RMRB 15: Gaining a Huge Following

Jake Davis

October 17, 2018

 

This business is an ecommerce, dropshipping, and Amazon FBA business in the apparel & accessories niche. Scott and his partners have grown the business to $40k/month in profit! This business sells a variety of women’s fashion accessories, primarily jewelry, on Shopify and on Amazon FBA (US & CA). With over 1 MIL social media followers and a large email list, the brand is trademarked and part of the Amazon Brand Registry.

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Speaker 1:           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 PNL. 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. This week, we’re gonna be looking at e-commerce, dropshipping, and Amazon FBA business that is in the apparel and accessories niche, selling jewelry. There’s one thing that’s really cool about this business is the massive social media following. This business has over one million followers across social media platforms, which is really cool. In just about four years, the business has managed to grow to be making 40,000 every single month. I was able to sit down with the owners of this business, figure out how they grew this massive business. Scott, Will, and Bill, thank you for coming on here today. How are you doing.

Bill:                         Hello.

Scott:                    Thanks for having us.

Speaker 1:           Yeah, it’s my pleasure. I’m really looking forward to diving in and discussing with you how you managed to build a million dollar business. It’s quite a feat, and I’m looking forward to it. Before we get to the questions that I have for you though, I wanna go ahead and run through a little quick summary of the business.

Bill:                         Go for it.

Speaker 1:           Again, the business was built in October of 2013, has a monthly revenue of $243,127, expenses of $203,828, to make for a net profit of $39,299, which is generated on a 12 month average. Included in the sale of this business are two domains, site content and files, two Shopify accounts, two Amazon seller central accounts, email accounts, and email lists, and social media accounts, which include Facebook, Instagram, YouTube, Pinterest, Snapchat, and Twitter. Guys, can you tell us a little bit about your background in building and running online businesses?

Bill:                         Yeah, absolutely. We’ve been running online businesses for about six years now. Originally before we started, William, my business partner, owned a daily deal website similar to Groupon or Living Social. That gave him a pretty decent education in selling things online. After he stopped doing that, him and I partnered up and decided to figure out the e-commerce game. So within a year of learning how to do e-commerce, we started this business. It took off for us very quickly. It was my first business that I’ve ever run. It was Will’s I think third business that he’s ever run. Within the first year of running it, we were able to scale and I think we hired a lot of people early on, which looking back was actually a mistake, because we didn’t actually have to have that many people working for us. But I think we hired 18 or 19 people all at once, and started to run the company and continued growing it. Things have been pretty good for our business since then.

Speaker 1:           So you mentioned the mistake that you made of hiring too many people. I wanna touch more on that in second. But when talking about what’s led you to the creation of this business, I gotta ask. You’re selling jewelry. What led you to sell these products?

Bill:                         Well before we got into jewelry, we did test a lot of different product niches. The market that we were doing paired really well with the jewelry niche. The owners of the company are actually met. But we were able to figure out pretty quickly what styles worked and what styles would convert. Of course, like any other e-commerce business, we always had two or three skews any given time that were making up the bulk of our revenue. So yeah, we were pretty good at finding products that did really well with our marketing, and it was just a matter of finding products and then scaling the marketing budgets.

Speaker 1:           The business as I mentioned at the start of the interview, is e-commerce, dropshipping, and Amazon FBA. Which part of that is the biggest percentage of the revenue stream for the business?

Bill:                         Without a doubt the website, our personal e-commerce Shopify website generates the most. I don’t know the exact figures, but I’d ballpark that it was like 90% of our total company revenue is generated from the Shopify site. I strongly believe that we could do a lot more on the Amazon side, it’s just that William and I haven’t put a lot of time into it. We’ve basically put the listings up on Amazon, and those listings did pretty well but I’m pretty sure it’s because this brand’s been up for five years. We’ve sank millions and millions of dollars into advertising on it. So I think that we have some brand momentum and there’s some brand awareness around the brand name. So I think that’s driving a lot of Amazon sales for us. I think if there was a buyer who had any background in selling on Amazon, they could definitely scale it very quickly on the Amazon side.

Speaker 1:           Do you have a trademark registered on the brand?

Scott:                    Yes. And on top of that we’re part of the Amazon program for trademarks as well.

Speaker 1:           So when you take a look back over the last year, just purely looking at the numbers here. You notice a couple things. You notice a huge spike in the Christmas time, which correct me if I’m wrong, I’m gonna attribute to holiday season?

Scott:                    Yes, that’s correct.

Speaker 1:           Mm-hmm (affirmative). And then it’s kind of up and down, but the last few months now have been a bit more down. So can you talk about what’s been going on in the last few months that’s been causing the revenue to go down?

Scott:                    We’ve had a lot of inventory run out the last few months, because we’ve been low on inventory for some hot skews, the numbers aren’t where we usually have them. The challenge with e-commerce sometimes is that selling products pop up out of nowhere, and a lot of the times you under order and don’t have enough inventory in stock, and then there’s of course a month to two months lead time to get enough inventory to supply that demand. So I know for a fact that that’s one of the biggest issues we’ve been facing. Will’s in charge of marketing, so he can probably answer the rest of the question.

Will:                       Yeah, I’ll take that over, Scott. I think the biggest issue is we went from actually holding inventory ourselves to basically going to a supplier that dropships for us. There was a lot of logistics issues that went along with that. They wouldn’t hold enough inventory for us, so we had to keep our sales low just so we wouldn’t do pre-order sales. Because we noticed with pre-order sales, we’d get a lot of returns and it just wasn’t working for us profitably. As of late, I had multiple meetings with them in Atlanta, and now are going to start ramping up inventory for us. One of the good parts about the supplier is that we don’t have to put any money up front. They provide inventory for you, and you just mark it the inventory.

Speaker 1:           That definitely makes sense. So it sounds like it’s not like the brand is hurting or people are losing interest, it’s that you purely did not have enough supply to meet the demand.

Will:                       That is correct.

Speaker 1:           When did you switch over to using that new supplier system?

Will:                       Basically almost full time in January. In January. We were making actually really good sales, but part of the issue was we were selling things that weren’t in stock and there was a four week delay, which caused a lot of our returns. People are looking at actual returns, that’s the reason why. The high percentage of returns was this day and age, you really need to sell what’s in stock. People expect to receive things in two or three days. If they don’t they’re instantly unhappy when they receive it, and very likely to return the product or request refund.

Speaker 1:           And Bill, as you mentioned, you are working to improve that system so you don’t have inventory shortages, correct?

Bill:                         Yes, yes, of course. I really spoke with the owners and they’ve seen us sell a lot of products. I explained to them, listen, I can’t work with you guys unless we get more inventory. Unless we do more inventory on hand. They understand it now. They fixed their logistics system on their end. We have weekly inventory meetings now with that Atlanta dropship company and it’s getting better. Even this week, it’s been starting to get better and better. Because the initial batch they finally ordered for us just recently came in last week. Our sales already have increased by about 20 to 30% from the week before.

Speaker 1:           So Scott mentioned that you’re in charge of marketing. Can you talk about what exactly you all are doing for marketing for the business currently?

Bill:                         Yeah, we do a lot of social media, mainly. What we mainly use is Facebook advertising with a little bit of Google ad works, retargeting, and also email marketing as well. We have a list of 700,000 emails, and we send out a weekly email.

Speaker 1:           700,000, that’s a large amount of emails to have on that list. Do you have a good amount of returning customers through that list?

Bill:                         Yes we do. I’d say we definitely do. I’d say the returning customer rate is somewhere around 10%. 10 to 20%. I can’t give you the exact number, but I’m sure we can find that number for you.

Speaker 1:           How about the other social media accounts? You mentioned Facebook, but are the other accounts a driving traffic source for the business?

Bill:                         What I notice is actually Instagram is doing a lot better as of late from a marketing perspective. We do a lot of advertising through Instagram, which works through the Facebook platform. So I notice that it’s been doing well. I believe we have over 100,000 followers on Instagram. I can find that out for you in a second. But yeah, Instagram’s really good. I’m really starting to get into Google ad works, I’ve been seeing some success with that as well.

Speaker 1:           Scott, you mentioned earlier that you had hired too many employees too quickly, that makes me wonder. How many employees do you have now?

Scott:                    Currently, we only have two employees that work in our office in Florida, and another two support employees that we have outsourced to a company in the Philippines.

Will:                       If I can expand on that also, we’re probably looking to get down to one support agent for the company. We’re gonna move down in the next month or so to just one agent.

Speaker 1:           Do you know if those employees both local, and remote are willing to continue working with the business when a new owner takes over?

Will:                       Yes they are.

Speaker 1:           You mentioned that you have an office in Florida, correct?

Scott:                    Yup.

Speaker 1:           Okay.

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                                So when talking about the future here, what are some of the major opportunities for growth that you see a new owner being able to take advantage of?

Bill:                         The biggest growth opportunity in my opinion is honestly selling the diamond jewelry. We went to all precious metals with real diamonds.

Scott:                    So over the last year and a half, we’ve worked with a supplier in the USA who provides us with really, really high end products that not a lot of other people have access to and holds inventory for us at no cost to us. So there’s actually very low risk and we strongly believe that gives us a huge edge against our competitors, because we don’t have the risk. The quality of product that they provide for us is really, really, really high. So they’re one of our main manufacturers right now. We also hold inventory in house at our facility, but we’re thinking about pivoting everything to this new supplier, just because the quality of product they provide is so high and we don’t have any risk.

Will:                       I’d add one more thing in there as well. They actually also help us design new products with our product developer at zero cost. So any new product idea that you have, they will design for you at zero cost. Which I think it a great benefit. Which is huge, because in the past, two, three years ago we had like I mentioned to you early on this interview, we hired a lot of people. A part of that staff were product designers that would come up with product ideas and design things for us. The manufacturers would charge us the sample fee between two to $400. We had a lot of these sample products coming through the pipeline, so that was a big expense for us. But we have now wiped that out completely because this supplier is able to do it for free.

Speaker 1:           And just to kind of recap and give my take on that whole situation there. With the exclusivity you have with that premium supplier and the trademark on your brand, it sounds like it would be very difficult for someone to come along and try to copy what you’re doing.

Bill:                         Yes.

Scott:                    Very difficult.

Speaker 1:           So you have a storefront set up for online for US and for Canada. Have you looked at expanding into other territories worldwide?

Will:                       So we mainly concentrate on the US, though we do have Canada because it’s so close to the US. We do have customers throughout the world, but the vast majority of customers are in the US. There may be some opportunities in the future, but we think focusing on the US is the right strategy going forward.

Speaker 1:           Speaking of looking to the future, why have you three decided to sell the business today and what do you plan to do in the future?

Bill:                         So the reason we’re selling the business is because we’ve been doing it for five years, and there’s other opportunities for us in the e-commerce world that are separate niches. We’ve just been in this niche for five years and we think it’s time for a change. Our interests have changed as business owners over time and there’s a lot of opportunities out there. This is still a huge opportunity for us, but we’ve all actually decided to go our separate ways and start our own ventures. So this is the only way to kind of get that going.

Speaker 1:           We touched on this briefly earlier when we mentioned that the quality of the products, the brand name, and the exclusivity with the supplier mitigates some risk, but are there any other significant risks that you feel a new owner should be aware of?

Scott:                    Early on, the biggest risk for us was putting all of our capital into a skew, like a hot selling skew. The risk with the niche that we’re in is that it’s a trend niche. So there’s products that will trend, and then after five, six months of those products trending, they might no longer trend. That being said, we do have products and skews that have stayed trending for a couple of years. But the challenge for us was putting a lot of time into our inventory buying decisions and making sure that we bought just enough inventory of each skew. We have made mistakes in the past buying too much inventory of one skew, and having our capital tied up in that inventory and having to liquidate it. That’s why we spoke earlier about getting a supplier who could actually have inventory on hand where they would front the cost themselves without risk on our side, financially. So we fixed that problem to the best of our ability we believe. So that’s one risk.

                                The other risk is something that everyone in e-commerce faces, and that’s just like Will was mentioning. We use digital marketing like Facebook, Instagram and Google, and those are really every day the ad auction kind of changes. So one day you might have really good sales, the next day the sales might drop a bit. It fluctuates quite a bit. So you will need someone who understands how to manage all that. The good news about Facebook advertising and Instagram and Google is that it’s very teachable. Will has taught a team of employees that worked for us to do it, and they did actually a really good job for us for a number of years. So that’s the only challenge I think. Like we mentioned before, we’re more than happy to spend as much time with the buyer to make sure that they really understand how to market effectively and properly. We can provide all the support they need so they understand the best way to market in 2018.

Speaker 1:           When talking about bringing a new owner up to speed onto what they need to do to run the business, what do they need to do to run the business? What all do you do?

Scott:                    Well I personally no longer work within the operations of the business anymore. William still actually manages a lot of the operations, so I’ll pass this over to him.

Will:                       Yeah, what a new owner would need to do is to work with our supplier in Atlanta to make sure that there’s always inventory in the hot selling items. They would need to advertise via the digital marketing channels on a daily basis, work with our product developer to design new products, email marketing on a weekly basis, and just a few other little things that just go into running a business. A day to day business. I just can’t think of it off the top of my head, but those would be the main points.

Speaker 1:           If you had to put a number on the amount, the hour count that an owner will have to invest in the business, what would that be?

Will:                       I’d say between 10 and 20 hours a week.

Bill:                         I’ll chime in on that. I really think it’s just a matter of hiring the right person. Again, e-commerce is very teachable. The marketing side of it is very teachable and we already have a really strong employee who designs all the products for us going forward, and she’s already working on a lot of samples for the future that are looking pretty promising. So you can leverage the employees that we have, and if you really want you can actually just train someone to do everything on the marketing end. So you can take that 10, 20 hours per week all the way down to one to five hours per week if you just hire the right person.

Will:                       Yeah, and then she also does the email marketing, as well as all our social media posts and any other little things that the business needs. She’s actually a graphic designer as well, so she knows how to. Oh, she changes the website theme as well, the main images on the website. Say it’s Christmas in July theme, she’ll change all the graphics for that. And does a bunch of other things.

Scott:                    Yeah, the only thing I think that the owners do, and again I don’t work on the business anymore, it’s Will’s the only one. Will, you spend most of your time, if not all your time on the marketing side of things, right? Like I said before, Will would be happy to teach someone how to do the marketing, and also maybe even how to find the right person to manage the marketing so the new business owner’s time is completely freed up. We’ve hired multiple people to manage the marketing for us, and we’re pretty successful at that. We know what it takes to be good at digital marketing. The educational background, the personality types, all that stuff. We know who to hire, so we can help them with that if need be.

Speaker 1:           Bill, would you guys commit to a non compete?

Bill:                         Yes, absolutely.

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

Bill:                         I don’t know. We can always consider any offer, but an earn out would be not what we’re traditionally looking for. We’re looking for a one time exit. But we’ll consider any offer.

Speaker 1:           Mm-hmm (affirmative). Guys, if you had to put yourself back five years ago when you started this business and tell yourself something that you know now, what would be the one piece of advice that you wish you had known then?

Scott:                    For me personally, I would not spend so much money and time trying to create hundreds of skews, which we’ve done in the past. I would focus all my efforts on two, three, or four skews so things didn’t get so complicated.

Will:                       I would say that I would’ve focused on higher end jewelry five years ago instead of selling $19 items. So that there was a bigger margin when selling digitally, because the cost of advertising has gone up so much. So if I were to go back, I would’ve sold items over $100 price point jewelry items instead of $19 items which we used to sell.

Speaker 1:           Thank you all so much for taking the time with me today. I do have one final question for you. But before we get to that, I wanna go ahead and run through that quick summary of the business again. Again, the business was built in October of 2013, has a monthly revenue of $243,127, expenses of $203,828, to make for a net profit of $39,299, which is generated on a 12 month average. Included in the sale of this business are two domains, site content and files, two Shopify accounts, two Amazon seller central accounts, and just for clarification, all of those are Canada and US. Email accounts and email lists, and social media accounts. Scott, William, and Bill, if you had to put yourself in the shoes of a buyer, why would you think that this is a business worth buying?

Bill:                         Yeah, well I think there is a massive opportunity with e-commerce in general right now, and over the last five years figured out exactly how to run this business properly, to make it as profitable as possible. Over time, discovered certain products and product styles to focus on, and right now is truly only the beginning. I truly believe someone could scale this business to 10, 20, 30 million dollars if they had the right infrastructure. We certainly have the knowledge and the intellectual property to provide someone with to get to that level. So yeah, I think it’s a huge opportunity and I really believe that we’re selling it at a really good price for the value considering that we have 700,000 emails, almost a million followers on social media.

                                We’ve also built, we’ve had millions and millions of dollars going into marketing. We have built a loyal brand following, and there’s a lot of women out there that know about our brand and swear by it. We have a lot of customers who buy from us month after month. So the momentum’s just beginning, and again the niche that we’re in, there’s a lot of profit to be made. This brand can truly, truly compete. I really believe that, and again, I think it can really be scaled to two, three, four times the level it’s at now with the right buyer in under a year or two.

Speaker 1:           And it’s worth mentioning again that as amazing an opportunity as this is and a huge money maker. Guys, you built a million dollar business, that’s incredible. This is also something that Scott mentioned that if you hire the right manager, you may not even need to put much time into the business. You could focus on bigger picture or just sit back and make that profit.

Scott:                    Yeah, that’s correct. The beauty of e-commerce is that there’s small overhead. Most of the money that you’re gonna spend is gonna go into marketing. If you just have the right person who is doing the marketing, there’s no reason why you can’t scale the business to multi, multi millions.

Speaker 1:           Guys, thank you all so much for taking the time. I’m really glad we were able to coordinate today, and I really appreciate the time, and I hope you have a great day.

Will:                       Thank you.

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 to 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.


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