremely active in the past two months as well, and that is bringing in a lot of traffic and a lot of micro influencers within communities that we are working with as well. To be able to keep that spike, like I said, I started with Facebook, but with Facebook being an ever changing platform, I’m finding that it’s not the most reliable thing. It’s better not to keep all your eggs in one basket is what I’m saying, and to basically diversify.

                                Right now, we are testing YouTube advertisement and Google Shopping as well. And I think the best way to keep that spike up, is basically to drive traffic from different social platforms that are cheaper, that are easier to reach people on. I mean, all you have to do is really drive traffic. I mean the front end, even if you don’t make sales on the front end, your email base is, I mean it’s amazing, it brings in about 20% to 30% of the revenue per month. And we have [inaudible 00:11:33] flow set up for retargeting and bringing back customers, as well as we do campaigns every week. We call them blast campaigns, where we basically send content out or give special discounts. And I mean they come back. So we make a good amount of revenue just on email.

                                And like I said, the reason I’ve kind of scaled back in May and now, is because I don’t have the time to test on the Facebook platform as much as I did back in March and April. I mean, that’s what needs to be done, and there just needs to be more testing and more diversification on social platforms.

Speaker 1:           And that time that you don’t have right now, as you were telling me before we hopped on this interview, that’s the reason why you want to sell the business today, correct?

Isra:                       Right, absolutely. So my story is that, I really started with it thinking, I was just gonna start a store that’s going to make, you know, a five figure. I really never thought it would ever go up to, you know, $45,000.00, to $50,000.00, even $60,000.00 in March, revenue so quickly. But that’s what happens when your products go viral, you have to scale them because people, you know, you bring in traffic and you don’t have a choice but to scale.

                                When I first started this, I didn’t realize that this was gonna explode into what it is. I really thought it was just going to be a modest amount of revenue that came in. But when it started growing at a very high scale, I think that’s my biggest downfall is that, I didn’t prepare myself enough to keep it going. And I think somebody with that knowledge or with better time management and they have more time to be able to scale it, and be able to maintain it would do great with this. I did think at one point just to shot it down, but our customers, I mean I’m being truly honest, our customers are, you know, they love us. Even if you go to our blog post, we actually do a lot of content based on our customers. They email us their stories and how their products have changed their lives, or how they have been able to bring about joy to their families and friends through our products, which is great. And that’s what we do, we integrate our customers into the brand, so they are like ambassadors.

                                I just launched an affiliate program, because a lot of them have been just … if you go to our reviews, everyone’s saying, you know, we gave out your website because everybody’s asking. And so, we wanted to incentivize our customers to have a reason to give out our name and also be able to earn. And I think that’s one way to create a solid brand, is to create a family where customers they feel like they are important and that they are playing a role in the business and the brand, as well as being able to earn through it.

                                So that is the reason I kept it open, and so I have to sell it instead of just shut it down. I really believe in it, I do love it, I just can’t see it just go like that, so I’m hoping somebody can carry on that legacy with it.

                                (Music).

Speaker 1:           Hey listeners, do you want to find a business that is just right for you? Head on over to Empire Flippers and have a look at our marketplace, where you can see real businesses making real money, just like the one we’re looking at today. In fact, don’t miss out. Head over now, share your email address, and we’ll send you hot fresh new listings of successful businesses every week to your inbox. Now back to the interview.

                                Speaking of growing the business, what do you feel are the big opportunities for growth that a new owner could take advantage of?

Isra:                       I’m gonna start with two things. So the first product that I started was actually a losing profit product, I should say, in the beginning. I did not make money money on it. Then I took it, and I literally took it from like negative revenue to making about 40% of our revenue through marketing, through influencers and through a good ad copy. I really put some effort into that product. And we were able to actually recreate a different variant it based on our customer feedback. And they absolutely love it. And that’s one thing that we did, was we were able to take our customers feedback and cater to them. And that’s something they appreciate, because they know that you’re listening to their suggestions.

                                Our other product is actually a collection, and it’s massive. I literally just stumbled on it and I thought, “Hey, this would be nice.” And literally, I did not know that at the time that this product would just take of like crazy. It basically a resonates with a large population, a group population, and they spenders and it resonates with an era of their time, and it’s taking off. I think I’ve added about … let me check the analytics, but I believe we have over 20 products just in that collection, literally selling every day without us even advertising them.

Speaker 1:           So If you were to go ahead and put advertising behind those products, that are already selling organically, you know, there’s no telling the heights that they could reach.

Isra:                       Right. And I just wanted to put that out there, the only advertisements I have actually done on Facebook is for two products. I have not even like scratched the surface with these products. I mean, if you go into like a 90 day, you can see the other products. Every time we introduced one, it just took off. We’re selling like 100, 200 of them without ever advertising them. And our average order value, it’s just been increasing like crazy, just because people want these products and they’re willing to pay for them.

                                So it’s amazing to see that you’ve discovered something within your niche that resonates with a huge population. And I mean, it’s growing. And the great thing about these products actually, that it’s not geared just toward the niche, it’s actually geared toward the general population. We have people in all different niches buying it. So, that’s the great thing about this is that it can be scaled on like a basis of not just within the niche, but outside of it. Because it is a general product, it’s just a little bit modified to the niche, but most people if they are into the niche or not, they buy it anyway.

                                We actually tried different interests with it, and it did sell with about six or seven other interests besides our niche. So that’s the great thing about this product line. You have over, I think about 20 to 30 products in this collection, and it literally stands … basically just a certain group of population, and it is the largest group of population in the US. It’s just, it’s amazing. I just did not test every single product just yet, because again, time and it needs a lot of attention to be able to reduce the ad spend and bring up your profit. And you have to test price elasticity and all that. But we were able to do great numbers with just this one product, let alone the other products.

Speaker 1:           And I have myself looked at this niche, it’s very, very gigantic as you’ve been saying. There’s a lot of opportunity. And as you’ve shown over the last six months, this business has just been growing.

Isra:                       Right. The thing is, it’s growing and I haven’t even like scratched the surface, that’s the thing. I was kind of afraid to spread myself too thin with too many products, because we did focus on that one product, and we actually started wholesaling it because we wanted faster shipping, a better turnaround for our customers. And we sell out. I actually ordered 1,000 of them in February, hoping to pass through the Chinese New Year time, and we sold out within a week, I think a week and a half of all of it. And it just, I mean people were buying multiples, people were buying wholesale, and it was just crazy. The Chinese New Year didn’t even hit yet, and we were already sold out. So, it was really hard to keep that going during February, that’s why we kind of just kept it down and then we scaled it in March.

                                But just the amount of potential there is with just one product, let alone a whole collection is insane, just to think about it. I don’t know how else to put it, but yeah.

Speaker 1:           It’s a mountain of an opportunity, and it’s really cool to see that you’ve grown this. I mean you made $12,000.00 in profit last month, you know, like that’s just awesome. So Isra, do you feel like there are any significant risks that a new owner will encounter when trying to grow this business?

Isra:                       So like I said, the only risk that I foresee, and the only risk that I actually foresee with this and the reason again that I’m trying to find a better owner to replace me, and be able to do this better than I can, is diversifying your platform. You can’t rely on one platform, and I think that was my downfall in the past. I want to say, being able just to rely basically through scaling, it’s better to be able to drive traffic through different platforms, just so that you have that traffic coming in. And not everybody uses one social media platform, like you know Instagram has different audiences than Facebook, YouTube and all that. And if you’re just sticking to one platform, you’re not gonna be able to reach those other potential customers if you do not diversify.

                                I have done SEO on my website, and you see it does come up in Google, we do have traffic through Google. Last month there was about 1,000 sessions just through Google. Instagram we get about 3,000. Even Pinterest, Pinterest I haven’t even done anything with it besides connect it to my Shopify store, and we’ve gotten about 100 visitors just through Pinterest.

                                So it’s good to be able to have your name out there, besides one platform. It does take, I mean I don’t know who will take this over, if they do, but if they have that experience or if they have that team to be able to diversify, they would see this grow exponentially in the next couple months, because that’s all it needs, traffic from other sources besides what I have been doing through Facebook. And again, I mean literally I’ve only tested two products. And so it has so much potential, it just needs the traffic right now.

Speaker 1:           Would you commit to a noncompete?

Isra:                       Yes. I’m actually planning on leaving the niche, and I’m not looking into competing in it again. It was just a learning experience for me.

Speaker 1:           How much support are you willing to offer a buyer during the transition period?

Isra:                       So I’m willing to offer up to three months, if they need more that’s fine. But I will work with them up until all our tickets are closed, and be able to provide extra support, especially when it comes to suppliers and our warehouse wholesale, and also if they take on our virtual assistants as well.

                                So I’m open to helping them out, just getting set up. I’m also willing to work with them, provide them insight on good structure for our email marketing that’s been working for us, because that’s something you own, and that’s something you can control and do so much with outside of driving traffic.

Speaker 1:           Are you willing to negotiate on something like an earn out?

Isra:                       Yes.

Speaker 1:           Isra, if you were able to give yourself one piece of advice that you wish you knew when you started, what would that be?

Isra:                       Doing your research and do it well. I think if I could go back, I would have not jumped in right away. I think that’s where I lost … most of my money was spent on testing and structuring the business, it wasn’t really spent on actually running the Facebook ads and scaling. It was more understanding my numbers, understanding what works best within the niche. So that’s something I would go back and do my due diligence, and I would spend about a month or two just researching any niche I go into and try to get in that mindset. Even though I do have a lot of background in this niche, that’s why I actually wanted to, and it was a lot easier for me to integrate into it because of my background. But that is one advice I would give is that, you know, to be able to do your research and be able to come in with some knowledge of how to set this up and how it works.

Speaker 1:           Awesome Isra, thank you so much. I do have one final question for you, but before we get to that I want to go ahead and run through that quick summary of the business again. The business was built in February of 2017, has a monthly revenue of $45,098.00, expenses of $39,577.00 to make for a net profit of $5,521.00, which is generated on a six month average. Included in the sale of this business are the primary domain and all site content and files, email list of approximately 16,000, Facebook, Pinterest and Instagram pages, Shopify account, supplier contacts, and additional domain. Please note the inventory is not normally included in the list price. Further details can be provided to active depositors.

                                Isra, can you give me in your own words your best 30 second pitch on why someone should purchase this business?

Isra:                       Okay, so the reason I think this business is great is because, you really do have the opportunity to create a brand, but not only a brand within a store, I think you have the opportunity to create a wholesale and affiliate programs which we do get a lot of requests for. But to be able to take a store that has all the data, and be able to look at it and be able to just go in and apply that data and make it work, I mean you have everything set up for you. I literally have worked very hard in the past year just collecting data and information on my customers.

                                When you get this business, you will know exactly who your customer is, you will know who you need to target, and all the information and all kind of products they want, and what kind of emotional appeal. I did a lot of work and background in ad copy and emotional appeal in ad copy, so I’m willing to work with you on that as well. It’s a built-up business that just needs a little bit more effort and a little bit more time, to make it grow to its seven figure potential, that I believe in. And that is the only reason I did not shut it down, is because we have customers relying on this business to grow, and I mean they love it. And that’s something I hope the next person that gets it would be able to basically grow and continue with. Because it’s really not just about the money, it’s about catering to this audience, this passionate audience as well.

Speaker 1:           Isra, thank you so, so much for taking the time today. Hearing about your story and how you got started with this six figure business that you built was really awesome to talk about, and I really appreciate you taking the time.

Isra:                       Yeah, no problem, I really appreciate the time as well, to be able to provide the insight.

                                (Music)

Speaker 1:           You just learned how this business works, and I want to give you the opportunity to learn more about what you can do to buy real online businesses just like this one. If you want to find out more about businesses making real money, head over Empireflippers.com and sign up for our mailing list. There is an entire world of people quietly investing their money into online businesses and seeing great returns. Now, we want to help you do the same thing.

                                (Music)


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