RMRB 8: Dropshipping to the Military?
Selling primarily B2B to schools and the military, this dropshipping and Amazon FBM business in the technology niche has grown to $4.5k/month. Cameron has grown this business primarily on his own Shopify store, but also by selling his products on Amazon. He maintains the business very passively and shares his experience of choosing FBM rather than FBA with Amazon.
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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, listener, welcome back to the Real Money, Real Business podcast. Today we’re going to be looking at a drop shipping business selling technology products, not only on its own website, but also on the Amazon platform. I was able to sit down with the owner of the business and figure out how exactly he got this business to where it is today and where he sees someone else being able to take it if a new owner takes over for the business. Cameron, thank you for taking the time to sit down with me today.
Cameron: Thanks for having me.
Speaker 1: It’s my pleasure. It’s my pleasure. Where are you calling in from today?
Cameron: I’m in sunny Southern California down in Marietta.
Speaker 1: Sunny southern California. I am in sunny southern Florida, so pretty good weather all around here.
Speaker 1: Well before we dive into the questions that I have for you, I want to go ahead and run through a quick summary of the business. Again, it was built in July of 2016, has a monthly revenue of $24,142, expenses of $19,606, to make for a net profit of $4,536, which is generated on a 12 month average. Included in the sale this business are the domain, site content and files, Amazon seller central account and the email list. Please note that inventory is not normally included in the list price. Further the details can be provided to active depositors.
Cameron, can you tell us a little bit about your background in building and running online businesses?
Cameron: Yeah, so I’ve always kind of been an entrepreneur type person. It started a probably a decade ago. I got into making mobile apps. I actually developed one of the top selling book and reference apps in the Android app store. So started with that. I’ve always been into web design so I’ve always just been trying, I had an online clothing business back in the day. I’ve always just been trying new approaches to build businesses, build additional sources of income.
And so then I got into drop shipping and I got really deep into Shopify, how drop shipping works and selecting a niche and all that stuff. All that research kind of led me to this business, which is actually my first drop shipping store. It has been really successful so far.
Speaker 1: And with it being your first drop shipping store, is there a reason why you are selling it today?
Cameron: Yeah, primary reason is just for other investments. I liked the ease of drop shipping and how small amount of time I have to put into it and the monthly income is good. But for what I’m focusing on now in life, I would prefer to get a large lump sum so I can make a bigger move for future plans.
Speaker 1: So something that you see commonly with Amazon businesses are FBA businesses, fulfillment by Amazon. And this business is FBM, fulfillment by merchant. So can you talk about your decision to go with that route for the business?
Cameron: Yeah, so this was, obviously this was my first drop shipping store so it was my first time really working with Amazon as well. And because we’re drop shipping, I don’t keep inventory or anything like that. And I know, I think to do the Amazon fulfillment by Amazon you have to have the inventory on hand and you ship it to Amazon. And then they could fill it and they ship it.
And I just haven’t seen, I mean, while I’ve seen sales come from Amazon, I haven’t seen enough to justify purchasing the inventory upfront, shipping it to Amazon. I more so just wanted to be on the Amazon store just to kind of get more marketing and more visibility out in the market. And the amount of sales it brings in as cool as well.
Speaker 1: So basically you wanted to ensure that you didn’t have outstanding inventory. So when a customer makes a purchase, then you go ahead and make an order, correct?
Cameron: Correct. And I don’t really know enough about Amazon to feel comfortable just because the products that I sell are higher up in price. So I didn’t want to front all this capital to buy inventory in advance then ship it to Amazon and I’m not sure how well that would be or how successful that’d be. So I just kind of played it on the side of caution and just went with fulfillment by merchant
Speaker 1: And that definitely makes sense. Your reasoning is fair. So the technology niche that you’re in, how did you come up with the idea to start the business?
Cameron: Really, I just knew I wanted to create a drop shipping store and I just did a lot of research on product niche. I wanted to stay away from low cost products. I didn’t want to have to sell 100 products to make a good amount of money. I wanted to be able to have a couple of orders per month that were high ticket. I also didn’t want to drop ship from someone overseas because I know that the shipping time, usually it takes a really long time. And so I wanted to find something locally here in the US that I could ship and that didn’t have a lot of competitors.
And so after doing tons of research, I landed on this niche and has been really a good choice I think so far.
Speaker 1: When you take a look back at the numbers for the last year, obviously the $4,500 that I read for net profit is based off of a 12 month average as I said. So looking back at the 12 months, you notice that it’s pretty solid. It’s pretty consistent, I guess is the word I want to use. Except for there was this one month where you were negative $1,000. What happened in, I guess that’s in September of last year?
Cameron: Yeah, so that was just me experimenting with marketing. So I had a buddy who he has a little marketing team and he pitched this really good deal to me for email marketing and email blasts and all this other stuff. And so he basically, I paid him, I think it was like $2,000 or something like that to do this whole marketing. I was just experimenting to see if I can get some more sales. And so that month, obviously, because I spent that $2,000 I wouldn’t normally, and it kind of reflects in the numbers. But the business itself didn’t necessarily will lose money. I just took some of those profits and put it into marketing to see what would happen.
Speaker 1: So you would say this valuation here, it could be a pretty good deal for the buyer because it actually may reflect a little lower than what you feel the business actually earns because a lot of the profits you were pouring right back into the business.
Cameron: Exactly. And that goes for my AdWords spend as well. If you look at that, there was I think several months where I was spending anywhere between $1,500 to $2,000 a month on Google ads and those did bring in sales and I did see some success from that. But overall over the time span of me running the ad campaigns, I was spending more than the orders were coming in. And then that’s just more so because this is my first time ever having to do marketing. I was kind of learning as I go with Google AdWords, so I’m not an expert by any means. So I’m sure there was lots of things we could have done to tweak those ad campaigns and to get better results from it.
But that’s why I actually just stopped the Google AdWords all together, because I saw more profits from just doing my own thing than putting into Google Ads. But I’m sure if anybody has even moderate experience with Google AdWords, they can probably get better success than I did.
Speaker 1: And you said that the large majority of the traffic of the revenue does come from your Shopify store, not from the Amazon side of things.
Cameron: Correct. No, almost all of the orders that I receive are from the Shopify store directly. I probably only get a couple on Amazon per month if that.
Speaker 1: And you’ve definitely mentioned the AdWords here and that’s obviously an opportunity if someone comes in with that experience and can grow that even more. But did you experiment with other forms of marketing? I know you said you’re new to it. That could be social media marketing, it could be email marketing, content marketing. Did you look at any of those avenues?
Cameron: Yeah. So my buddy that I was talking about that I had paid to do the marketing for me, he actually did email blasts. I think it works with some third party that has huge relevant email lists for this niche. And so they blast it out. And so I experimented with that a little bit. Because most of my customers are school districts and military, social media didn’t really make a whole lot of sense. I mean it may, what do I know, I’m not an expert marketer, but my mindset was these are schools, businesses that are primarily buying, they’re probably not on Facebook all day. I probably shouldn’t dump money into that. But who knows? I’m not an expert in marketing by any means.
Speaker 1: And if someone looks at this and sees an opportunity there, definitely go ahead and take that opportunity.
Cameron: Yes, for sure. And there was actually a few opportunities coming up here in the near future, the beginning of June. Right now, I’m currently only working with one supplier for our products, though I did get approved to be a vendor for other suppliers who said I could sell their product. I just never took the initiative to add those all to the site because I just wanted to focus on this one and get it dialed in.
But anyways, this supplier that I’m working with now, they’re actually replacing their entire product line at the beginning of June with all new products. It’s basically the same, it’s still the same product, it’s just new hardware. It’s like a newer version of everything. And this newer version is going to bring 5% more profit margin. So before I think it was 25% across the board was their profit margin for everything you sell. Now their new product line is going to be 30%.
And then on top of that, because a lot of our customers are military or some are military rather, and there’s actually a special certification you can get, but one of the requirements was the business has to be two years old, which that’s coming up this July. And once July hits you can basically take government contracts. So there’s like a portal you can go where there’s all these government bids where they’re saying hey, we need this product. Any company that wants to place a bid for this, we’ll give our business to the best deal. And up until now I actually had to turn away a couple of customers because I didn’t have that certification and they only purchase from vendors would that sort of vacation. So up here in July, once that hits, there’s actually a lot more opportunity for more business to come in that I wasn’t able to get before
Speaker 1: And that is coming without you having to do any extra work. The higher profit margin, the larger customer base, those are just going to be doors that open to you.
Cameron: Correct. The only thing that may have to happen is when they release a new product line, I may have to update some of the pictures of the products I have now and I think some of the pricing might change as well, so just really minor stuff. But other than that, yeah, exactly. There’s not a lot of work involved in that. It’s all just going to be doors opening.
Speaker 1: How many hours per week would you say you put into the business?
Cameron: Maybe two at most. Most of my time really is just waiting for either an order to come in, for the supplier, the supplier may call me or email me and say hey, I have a customer looking to purchase. Here’s the information, please reach out to them. Every once in a while I may get a phone call, someone saying they want me to re-email them an invoice. And with schools, the way most of them purchase is through purchase orders. So they’ll actually send me a purchase order and then I just have to type up like a Word document invoice that says here’s what you’re buying, here’s the date, here’s a purchase order number so that they can send the payment.
So really however long that takes and that’s maybe, if I get an order right now it would probably take me 10 minutes to type up the invoice, respond to the customer, say hey, you’re good to go. So no more than an hour or two per week.
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You mentioned a couple opportunities that are coming that are timely. Do you feel like there are any big opportunities for growth that a new owner with a certain expertise could come in and grow the business more?
Cameron: Definitely, like I was saying, I need anybody with marketing is definitely going to be able to grow it. There’s not a lot of competitors out there and a lot of the competitors that I’ve seen, their websites are really old, outdated. So I’m sure that could easily be beat with the right person in marketing. I mean, yeah, that’s really the biggest thing is I just don’t know marketing. I’m more of a developer, creative type person and not so much the marketing side.
Speaker 1: Do you feel like there are any potential risks that a new owner should be aware of?
Cameron: Not really. I mean I’ve been doing this thing about two years, literally almost no stress. There’s really not any risks at all. I mean, the supplier is in really good standing with us. We’re actually one of their favorite vendors. They go to trade shows locally here throughout the United States and I’ve actually gone to a trade show. They invited me to go with them, walk the booth with them. And so I met a lot of them and we have a really good relationship so there’s no risk of that being damaged. They’re not going anywhere anytime soon. Like I said, they have a new product line coming out. And that’s, like I was saying, this is really just one vendors. I’m already approved for other vendors as well. I just wanted to focus on this one. But there’s really no risk involved here.
Speaker 1: Yeah, and it sounds like the opportunities are plentiful in terms of someone coming in with marketing experience, if that be social media or content marketing, improving the Google AdWords with the SEO. And then also if someone comes in with Amazon experience, maybe getting set up on Amazon FBA is a good strategy or doing more with Amazon FBM, maybe getting set up on different marketplaces like Jet and Walmart and Ebay. I mean, do you feel like all of those could be potential opportunities as well?
Cameron: Yeah, definitely. I actually think there might be a competitor to that uses the fulfillment by Amazon with the supplier’s products. So I mean if they’re doing it, there has to be some benefit and then doing it. And there’s definitely other avenues for sure.
Speaker 1: Do you feel like this is a set of products that could be expanded beyond the US, or I guess first question is do you currently sell anywhere outside of the US?
Cameron: I have sold to a couple of customers in Canada and someone in the UK I think ordered once before. They had to be shipped to New York and they had some third party company that handled the international piece, but we definitely can sell to international and it’s happened before.
Speaker 1: So o maybe exploring that could be even more of an opportunity for a new owner.
Speaker 1: Would you commit to a noncompete?
Cameron: Yeah, exactly. I would.
Speaker 1: And you mentioned that you’re the creative behind the business. Is there a lot to walk through a new owner in terms of getting knowledge on the products, on the niche?
Cameron: No, the supplier is actually really good in that aspect. They have a book, a physical copy that they mailed me and a digital copy to download that is literally a booklet that has pictures and pricing of all the products, brief descriptions, just really a quick reference to see what the product is. And then their personal website, they have videos for every single product they offer, which I basically put on my site as well. So they have all that marketing material, all the knowledge and stuff is there. They have videos. Anytime I’ve emailed their marketing team and said hey, can you send me an image for the promo you’re running this month, whatever that may be, they have no problem making that and sending it over to me.
Speaker 1: Are you open to something like an earn out?
Cameron: I would definitely prefer not to do an earn out. So if there was any other offers that were not an earn out, I would be more open to taking those.
Speaker 1: Awesome. And I meant to ask this a second ago, but I got sidetracked by my own next question. So with that said, with the product descriptions and pictures and all of the resources you do have coming in to help with the transition, what else would you be able to do to help with the transition? Could you get on Skype calls? Would you do email support?
Cameron: Yeah, I’m not against any of those. I mean, I have a bunch of free time, so I mean I’m on the west coast obviously so it’ll just have to be within awake hours. But other than that, I don’t mind not helping the transition, but it really shouldn’t be that complicated of a process. It’s a really simple business to run. It’s on Shopify. All the graphics are already done as far as the logos and stuff like that. Everything’s really turnkey set up. So I would imagine that after the first week, the person that takes it over would be able to do it all on their own.
Speaker 1: Awesome. Cameron, 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 July of 2016, has a monthly revenue of $24,142, expenses of $19,606, to make for a net profit of $4,536, which is generated on a 12 month average. Included in the sale of this business are the domain, site content and files, Amazon seller central account, email list. And please note that inventory is not normally included in the list price, but further details can be provided to active depositors.
Cameron, can you kind of recap everything we’ve spoken about today and in your own words, give me your 30 second pitch on why someone should purchase this business?
Cameron: Super easy. This business is turnkey, streamline, really easy to run, barely takes any time. You don’t have to worry about anybody overseas that doesn’t speak English or anything like that. It’s all coming here from the US. All the products that I sell are primarily high ticket items, so you only really need a few orders per month to make a good amount of profits. As an added bonus, I’m actually able to redeem a lot of air miles just from using my travel credit card to purchase these drop shipping orders. So I get to travel for free basically every month.
It’s just really easy business to run. You don’t have to put a lot of time or work into it. You can leave it as it is now and get good income or you can, if you are familiar with marketing, you could really probably blow this thing up and double, triple or who knows. Sky’s the limit
Speaker 1: And also taking advantage of the timely opportunities that are coming up in the next couple months as well.
Cameron: Yeah, exactly. And summer months are the busiest. That’s when schools are really placing the orders for the next school year. So I see the most orders during the summertime and that’s we’ll get months where we may get $10K in profit in one month. So I mean, the summer months are the biggest ones.
Speaker 1: Cameron, thank you so much for coming on today.
Cameron: Thank you.
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