RMRB 31: Running a Dropshipping Business

Jake spoke with Damien about his dropshipping business created in October 2017. The Shopify site features a variety of products, primarily focusing on families and is earning over $7.5k/month in net profit. The business has strong traffic figures, stable supplier relationships, and a team of employees in place.

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Jake:                      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 and 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. This week I spoke with Damien about his drop shipping business that is making over $7,500 every single month, in net profit, selling a wide variety of products. Primarily, focusing on products that are helpful to families. Damien, thank you for taking the time to come out here today. How are you doing?

Damien:               I’m pretty fine today. Thank you Jake. Thank you for this interview.

Jake:                      Yeah, of course. Thank you for taking to time. It’s a pleasure having you on here and I’m excited to discuss your drop shipping site with you. But before we dive into the questions that I have for you, I want to go ahead and run through a little quick summary of the business. Again, the business was built in October of 2017, has a monthly revenue of $51,221, expenses of $43,447, to make for net profit of $7,774, which is generated on a 12 month average. Included in the sale of this business, are the primary domain, [inaudible 00:01:27] two Facebook accounts and the email list. Damien, can you tell us a little bit about your background, building and running online businesses?

Damien:               Yes, first of all, I’m Damien Frozo. I’m from France. I’m a young entrepreneur in e-commerce since, three years now. I’ve built one Amazon of BA business, before this drop shipping store. And I decided to create this business last year, April, to train my wife, honestly. Because it was just a funny game. A little game and then three months later we started to grow serious in this business and create a real brand business with good image. So, yes, it’s a young business, but really profitable business. And let’s discuss about it.

Jake:                      Yeah, I’m very excited to. So, you mentioned that it’s profitable and it certainly is. You know, like I mentioned before, you’re making over $7,700 every single month in profit. So, why have you decided to sell the business today?

Damien:               Because, honestly, like a [inaudible 00:02:30], I got multiple activities now and I don’t have much time and day is 24 hours, unfortunately. So, I have to choice. My option is to sell this business, because I want to spend my time on my first love. Yeah, my first love, sorry was Crypto currency, but now I got to dive into my Amazon business, one of the business I got. So, yes, I need cash flow, honestly, to put in this business. So, that’s why I’m selling this drop shipping store.

Jake:                      And that totally makes sense. So, how did you come up with the idea to start this business? Why a drop shipping site, rather than something like Amazon FBA?

Damien:               It’s a good question. Amazon FBA is pretty good, too. It’s two different business model. That’s honestly, I wanted to create a store with a quick win. Quick profitability, and I wanted to apply this business model, because you don’t have to need stocks. It makes sense because I was a [inaudible 00:03:35] manager in my past life, when I was a salary. And I just wanted to give my routine an opportunity to deal with signing suppliers and make contracts with them and propose new products with good condition in Europe place, for European customers. And honestly drop shipping is very profitable now and we got a lot of opportunity with this business model. Have great communication with our [inaudible 00:04:07] contacts. And one point … very important point that I would like to share with potential buyer is drop shipping store everywhere in the world, but honestly the competitors are less present in Europe now. And it’s quite easy to start a drop shipping store here in France and sell all over Europe. And, yeah, I just wanted to create something big in a quick time.

                                And honestly drop shipping is really interesting because you can move fast. You can [inaudible 00:04:40] fast. You can … there is less competition on the markets and Amazon BA is not the same profit margin, you know. There is much marketers and it’s quite difficult for the moment now, with Amazon FBA. And, yeah, drop shipping is a really great opportunity for our entrepreneur to make quick profits and go with the great cash flow in a [inaudible 00:05:04] time.

Jake:                      As you said, you wanted to make a business that took off quickly. And taking off quickly is exactly what you did. This business has been around for just over a year now and you’re already making, you know, $8,000 every month, pretty much. So, I mean, you’ve certainly been successful with it.

Damien:               Yes.

Jake:                      When speaking to what you do with the business nowadays, you say that you don’t have a ton of time to focus on this business. You’re doing a lot of other things. So, what work is required from you, the owner of the business, to maintain it as is?

Damien:               The first point is to be familiar with Facebook advertising, because I got three task. My routine tasks are monitoring the [inaudible 00:05:43] spending everyday. I got to test products everyday, too. So I try to test one product, yeah, everyday. And the third one is the team management, because we got five employees now. And let’s say I have worked 30 minute to one hour a day for the Facebook advertising. 30 minutes on product testing and 30 minutes was the management of the team, to make sure that everybody’s going well. And it works great. Thank you, Jake.

Jake:                      Yeah, and say you have five employees here. And from my understanding, they basically just handle the customer support, track support, and sales and stuff like that.

Damien:               Yes.

Jake:                      So, are they willing to continue working with the new owner, during the transition?

Damien:               Yeah, of course. Of course. It’s very important for potential buyer, of course, to be sure that the current organization is stable. And it is. Everybody’s really enjoying the task everyday. And I got a right hand, team manager. She is responsible for planning, training, customer relationship and other into. One of my VAs, on the ML support and three of them are dealing with the [inaudible 00:07:03] reports and [inaudible 00:07:05] team. So they give coupons to prospects and we got daily reports. And it work pretty well. So, yes, I wanted to have a great organization because when you do drop shipping, the main problem you can encounter is the delivery time. And honestly I got multiple agreements with all our suppliers to deal with 10 to 15 days. I talk about deliver time, of course. And if you don’t have a strong background on your customer service, it doesn’t make sense. So, yeah, I wanted to create the right organization to the right ambition.

Jake:                      Where does your traffic for the business primarily come from?

Damien:               Facebook. Facebook ads because, you know, Facebook is pretty easy to use. And it’s the easiest way to advertise products on social media platform. And this is an opportunity for the potential buyer is we don’t have any ads turning into Instagram yet. We got a presence on Instagram, but not on SnapChat, even on Google [inaudible 00:08:14] or Google Shopping. So, that’s a great opportunity to go on SnapChat and Google Shopping, too, and go to the next level with other platform. Because honestly, Facebook is a great platform and every drop shipper use Facebook, of course, because you can do great figures on this platform. But the next step is to move … not to move totally, but to use all the platforms, like SnapChat or Google Shopping. And I got a lot of friends who are doing this now. And it works super for them, so I guess the potential buyer gets a lot of full opportunity to grab the business and increase the turnover, the profit margin to the next level.

Jake:                      That is certainly an opportunity. Expanding to take advantage of other traffic sources and stuff like that. You also have this email list, that has about 20,000 subscribers and-

Damien:               Yeah.

Jake:                      -it’s generated from past customers. And you have an open rate of 30%, which is really good. So, tell me about this email list and how you use it to generate return traffic.

Damien:               Yes, so how [inaudible 00:09:27] to manage other [inaudible 00:09:30] and years later. The trace of get response is simple because it’s [inaudible 00:09:35] on the market. The most [inaudible 00:09:37] spender, because it minimized the emails sent and they send to inbox. So, when a customer make a purchase on the website, the customer enter a self answering machine, that sends 21 emails the first month, after the first buy. And this emails are three type, information, entertainment and product promotion. And yes, as you said, the opening rate is awesome and we make free cash, of course, within the list, because you don’t have to spend any penny or any dollar on the ads. So, yes, this email list is super powerful now.

Jake:                      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 are 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.

                                Looking to the future, we’ve kind of already touched on some opportunities for growth. But, do you feel like there are any other opportunities for growth for this business?

Damien:               Yeah. You’ve got multiple opportunity and honestly, this company is like my babies. So I want to … I want the next buyer, the potential buyer to go to the next level. And yes, there is many opportunity. I can talk about several levels. The first one is develop social networks, like running [inaudible 00:11:13] Instagram interests. We don’t do this now and we should in the future. The next step is to target other marketplace, like the US. This is the biggest marketplace now and we don’t sell over there. So there is a big opportunity to grow. The third step is to test more product. You can hire one more VA and put the job was product testing as a description of this job.

                                One other point is to hire local agents in China. That’s what I’m doing now with my other business, but I got to tell, it’s very important to go to the next level if you want to go to five figures day after [inaudible 00:11:54]. You’ve got to hire local agent in China. I have this experience on it, so I definitely can help the new buyer to go with this point. Because you can contract, you can discuss a better conditions. I talk about price, delivery time and you can have faster shipping with this kind of relationship with a local agent.

                                And yet two last point, the potential buyer should sell products using manual bidding on Facebook. And as I said before, test new platform to generate traffic, like Google Shopping or SnapChat. Currently, SnapChat is growing fast, so yeah there is multiple levels to go to the next level.

Jake:                      So, you mentioned all of those different strategies, and certainly there’s a lot of room for growth for this business. If you were to keep it, what is the first thing that you would do to try to grow?

Damien:               Honestly, brand image. Brand image and develop this Instagram and Pinterest. Because if you got a pretty good brand image, a lot of platform, you can build the relationship with the subscribers, and the more subscribers you have, less money you have to put on the table. So, honestly, the first point is this and then I would hire a local agent in China.

Jake:                      Do you feel like there are any potential risks associated with this business that a new owner should be aware of?

Damien:               I can’t say no, because risks are everywhere now in business. But, honestly this is a solid company. And yes, the amount of risk I can see is if the next buyer, the new buyer take decision to stay on Facebook and only Facebook. You know, Facebook show us a lot of inconsistency [inaudible 00:13:42]. So, it will be safer for the new buyer to go to a new platforms. That demand risk because I don’t want this business deep enough, one and only one platform. Honestly, it’s the major risk today, but I guess Mark Zuckerberg is not dying tomorrow and his platform is going really well. And it grow everyday, so I guess the future of e-commerce will be on Facebook, the next 10 years, without any problems. But, you can’t depend on one platform.

Jake:                      Would you commit to a non-compete?

Damien:               Honestly, I’m a new father, since one that I have here and I wanted to start a company for … to put my experience and my background to … it’s like a challenge. This company was a challenge for me. And honestly now, I’m [inaudible 00:14:42] person. I’m talking with a lot of transparency with you, Jake. There is no way to put this business down. As I told you, this business is like my baby. So, I wanted the new buyer to be successful and I don’t have the intention to become the next competitor of this company. Doesn’t make sense for me.

Jake:                      How much support are you willing to offer a new owner, during the transition period?

Damien:               I guess as much time as the new buyer wants, honestly. Because you can’t make sense … I can definitely not spend my whole life for the new buyers, but I guess one month would be enough for the new buyers to share all the knowledge I have to develop the growth of the company. I talk about suppliers, logistics, marketing, the financial side, of course, too. I guess one month is pretty much enough for the new buyer to be comfortable with management of this company. But if, honestly, if the new buyer needs more time, it’s not a problem for me. If the new buyer takes 10 days, it will be fine, too, but honestly, I don’t think this [inaudible 00:15:50] much. I want that new buyer to be successful. So, one month seems correct to me.

Jake:                      Awesome and I’m sure that makes someone, you know, looking at this, feel better that you are really willing to help them be successful here. Are you open, Damien, to negotiating on something like an earn-out?

Damien:               Yes. Yes, I can.

Jake:                      Awesome. Well, thank you so much for taking the time with me today. Before I let you go, I have one final question for you. SO, given your experience in online business and specifically with this one, putting everything together that we’ve spoken about, why do you feel like this is a business worth buying?

Damien:               Honestly, this … I talk about my experience. With my experience on the great opportunity for potential buyer to buy this company, there is a lot of opportunity. There is a lot of levels, like I mentioned before. But, we being the promotion of great values. So, like smiling, like, some stuff around the good life and honestly, people need to smile and needs happiness today. And, this is the heart of the company. And it’s not too difficult deal for us to promote happiness and smiling. So, we promote good values today. We got a great organization. We got a plan. A great plan, for the next year. I talk about product testing. I talk about turnover. I talk about net profits and to conclude, $7,000 net profits per month is great. But, it’s really the first level that this company is … because you can easily go to much more, if you spend a little more time and if you spend more money and put more money on the table. So, I definitely trust that it’s a golden company. Yeah, it’s aa choice for me to sell it today. But, as I mentioned before, I will be present. I will be here for the new buyer to give my time, my experience, of course, to … for the new buyer to go to the success and the next level. So-

Jake:                      Absolutely and I mean, from my part, when I look at this business and it really seems like something that you’ve done this in just a year. Right? You know, this business was built in October of 2017. It’s November of 2018 at the time of this recording. So, I mean, where can this business go, when given more time?

Damien:               Honest;y, maybe 15 to 20K a month. That was my first motivation before I took the decision to sell this business. But honestly, you can move fast and go to four to five figures a day and go to 10 to 20K a month. I talk about net profits, of course.

Jake:                      Damien, thank you very much for the time with me today. I really appreciate it.

Damien:               Thank you very much, Jake. Thank you for this interview. And sorry for my French accent, but I really just love it, so I keep my French accent.

Jake:                      No, you’re right. A lot of people love it. Don’t apologize for that. You know, it’s … I should apologize for not having a French accent.

Damien:               No, no, don’t. Thank you, Jake.

Jake:                      Yep, my pleasure.

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