RMRB 32: Running a Hands Off Dropshipping Business

This week, Jake spoke with Lasina about her dropshipping business created in November 2017. Her Shopify site sells variations of a specific type of chair and works with suppliers based in the US. Thanks to two employees, the business requires minimal work from Lasina to maintain. 

Find more businesses like this one on our marketplace: http://bit.ly/2Hesu7q

Check Out This Week’s Episode:

 

 

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 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. This week, I’m going to be looking at a drop shipping business that is making over $8,600 every single month in net profit, and thanks to two employees, requires minimal work from the owner of the business.

                                Lasina, thank you for taking the time to be on here with me today to go over this business. How are you doing?

Lasina:                  Hey, no problem. I’m doing great, thank you for asking. How are you?

Speaker 1:           I’m doing mighty fine as well, and I again really appreciate the time. I’m very excited to discuss this business with you, but before we dive into the questions that I have, I want to go ahead and run through a little quick summary of the business.

Lasina:                  Sure.

Speaker 1:           Again, it was built in November of 2017, has a monthly revenue of $39,231, expenses of $30,574, to make for a net profit of $8,657, which is generated on a six month average. Included in the sale of this business are the domain and all site content and files, email list, Facebook account, logo and branding, employee relationships, and supplier relationships.

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

Lasina:                  Sure. Actually, I started this by going through Drop Ship Lifestyle. You’ve probably heard about them before. I know you guys have worked with them with a few of their, I guess, sellers, but with Drop Ship Lifestyle in general. So, they highly recommended you all.

                                And so, I got the course from them in 2016, and what I did is I obviously saw the way that Drop Ship Lifestyle teaches you to build businesses, eCommerce businesses. So, I saw the … really did see the value in it, and it just made a lot of sense.

                                So, what I did on that point is I went through the course, and I built my first eCommerce store. It was a dining room table store. I would call that more of my practice store, if you will, pilot project, I guess, where I was applying everything.

                                It worked out. It was really good for me, but it really taught me the importance of niching down, or niching down. And so, I wanted to get into something more like that. So, I went onto another furniture site, penned, then I realize, okay, I’m still biting off more than I can chew here. I’ve got too much competition.

                                So, I kind of like went back to the drawing table, and this sort of fell my lap, this niche. So, I did a lot of research on it, and then I saw the opportunity there. So, I just went with it, and I just built it. I learned the product, you know, inside and out, built the business from the ground up, and I’ve been running it consistently since November of last year.

                                So, that’s kind of my experience. It was a rocky start, but you can’t always get it right the first time, and hey, if you can, great, but for me I had a huge learning curve in the beginning. Business was definitely something very new to me, working for myself, so, and then of course building an online website. I had blogs and things like that before, and I also worked in search engine optimization, however, this was probably my biggest accomplishment out of … well, besides SEO, I would say that was my biggest accomplishment to date on that, so …

Speaker 1:           Yeah, and you’ve clearly done very well with this business. I mean, it’s valued at $200,000. So, why have you decided to sell it today?

Lasina:                  Okay, good question. Well, I have decided to sell it because I got into leadership coaching and training, something I’ve always wanted to do, and that opportunity presented itself in a very unique form this year, probably like the late summer. And so, then I started to move in the direction of selling the store.

                                And the store has allowed me to do, and just to begin that process. However, you know, it does take away a lot of my focus, because there are a few things that, you know, I was training staff, and I was doing a lot of different things for a little while, and really was focusing on getting the store into even a better place than it was at the time, and fixing some, you know, tying up some loose ends.

                                So, I felt really strongly about just moving on from this eventually, within the six month term, or around six months, because I could see the opportunity for leadership coaching and training, and that’s the direction that my life is going right now, and it’s really starting to take off, so …

Speaker 1:           When you look back over the last 12 months at this business, you notice that got a little up and down, and while the overall trend seems to be growing, you know, there are still some down months. So, why is there a little bit of lack of consistency here?

Lasina:                  Sure, that’s a really good question, and I love answering it, because the reality actually is, is that we open the store with one supplier, okay? So, one supplier will only get you so far. Now, maybe some people might argue that, I don’t know. We still did okay, just for the fact that we had one supplier.

                                And so, we wanted to be able to add more suppliers that were in demand. The one supplier we had started with was in demand, but the price point was not as high. Then we came across our second what we call a gold supplier line. The price point is much higher. The margins are much better, and their product is definitely a little more superior. However, both lines sell really well.

                                So, when the beginning, sure, we started in November. It was just before Black Friday. We did get a few sales out of that. We had the holiday shopping as well. With the one product line, you know, I’ll say, December was like, you know, it was our second month in. We were maybe two weeks in already, and we did about 17, almost $18,000 in sales. I mean, that’s pretty good for one product line.

                                And so, then, January, February really died off, and then we added, we found our second product line in March, and we added them. I was really happy to add them to the site, and they obviously were the ones that really helped increase the average order value and the sales.

                                And then also I would say too, just to add to that, our marketing campaign was not very well set up in the beginning. We definitely lost a lot of money, and then just needed to really sit down and refine it. So, we worked with a Google expert, who kind of led us in a really interesting path, and we ended up spending way, so much money in those months when we’ve added this new product line, that it really affected a lot of things.

                                So, I actually let Google go. I consulted with a coach from Drop Ship Lifestyle, and he kind of said just go back to the campaigns right now that are working, and he gave me a really good way to set up the ads.

                                So, then we had a difficult time in May. May was because we got a couple of really large chargebacks, and our marketing campaign had drained us so much that I was really … you know, it was a little bit of a frustrating time.

                                But I stuck with it, I figured it all out, got the resources together to just put us back on and continue going. I wasn’t going to give up that easily.

                                And then what we did is we actually bought a theme through Shopify. Then we had a web designer that we also got through Drop Ship Lifestyle customize our theme, and make the banners, and all that stuff. And that’s kind of the design that we have today.

                                We further refined our marketing campaign. We set it up with our new strategy, and it definitely showed a lot of great results right away, between the store design, the new marketing campaign setup, and then having a second product line. So, more consistency does come from June until today, definitely.

                                The lower months, they’ll go back to is like September and October. Again, that was a question that was asked before. We got a lot of the same traffic. We spend a lot on the same campaigns. However, people at that point just didn’t seem to be in the strong buying mode.

                                However, a lot of those people did sign up our mailing list, and we were able to, I think, capture a lot of those people through our Black Friday offers and others sales that we’ve had going on. And anything that we have going on, we just kind of, we let our email list know, and we usually get something out of that email list.

                                And so, it didn’t show a lot, numbers wise, in September and October, but it definitely showed up for November, and it’s definitely showing up already for December, so …

                                And I think, too, we’ve also tried a couple of different things. We’ve just tested out different stuff to see, like, different chat services, or 24/7 support. You know, we had a couple of different things. So, we did do a lot of testing to see what worked, and what didn’t work, and what was wasting money. And as you can see, some of the expenses were really high on some months, too.

                                We also added Norton and the Better Business Bureau, and I really think that helped us a lot throughout the summer month, and even throughout the shopping season as well, too, because the trust level’s really low.

                                So, it’s been through some hard times [inaudible 00:09:09] times, but we’ve built a very strong foundation on where we’re at right now, and it’s just kind of at a place where it could, really, up is the only way you can go with this business, so …

Speaker 1:           Yeah, clearly, and it sounds like you’ve ironed out a lot of the kinks, adding new products, getting these processes in place. So, that makes me wonder then, what are your roles when running the business here?

Lasina:                  My roles are, because of the way that we’re set up with drop shipping in the US only, so it’s US suppliers to US customers, so unfortunately with the type of product that it is, it’s really difficult. They’re not set up on like an EDI or anything like that type of software. So, there is some of that, the … meaning with payment processing.

                                So, my employee that I work with right now, she’ll send in the orders, however, you know, I handle the payment. So, I make sure that that’s done. I also double check, you know, want to make sure some things are accurate, because when you’re working remotely with people, you do want to be able to trust them, however, when things get missed and then you find out later on, when the customer receives a product, then you have a more expensive problem down the line.

                                Sometimes, I know a lot of people don’t like to do this, but because I know the product well, sometimes I’ve had to step in to close sales. And, you know, with Drop Ship Lifestyle, they kind of recommend that if you’re still working with new people, and sometimes the numbers can be intimidating for some people, or the product itself can be.

                                So, I’ve stepped in to close some sales or, you know, help put out any fires. Sometimes there was misunderstandings, people don’t understand when they order things sometimes, so I’ll reach out with an email or a phone call, if necessary.

                                So, it’s really just mainly the financials, the day to day operations, of course, making sure things are up to date on our website, because these suppliers do change their products. So, we got to make sure that people aren’t buying products that no longer exist, which has happened a couple of times, not because of our error.

                                So, there’s just things like that we need to make sure are running properly so that we’re not coming back and having to refund money because the customer didn’t want this, or they wanted something else and we no longer have it, and things like that.

                                So, honestly, when it comes down to the store operations, yeah, you’re looking, depending on the week, Black Friday week was busy. I mean, I probably worked more around closer to 10 hours, but on the average it’s usually about five to six hours a week doing these little things, or sometimes coaching the staff, and training the staff, and making sure that they’re up to date on everything as well, and that they’re doing what they’re supposed to do, and just having those moments with them.

                                So, it does change depending on the needs of the store, but then the basic stuff is there, so …

Speaker 1:           How many employees did you say you work with?

Lasina:                  So, right now we actually have two employees. One is in training right now, but one US-based employee, and she covers the better part of … she covers the morning, and up until 2:30 Eastern Standard Time. And then we are training someone to handle sales and customer support until eight PM Eastern Standard Time. So, we’re still working with him to just get him up to speed on the product and everything, and get him set up for taking phone calls, so …

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 head, 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.

                                With all of the things that you’ve put in place, all the processes, the products, employees now that you’re having in place for this business, what are some of the major opportunities for growth that you would focus on if you were to keep it?

Lasina:                  I would say that there is an incredible opportunity for facilities that would buy large amounts of these chairs for their patients, okay? Because they are often looking for specialty fabrics. They’re looking for, definitely go with bulk discounts, they do get a lot of their patient, you know, that come in there for permanent, long-term care, they’ll often charge a rental fee for those chairs.

                                And so, there is a tremendous opportunity within the industry that we have yet to tap into, and it’s just a matter of someone sitting down and figuring out the right script, figuring out what the industry really needs, which I kind of have a good idea already, and just cold callings, building those relationships, and sending out catalogs.

                                And that’s the other thing, we don’t have a catalog. However, I’ve mulled over that idea a few times. However, I don’t get a lot of requests for it. So, it’s something that a future owner were to create a catalog, and be able to offer that, that would be really beneficial, because there are some people that call for it. Facilities may ask for it.

                                So, that’s probably the biggest opportunity right there that I’m pretty sure we’re missing out, and we’re talking, you know, larger orders, like, you know, a few chairs in an order, so …

Speaker 1:           And then, on the other hand of the opportunities that you see, or risks, what kind of risks do you see this owner … this business having, sorry, that a new potential owner should be aware of?

Lasina:                  I think the biggest issue this niche has is the demographic can be very untrusting, a little bit, they misunderstand. Sometimes we get customers that order, and they don’t remember because something happens, right? And then they end up in the hospital, and we don’t know.

                                So, the biggest risk would probably be gaining their trust and keeping it, and preventing any kind of chargebacks or anything. We haven’t had a lot of them, considering the volume of sales that we’ve had. It’s just that there are customers that misunderstand, and they want to return the product. And so, that could be … returns can be pretty high if you’re not … So, that would be the biggest risk, really.

                                The other thing is sometimes, you know, customers will get a lemon, right? And it doesn’t matter if you tell them that there is an extensive warranty program, many of them do not understand how that coverage works. So, they may think that they just got this broken chair, and, you know.

                                So, it really could be just misunderstanding, and not getting the right information, ordering something and then thinking they’re getting something else. And so, I think that could happen in a lot of different businesses. But honestly, this store, this niche, is well positioned for the current market.

Speaker 1:           You now have some experience with drop shipping, online business. You’ve learned a lot from particularly Drop Ship Lifestyle, as you’ve mentioned. What advice would you have for someone who wants to get started with their own drop shipping business?

Lasina:                  My advice is to, definitely, do not sell $20 phone cases. So, basically, you want to get into something that in demand, but you also want to get into something that has a good price point, that will allow you to profit, so that you can profit on fewer sales. That means, you know, you’re going to have less processing, less customer service.

                                It’s not that we don’t have that now. Obviously, with the more orders you have, the more customer service you’re going to have. However, honestly, with 40 to 50 orders a month, on average, for this store right now, is a really good place to be at in terms of tracking, shipping ordering processing, customer service.

                                Once you get any higher than that, I mean, it’s not that it’s not worth it, but if you’re processing 4,000 phone case orders every month, you’re going to have a different level of customer service, and your profit margins aren’t going to make it worth it. So, definitely, that’s my biggest piece of advice is to aim high, look for something that’s …

                                You know, and also the next piece of advice I would give as well is really do your research. Really do your research and see what people want, what are people buying? But also see who your competitors are.

                                The one really cool thing about our business is that there are no other niche stores in what we do. Yes, there are stores that sell our products, but there are no niche stores in what we do. We’re the only niche store doing this business. So, if you can be that one person that’s doing that and still have some competition, I think you would do really well, so …

Speaker 1:           Are you willing to commit to a non-compete?

Lasina:                  Of course. Yeah, absolutely, 100%.

Speaker 1:           And how much support are you willing to offer a new owner during the transition period?

Lasina:                  So, I agree to do a month of emails, and make … a month of emails, and Skype calls where necessary, to ensure that the transition goes smooth, and obviously to really just do the knowledge transfer, because there are a few things to know, so …

Speaker 1:           And are you open to negotiating on something like an earn out?

Lasina:                  I am. It would really depend on the offer. The more that the buyer put down, the easier that decision would be for me to make. But yeah, I’m definitely open to looking at that.

Speaker 1:           Awesome. Lasina, thank you very much for taking the time with me. My final question, before I let you go, is, you know, putting everything together that we’ve spoken about, if you were looking at this as a potential buyer, what about this business makes you feel like it’s a business worth buying?

Lasina:                  That’s a really good question. I actually thought about that, and honestly, the very first thing to think about, would this be a good buy, I’ll actually give three things.

                                The first thing is, is like I said before, this niche is very well positioned for the market demand, and the market demand that the market is about to see.

                                The second thing is, is that the groundwork has been done. We’ve gone deep in that dirt, and we’ve built a really good foundation of knowledge, relationships with suppliers, just understanding what the market really needs so that a new owner could really take us from where it’s at and focus on really growing it to the next level. And they would definitely need to learn it, but they don’t need to learn it the way that we had to learn it, because I already built all that up. So, it’s just a matter of transferring it over and taking it to the next level.

                                The third, I would have to say, is that even with where the store is at today, if a person were to buy it and they did not do anything, really, outside of what we’re already doing right now, they would still make an income off of this. So again, it’s well positioned, the groundwork’s been done, and it’s already set up to continue to earn, so …

Speaker 1:           Lasina, thank you very much for taking the time to be on here with me today.

Lasina:                  No problem. Thank you so much.

Speaker 1:           You’ve 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 a 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.