The Quiet Light Podcast

It's a jungle out there. Today we invite you to reflect on the state of the internet world we live in as entrepreneurs and the impact e-commerce can have on hundreds of thousands of people. One of the most interesting trends we are seeing in the arena is the service companies popping up to support the thousands of Amazon merchants out there.

Today's guest, who quickly turned his back on a career in engineering in his twenties, started dabbling in Amazon sales until he came up with the idea for Jungle Scout just before taking off on a three-year world tour. He talks to us about how he spent those years living the true entrepreneur experience while actually building his now 100 person company. Jungle Scout searches, captures, analyzes and refines billions of data points from Amazon to deliver the most accurate data in the industry. His 200,000 plus customers were all clearly in need of his merchant scaling tools. Jungle Scout also offers numerous free educational resources to give young entrepreneurs everything they need to succeed.

Episode Highlights:

• How Greg convinced his wife to give everything up to travel the world.
• The hesitation, the results, and the payoff of that path.
• The employee structure of Jungle Scout.
• The company's original design and what it has evolved to today.
• Stories that stand out as models of success for Jungle Scout.
• The Five Minute Pitch – what it is and how it's helping entrepreneurs succeed.
• How the Jungle Scout scholarship program is motivating young entrepreneurs.
• What's coming up for Jungle Scout.
• The company's new initiatives for bringing ease into scouting suppliers and merchandise.
• How his products have created friction with people in the business but also brought them in as clients.

Mark: Alright allow me to relax philosophically here for just a minute and I invite you to reflect on just how impactful our current era is with the Internet. Back at Traffic & Conversion in February, I actually hear Richard Branson talk about what they would do to get attention and PR; crazy stunts, parachuting into places and doing these incredible things just to be able to impact large volumes of people. Well as online entrepreneurs we have that at our fingertips and can do that often from our bedrooms just by putting up a good marketing campaign online. But we have the ability to impact thousands of lives and have this network effect as well of these thousands of lives impacting other people's lives. And I looked at where we're at with the Internet today and I think one of the most influential areas are all the service companies that are popping up and SaaS companies popping up to service the Amazon merchants that are out there. And I'd say by far one of the leaders of the pack is Jungle Scout. They—most of everybody that is in the Amazon world, you know who Jungle Scout is. They're kind of ubiquitous with this idea of product research. Joe, you got to talk to Jungle Scout in this week's podcast.

Joe: Yeah. Greg Mercer founded Jungle Scout just a few years ago; 4 ½, 5 years ago, an interesting story. Look we talked all about how he came up with a concept, even where he met his wife Lisa, how we started the business, travelled with his wife Lisa for 3 years overseas while growing Jungle Scout. He has only settled back in Austin for the last year and a half, and the size of the company. And then really it was about his entrepreneurial journey. And then we touched on some of the key features in Jungle Scout and some of the other things that Greg has done with his good fortune like scholarships that you can find on the Jungle Scout website and in the show notes here. You know being entrepreneurs and having an easier time impacting people one on one or directly is something that we know here at Quiet Light because we're fortunate enough to be in a situation where we do work one on one with most people. And we know what it means when they sell their business or buy a business and get to stay home and see their kids more. We talked about that a little bit with Greg and like most entrepreneurs he started Jungle Scout to make money. But now that he makes great money that relieves the stress, right? We all want to have money in our bank account to relieve the financial stress but the big thing that fills his cup is the impact that he's having on individual lives. And he gets to hear about that impact when he goes out to conferences and they have a booth like out at Prosper and people come up to him and say listen this is my story, this is how Jungle Scout changed my life. And Greg says quite honestly look it wasn't Jungle Scout; it was you, it was your effort, it was your risk, your reward. Jungle Scout was just a tool that you used. So he's very humble about that but a great guy. Just a good human and I think that there are 2 or 3 things that come out of this podcast. First and foremost you get to hear a great entrepreneur story. He didn't go to school for business yet here he is running a business with 100 the least. What it's like to travel all over the world with your wife? It's right for some people, it's wrong for others. And then just the good things that he's doing with Jungle Scout Scholars and then all the features that Jungle Scout has, and the scariest one. And folks you've got to listen all the way through because we talk more about it at the very end. This is not a pitch for Jungle Scout. It's more of a story of entrepreneurial success. But you can literally find—can I give this away Mark? Can we give it out, too much information; what do you think?

Mark: Oh no it's a great tease so get to the end.

Joe: You can find your favorite product on Amazon and then use the Jungle Scout tool to find out who the manufacturer is in China. It is scary. But like Greg said it doesn't mean you're going to be successful. We know that all great ideas don't achieve success. There's lots of motes around these great listings on Amazon so it's no guarantee of success even though you find them in [inaudible 00:05:10.9]. But, great podcast, great guy, looking for to get to know him over the years as well.

Mark: So he's down in Austin, right?

Joe: Yes he is.

Mark: Is he going to come to our meet-up coming up at the end of May?

Joe: Yes he is.

Mark: And when and where is that meet-up? For anyone in the Austin area or who has always wanted to go to Austin area, this might be an awesome opportunity to meet Joe. I probably won't be there. Amanda will be there as well and some really, really good people are showing up to this as well.

Joe: Yeah everybody that we've worked with over the years that's down in Austin are getting an invite and hopefully [inaudible 00:05:44.1] groups is going to go. Actually, one person replied today and said thanks for inviting all my friends. It's like you're throwing a party for my friends. I appreciate it. It was pretty funny. And that was RJ at 101. It's going to be May 29th at Oasis at Lake Travis from 6 to 9 pm and it's just drinks nor dares and coming out with friends.

Mark: Awesome, and we're going to have a page up on the Quiet Light Brokerage website. We're going to make sure it's included in the e-mails that get sent out. And also on the show notes for this podcast so that you can RSVP if you do want to attend. We would love to see, we'd love to host it for the night; bring a friend, bring lots of friends. It should be a few hours of just really good networking and getting to know some really key players in the space. So please do show up. But now let's get to the good stuff [inaudible 00:06:27.7]

Joe: Let's do it.

Joe: Hey folks it's Joe here at Quiet Light Brokerage and today we've got another great guest on the Quiet Light Podcast. His name is Greg Mercer. Greg, how are you doing today?

Greg: Joe I'm doing fantastic. Thank you very much for having me on and it's going to be fun to talk to you.

Joe: Founder of Jungle Scout and many other things; a very impressive guy at a very young age. I just looked at your LinkedIn profile, listened to a couple of things on YouTube, and I saw your wife talking about you as well which was all positive by the way.

Greg: Oh, that's good to hear.

Joe: Well you know the drill, we don't have a whole lot of fancy introductions. So for those that don't know you and don't know the Jungle Scouts can you give a little bit of background on yourself and the business itself?

Greg: I'd be happy to. So it's probably most relevant to rewind back to my college days real quick. I went to school to be a civil engineer and graduated. I got a job working as a civil engineer and I just didn't like it at all. I want to become an entrepreneur so I tried a number of different things. But the 1st thing I had a little bit of success with was selling physical products on Amazon. And that's ultimately what led me to quit my job. I was able to kind of replace my income by doing that. My wife and I actually at that point sold all our belongings and started traveling around the world and living out at Air B&B's and running our business from there. And one thing led to another and I—the biggest problem that I had with scaling my Amazon business was finding new products to sell. So I had a number of products up, some of them are doing really well, some weren't doing really well. I didn't really know why some were doing well and some weren't. And what it came down to was the amount of demand there was on Amazon for these products. So being kind of an engineer by background and a very data driven person, I was able to create some algorithms to estimate how well all products on Amazon sell. And that was ultimately how Jungle Scout got started. So I'd never started a software company before but I 1st built a simple extension. I was like no one will probably ever buy this thing but if nothing else I can just use it for myself. And it turns out we were able to get people to buy it because if you fast forward all the way today there's about roughly 100 people that work in Jungle Scout. We have over 200,000 customers so it's grown quite a bit since the 1st day when I didn't think anyone would buy it.

Joe: That is absolutely crazy; 100 employees and did you say, 200,000 customers?

Greg: Yup over 200,000.

Joe: That's amazing. So I want to talk about a few things, I want to talk about you travelled the world with your wife while starting Jungle Scout so that's probably the most important thing. I love the fact that you went to school for civil engineering and then took a completely different path in the sense as an entrepreneur. But then you were able to start it as an entrepreneur while traveling the world and with your wife of all things. And then I want to talk a little bit about what Jungle Scout does and a couple of the other things that you're doing because of the good fortune you've had in the business through Jungle Scout. But let's get personal for a minute. I mean you are what 30, 31 years old I'm guessing? It looks like—

Greg: 31.

Joe: Right. So you've been at this for a long time. Did you meet your wife in college?

Greg: I did actually so yeah we both went to school at Auburn and that's how we met.

Joe: Amazing. And she actually was willing to sell everything and travel the world with you or was it her idea to do that?

Greg: I think it was my idea. I had read Tim Ferris' book 4-Hour Workweek and I was like well this is pretty cool. Instead of living here we could go live in all these cool exotic places in much less money. And so I was like Elizabeth we should go and try this. And she was like yeah you're an idiot. We're not doing that. But I kept on bringing it up over the months and she's always really enjoyed travel. I think her biggest hesitation at the time was she was working for Target and was on a pretty fast crew path. And I think that's where she envisioned her career moving forward. So I think that was her biggest hesitation. It was like man I'm kind of going to give up my career a little bit, or at least put it on hold if we're going to do this for a year or 2 or 3 years or whatever. So I think that was her biggest hesitation but she's like you only live once let's go for it. And yeah we both ended up loving it. We did it for 3 whole years so we both ended up loving it a lot.

Joe: And you launched Scott but just before you took off for a while you were over in Southeast Asia?

Greg: Yeah it was actually just before I took off. I like the week before we took off.

Joe: And how many years ago was that?

Greg: That was is January of 2015, so 4 ½ years ago.

Joe: So really you've run the business for the 1st 3 years of its existence by traveling.

Greg: Yeah.

Joe: That's incredible. Now the 100 employees that you have are they mostly remote, mostly they're in Austin, whereabouts in the world are they?

Greg: When we started the company it was fully remote. I was traveling around so I didn't have an office to hire this people in. So we are fully remote. In January of 2018 is when I moved to Austin. That's where I live now. Since then we've been doing a lot of our hiring in Austin. So I think about maybe 40 of the people are in Austin now and the rest of the team is either remote. And then we also have an office in Vancouver. And then we opened up an office in Shenzhen in China about 6 months ago. So some of the team is there now.

Joe: Amazing. So we'll talk about what some of those offices do for Jungle Scout and the subscribers in a bit. Now that you've gone through college, marriage, travelled the world, entrepreneur, you worked with directly and indirectly and inspire a lot of young entrepreneurs all over the world. Is selling everything, packing up, and traveling the world something you would say you got to do to that young man or woman that has the opportunity and is not tied down to things of this nature?

Greg: You know I'd say it's not for everyone. And for me, it'll probably be like one of the most fond memories of my whole life. I kind of go in through a period. I think I learned a ton about myself. I met a lot of really interesting people. I learned a lot about different cultures. I think we visited roughly 30 different countries. We would spend about a month sometimes 2 months in each country. So when you spend like a month or 2 somewhere sometimes a little longer but you get like a pretty good sense of just kind of like what day to day life is and what the culture is really about much more than like on a weeklong vacation. So during that, I got to just learn a ton about all these different countries, fascinating things that a lot of countries do like very well. I was able to bring back individual things. I think certain countries do very well so that was really cool. So I'd say it's definitely not for everyone. I think to a lot of people it's very stressful. You're moving all around the world and you don't have any kind of—or we didn't have any kind of a home base. So with all that being said it's definitely for everyone. But if you're interested in it and that seems like something that you'd enjoy I would definitely recommend for you to try.

Joe: Is there a particular book that you would have and go to? Is it Tim Ferris' 4-Hour Workweek or is there a great travel one?

Greg: Probably.

Joe: Probably; okay.

Greg: Yeah I'll probably just do the Tim Ferris' 4-Hour Workweek. It's a little bit outdated now. I think it was written over a decade ago now but the spirit is still the same.

Joe: I'm reading one of his books now and I'm looking around like my office here. I don't see it but it's the tools to tighten switches. It is one giant book. The great stuff all from the podcast off from those he's taken over the years and a lot of the 4-Hour Workweek stuff as well. It's funny we've had Bill D'Alessandro on the podcast. Do you know who Bill is?

Greg: The name rings a bell.

Joe: He's from South Charlotte and he runs a consumer products group down at Charlotte. He does a lot of speaking, very close friends with Andrew Youderian from eCommerceFuel and Bill had that same 4-Hour Workweek life at one point and do the same thing working from a beach in Southeast Asia or somewhere. And we talked about this on the podcast now he has staff, an office, a warehouse; in many ways just like you. And he finds that he actually has more freedom now than before because he's got people that can actually do everything for him instead of having virtual assistants that he has to check in with every day.

Greg: Right.

Joe: So it is not for everyone like you say but certainly something to explore. It's not for me and my wife. I was in your shoes once upon a time when I was living in the frigid cold of Portland Maine for those folks that are listening out from Portland Maine. And this is back in the day when I heard a commercial for GoToMeeting.com I'm like what? What is that? And I went across the hall—I signed up for a free trial. I went across the hall to my other office and log in get the free thing and then go to my PC is what it was. It was a derivative of that. And I log into my PC from across the hall, this is 2nd nature now but I was amazed. I was like this is incredible. I went home and I told Christiana and said hey we're going to Florida for the winter. And she said we are not, you're an idiot. [inaudible 00:15:35.1] we did it for 5 years and then we got the hell out of Maine because it was too cold. Sorry for those folks that are still there. Were in North Carolina now and do love it. But this isn't about me it's about Greg Mercer and Jungle Scout. So let's talk about Jungle Scout and what it does. I know what it does. I've used it a little bit in the past. I know a lot of clients that bought and sold business with Quiet Light have used it. So can you just touch on what it does—let's talk about the progression of it; what it originally did and what it's evolved to today.

Greg: Yeah. That's a good way to frame it. So it started out as just a Chrome extension. So most of the listeners are probably familiar with Chrome extensions which is a little add on that you install into your Chrome browser. And what it did is when you were visiting Amazon and you were on the listing or on a search page, you'd click this little Chrome extension and you'd see a little pop up. And on that pop up there was a number of different pieces of data. But the one that people care about the most is the estimated sales data. So that's what I was talking earlier; developing these algorithms that can estimate how well any product on Amazon is selling. Back then it was pretty poor accuracy, today a pretty high degree of accuracy. So that's how it started. Shortly thereafter we launched a web application and the primary functionality in there was again to find good opportunities on Amazon or find out how well things were selling. And that's kind of been transitioning over the years. We now have keyword research functionality. We now have functionality to help you find high quality suppliers or factories. Actually launching in 2 weeks is functionality to help you launch your product on Amazon. And then by the end of the year, it's going to be everything to help you kind of like manage and optimize your Amazon business as well. So the way we like or our mission here at Jungle Scout is to really empower and inspire Amazon entrepreneurs with the tools and resources they need to be successful. So we're building all that into our software but then we also have just tons of free resources in education and a whole bunch of other stuff just to help people be more successful on Amazon.

Joe: Yeah I've looked at some of that both on your website on LinkedIn on YouTube. You are all over the place. It's pretty impressive the reach that you've got and the folks that saying you are praising Scott Voelker is somebody we know in common does that well and does it all the time. I love the empower people approach and to fulfill their dreams not only the staff that you have but the people that used to program, the 200,000 or so subscribers that you have. A lot of people in your—let's call your world, I want to call you an influencer because I think that's what you are Greg. So in your world, a lot of folks say I've made X many millionaires. You've heard a lot of stories over the years of the way that the tools that Jungle Scout has and provides to people how it's changed their lives, can you think of anything or anyone that stands out and what an impact it had in terms of with their Amazon business and how it changed their lives?

Greg: I can think of a whole bunch of stories. And actually, I was—I think the last time we saw each other was at Prosper Show. And going to conferences and stuff like that it's always a great chance that I talk to all these customers in real life. So like probably a dozen times throughout that 2 or 3 day conference whatever it is like someone came up to me very emotional a few different times in tears but like just telling me this life story about how they found Jungle Scout and how it helped them create this business. And that's like a really, really special thing to be a part of. I never would've thought that in a million years like starting this business that people would come up to me in tears being like—just telling a story about how they were at a really low spot or they hated their job or whatever else and especially starting the business is what changed their life. A lot of them kind of attribute or say like Jungle Scout is kind of what caused that or encouraged them to do so or empowered them with the tools to have the confidence to do so. So yeah I mean there are tons of stories but I think most of them have like a ton of things in common, at least the ones that are most memorable are impactful to me.

Joe: And it's the impactfulness I think that is most interesting. I think that with success and some of the things that we do, and you do, and Scott does and Mike Jackness another friend in common it's A. being a good human and helping people. There's peace of mind that you get with money in your bank account but there's pure joy, satisfaction, and other things that are so intangible by helping others and having people come up to you like that and say what you've created has changed my life, what you did changed my life, what you said, the way you helped me change my life and very impactful stuff.

Greg: Yeah very much so and if you would have kind of—if I would really listen to this podcast not that long ago, just like 4 or 5 years ago, I would've been able to really like understand that at all. I don't think—at the time this seems like super shallow. But if I'm just being honest with myself, my only goal was just to make money. And the reason that was my goal at the time is like that's how I kind of like saw freedom. It's like okay I can quit my job or I have the security so I don't have to worry about it or I was always like—my 1st few years being an entrepreneur I was always so scared. [inaudible 00:20:59.8] like go back and get a job. Now it's like the most terrifying thing to me. So honestly—when I'm being honest with myself all I cared about was like the money at the time. And then kind of like as I felt like I was financially secure and kind of like no longer have those worries. That's when you're going to start asking yourself those questions like man what really does bring me the most happiness or like the most joy? And for me helping entrepreneurs is like very, very high on the list if not the top thing. So I would do these different case studies or free educational piece of content or whatever else. And people often say to me why are you giving all this away for free or why are you doing this it's only creating more competition for you or whatever else. And when I hear that it would just remind me of like yeah okay 5 years ago I would have said the same thing. I wouldn't have understood it but then I talk to these other people who are like successful entrepreneurs or whoever else and they're the ones who kind of like can understand that a lot better. It's like okay once you get to a certain point it's about okay what really brings you a lot of joy in your life, a lot of happiness and you want to optimize for doing those things.

Joe: Yeah and that free content and everything you're giving it away for free but you're helping people and if you're in this for the long term it's going to come back around. And I think you're in this for a long term. Absolutely, yeah. Some of the things that you've done over the past are overflowing into other things that you have ventured into. And I want to talk about a couple of them. You and a group of friends have started something called the 5 Minute Pitch. I took a look at an episode or 2 of that. I've talked to Mike about it. I saw the one with Andrew from ECF on it. Do you want to talk about what 5 Minute Pitch is and how you're helping entrepreneurs?

Greg: Yeah. So this kind of goes back to what brings me joy. And helping entrepreneurs is definitely one of them. It's also fun to hang out with other people I enjoy being around. So this was like a nice mixture of the 2. 5 Minute Pitch is shark tank style pitch competition where anyone with a small internet business who hasn't raised institutional money is eligible to pitch; so different people with all different types of businesses. Everything from a small software business to an e-commerce store to just developing a product and selling it through Instagram ads or whatever else. They pitch their business to myself and 4 other judges. And at the end of the season, the season actually ends in just a few weeks; we're giving the winner a $50,000 prize. They don't have to give up any equity in their business or anything. It's just prize money to help grow. So yeah it was a—we've only done one season of it. It was really fun and we'll probably do a few more seasons in the future.

Joe: That's great now everybody that listens to the podcast knows that we don't pitch products and services. But I think that they all should look closely at Jungle Scout and 5 Minute Pitch. Take a look at it if you've got a product that's just taking off and you want to get more into the e-commerce world. Take a look maybe you could be on season 2. Who is Kevin O'Leary in the 5 Minute Pitch? Who's—and have you said you're dead to me to anybody?

Greg: You know I've been watching some Shark Tank before thinking about these different lines and me and most of the other judges I think most of us are all just a little too nice to be Kevin O'Leary; which in results probably makes it a bit worse for television. But we're kind of just ourselves on the show.

Joe: We had the founder of Happy Feet on the podcast a few weeks ago and he said that—and he did a deal with Robert on Shark Tank.

Greg: Okay.

Joe: He said that when you're on shark—and I've talked to 5 or 6 people over the years that have been on, when you're on Shark Tank when you finish up they make you go sit with a psychiatrist for an hour. You can't leave 10 minutes n. It's at least for an hour because they want to make sure that you're not going to kill yourself because of some of the things that some people have said about your business; so pretty rough. Alright so let's talk about something else I looked at before we jumped on the podcast here and that is the Jungle Scout scholar; JS scholar. What are you doing there man?

Greg: Yeah. So it's just a scholarship program that we started just over the years I'm thinking of different ways and kind of like give back to the communities especially things I'm kind of passionate about. So that's one that we're doing. Each semester we're giving a scholarship to someone who's kind of like in business school or maybe computer sciences or something in that area who also has kind of like an entrepreneurial spirit. So it's pretty easy. Just create a little short video and submit it. Each semester we choose someone to give the scholarship to. And then with that also comes some mentorship for me to help them get their business off the ground.

Joe: That's awesome. I mean it really is. A lot of people talk about giving back and helping others, young entrepreneurs, entrepreneurs themselves but you're actually doing it. How long have you been doing that program?

Greg: I think we've given away 5 scholarships now so that would be about 2 ½ years I've been doing it. So it's cool.

Joe: That's impressive. Now I'm going to talk to my 17 year old when we're off. He's applying to college next year and—

Greg: Tell him to apply.

Joe: He is not going to business school. He'll probably be an engineer or maybe an art student, who knows we're still working that stuff out. They change their minds a lot. They really do.

Greg: Yeah I do too.

Joe: I did as well. And we've actually had people that have put their kids through college and then bought them a business when they graduated which is very interesting. It's almost like they shouldn't have spent that's $200,000 on college [inaudible 00:26:30.4] part of the business but kids get to grow up a little bit. What's down the road, what's in the future for Jungle Scout? What things are you going to add that are going to help those 200,000 plus subscribers and fend off some of the competition down the road?

Greg: Yeah we have quite a few product initiatives going on right now. We've really grown our product team a lot over the past 6, 12 months. We're going to really build out a lot of this stuff but most of it is around kind of what I spoke about earlier about right now the Jungle has got a tool at least that gets you up to until you launched your product on Amazon. We have a few other businesses that we have acquired or built over the years but we're kind of combining those into a singular tool. So by the end of the year, the additional functionality you can expect is like the stuff from those other tools. So helping you manage your business in our PPC and optimize it; all these different areas is kind of like what we're building in this year in 2019.

Joe: That's great I know that finding a great PPC company is often hard for folks, managing products we've got folks that buy businesses and just—I am looking for a great company that managed the entire thing for me so that's fantastic. One of the biggest issues people have Greg as you probably know is sourcing great products. Is that down the road or is that part of Jungle Scout at all now?

Greg: Yeah so we actually just released—so our newest feature is actually probably the one I'm most proud of called supplier database. And we actually just released this like a month ago. So it's pretty cool Joe. So we—I guess you've seen this too that a lot of people have a lot of problems finding high quality suppliers. And I did too. And I also found like this was one of the biggest pain points of our audience. And when I really started to get into this, it's like okay what's the problem here because there are tons of factories on Alibaba. That's how I used to find all my factories, just on Alibaba. There's tons of them and what it really comes down to is it wasn't like a shortage of factories or finding the factories or being able to communicate with them what it really came down to was finding a quality factory and vetting the factory before you did a production run. So like most of the horror stories that you hear are that the quality didn't come out as expected or every once in a while you hear a horror story about someone who a factory just ran off with someone's money or whatever else. And so there's a few ways I used to try to combat this; one was ordering a sample at a time. However, the problem is that when you're only ordering one unit, of course, they're going to give you the nicest one. They're going to like polish that one up extra but it's like oh can I do that on a production run of a 1,000 or 2,000 units and that's oftentimes not the case. So that was one way I tried to combat it. The other way was to get an inspection once the production run was finished. The problem there is when it didn't meet the quality sometimes you weren't able to get them to really fix what you wanted or is like sometimes a little bit too late at that point. So anyway the ways to try to combat it, the list was long but [inaudible 00:29:30.6] that effective. So what we did is we collected all of the US import trade data. So when you import something in the US you file some paperwork, yo give it to the government, and through this law called the Freedom of Information Act in the US, we're able to get access to that data. We put it into a database. We made it easy to filter and search through. And the way that it's able to solve this quality problem is you're able to find factories on there, you're able to see who their customers are, how often they import into the US, and how long they've been importing to US, the quantities; a number of different factors like that. So that's really cool but we kind of took it one step further by being able to essentially search for any Amazon product or any brand on Amazon in here and you could find out who are their factories.

Joe: Holy cow, that's amazing and almost offensive in some ways. I would think if you're an Amazon seller and you're able to scrape through their manufacturers. That's pretty incredible.

Greg: Yeah it's really incredible. It's like the old way for me of finding factories was when I found product idea I went to Alibaba, order a bunch of samples, whatever else. My new way of finding factories is like when I find something that I want to sell, and like sitting next to me right here is a little espresso. So if I want to sell espresso cups, I would just go to Amazon, I would search for espresso cups, I would see who gets the highest ratings.

So who has like 5 out of 5 stars with a whole bunch of reviews and I just find their factory. Because then like right away then you know that there's a high quality factory.

Joe: And you did that through sheer tenacity and hard work. What you're doing at the Jungle Scout is you're giving a tool to do it for them.

Greg: Yeah.

That what—

Greg: And that's what I do now; I just who the factory is of the highest quality product on Amazon and I just contact them and I buy from them. So it's a much easier way to do it.

Joe: Wow that's amazing; that's scary and amazing. Still, though I think for those that are going oh my God I'm never going to sell on Amazon because of that; it's that moat that you build around with thousands of reviews. I did a valuation today for something that is a fairly competitive it's in a very competitive niche but they've guy 17,000 reviews and the closest one has maybe like 1,100. That's an enormous gap in reviews. So there's a pretty big moat there.

Greg: Right, and you know this Joe it's—when we launched this there was definitely—we probably got a dozen emails of like really pissed off people because now everyone can find out who their factory is. But you realize this because you deal with people who are buying business all the time but it takes a lot more than just knowing a factory to create a successful business, right? [inaudible 00:32:09.4] like a lot of other steps.

Joe: A ton of a lot.

Greg: So just because people can find out who your factory is that doesn't mean that they can just copy your whole business. There's a lot more steps to it than that so I wouldn't be too worried about it. We actually saw this exact same thing when I originally launched Jungle Scout because prior to Jungle Scout no one knew how well products on Amazon were selling. And now all of a sudden you could see how well every product on Amazon sold. So same thing I got like dozens of people emailing me pissed off because I was telling the whole world about how well their products were selling on Amazon.

Joe: That was—they were pissed off shortly before they subscribed probably though, right?

Greg: Right. So we've kind of seen a little bit of a similar thing with the supplier database. And then to your exact most people are like wow, well I'd rather have all this data and the whole world be able to know who my factory was than this type of thing not exist out there.

Joe: Yeah I hate you but I'm going to give you my money every month because you created a great product. That's awesome; fantastic. I didn't know that it went to that depth and level where you can find the products manufacturer. That's incredible. Alright, Greg, we're running out of time, obviously, Jungle Scout is how do they find it? JungleScout.com?

Greg: Yeah JungleScout.com if you're not familiar with it you can read up all about it on the website. If you're interested in just selling on Amazon too, I might be a little bit biased but I think we have like the best educational content out there and it's all for free. You can find all of it under the free resources section of the website. So any format you like learning in whether that's on audio or video or written it's all on there. There's a lot of—a bunch of end up guides. We do this thing called the Million Dollar Case Study where we launched 4 products from start to finish. You get to see the products and everything along the journey. So yeah that's tons of stuff on there if you just [inaudible 00:33:52.5] on Amazon too.

Joe: Fantastic; a great educational tool and a great product. And for those out there with kids that are going to college in the next couple of years how do they get to the JS Scholarship or scholar site?

Greg: JungleScout.com/jungle-scholar and you can find in the footer of the website too.

Joe: I got it. I found it on LinkedIn. And then there's the 5 Minute Pitches well we'll put all this in the show notes as well. Greg Mercer, thank you very much for spending time with us. I know you're a very busy guy. I appreciate it.

Greg: Thanks again. I'm glad I'm here. Take care.

Links and Resources:

Jungle Scout

Jungle Scholar

The 5 Minute Pitch

Are we seeing a plateauing of Amazon? Those who think that any type of e-commerce conducted outside of Amazon is a dead-end are dead wrong. Today we welcome back Andrew Youderain to discuss his third annual State of the Merchant Report for 2019. If you've never read or heard us talk about the report, it's a comprehensive report of all things e-commerce that comes from Andy's exclusive database of real entrepreneurs, all running physical product e-commerce businesses.

With more than 400 qualifying merchants completing the questionnaire, the report covers an array of important topics including growth and conversion rates, profitability stats, advertising ROI, and even one surprise question about ways our members would fulfill their biggest indulgences. We'll go over all the questions, responses, and the surprising trends in e-commerce for 2019.

Episode Highlights:

• What is providing the best return on investment in terms of advertising?
• The facebook marketing factor, why it's so different, and how can be tricky.
• A shout out to email marketing as a very valuable and viable advertising tool.
• The reality of advertising fatigue and the big three – Google, Amazon, and Facebook.
• The typical store owner makeup and whether dropshipping is coming to an end.
• Surprising gains in manufacturing of original merchandise.
• The impact of the new tariffs on the surveyed businesses.
• Does everything seem to be growing? We discuss general growth rates in the e-commerce industry.
• The surprising thing we learned from the survey this year regarding Amazon.
• The place for premium and niche products.
• Andrew's top three takeaways from the survey.
• A rise in Chinese sellers on Amazon and what that means for e-commerce merchants and counterfeiting.
• Andrew's view on the FBA nexus and the state to state tax impact for his community of clients.
• The fun and surprising final question in the survey.

Joe: Mark back in Savannah I think it was 2016 was the 2nd time I ever went to eCommerceFuel. In a great location because I could drive there and it was a beautiful, beautiful location. And I was so proud because I brought copies of my e-book some would call it a book called 10 Steps to Selling your Amazon Business and this is back in '16. We're talking years ago. And so I thought I was at the forefront of things. And then Andrew does his presentation at the beginning of eCommerceFuel events which was really the state of commerce back then and what we've had him on the podcast about what this podcast today is about. The 1st thing he talks about is how few of the eCommerceFuel attendees are using Amazon; like less than 10%. And it was a very small part of their business and that Shopify and other channels were much, much bigger. And I was slightly mortified. But then the next year, the biggest growth I think in 2018 that we saw—actually it was at '17 because we stated e-commerce from Andrew in 2018 and the biggest growth factor was Amazon. And now that you've had him on again I think that that's changed a little bit, right?

Mark: That's right. In this year's State of the Merchant Report from eCommerceFuel, they've found that this is the 1st year that non Amazon e-commerce stores outpaced Amazon as far as new sales channels which is pretty amazing when you think about the impact. The quote directly is this was the 1st year non Amazon sellers grew faster than those on the platform. So there's more growth happening off of Amazon among their members than on the Amazon platform. That's pretty remarkable to hear that because it feels like feels like everybody's on Amazon. And we've often preached this idea of having diverse revenue streams and making sure that you're being multichannel with your revenue streams and platforms but you and I know a lot of Amazon sellers that have gone all in on Amazon so that they could just focus on the growth there to get as much sales blossomed there as they can because it's easier to do than trying to manage multiple channels. Those who think that outside of Amazon e-commerce is dead; it's not at all, not even close. There is a couple of other interesting things that came out of this report and I'm going to let Andrew really get into some of the things that he found impressive. But one of the things that that stood out to me was the effectiveness of Facebook as a marketing channel. It seems like everyone we talked to always says Facebook is such a great marketing channel and if we could just figure it out and what my experience has been is that everybody's trying to figure it out. Which means it's really difficult to actually do. I think those that have "figured it out" are doing well. But among the people that responded to this really lengthy survey that Andrew puts them through Facebook ads came in as the 5th most effective sales channel or advertising channel that people were reporting. And the ROIS, the media in ROIS was a full point lower than the next highest. And again we'll let Andrew talk about some of these things because I'm sure he has more insights than I do into the report itself. From just a general like where are you in the market as an e-commerce business or when you're looking to buy and identifying the right trends and the types of businesses that are going to be around for the next several years a report like this is just invaluable, right? You get to see where a business is going, where the industry is going, and maybe where the next opportunities lie.

Joe: Yeah and it comes directly from the eCommerceFuel membership database. As far as I understand it Andrew sends a survey out and collects all of this data and all of this information so it's from real entrepreneurs down in the trenches running their businesses; physical product e-commerce businesses. So if anybody is out there that is looking to grow their business outside of Amazon this report can help. If anybody's buying a business and wants to take it beyond Amazon this report can help. If you're on Shopify and you want to learn the other channels, what number 2, 3, and 4 are before that 5th one that's most effective being Facebook this report can help. And it comes from Andrew. There are very few people in the industry that are as good character as Andrew and the folks at eCommerceFuel.

Mark: Oh I was just about to say that now. A shout out for the good guys Andrew is certainly one of those. So let's get into this discussion between Andrew and I on this report and find out what some of the insights he [inaudible 00:05:59.2].

Joe: Let's go to it.

Mark: Andrew, thank you so much for coming back on to the podcast. You were on last year and we talked about the awesome report that you guys do over at eCommerceFuel; the State of the Merchant Report. And this is where you survey a lot of the members of your community which we've talked about here on the Quiet Light Podcast, Joe and I talked about it quite a bit. One of our favorite conferences, one of our favorite communities out there for high revenue e-commerce store owners; it's a fantastic community that you built there. And you do this report every year. It's a really good pulse of what's going on in the world of e-commerce. So thank you again for joining us.

Andrew: Yeah thanks for having me. I appreciate it. And good work with the podcast. I'm enjoying the Quiet Light Podcast. I kind of love your episodes and yes you're putting up good stuff; you and Joe. But your episodes seem to have just a tiny edge on Joe's. I don't know maybe it's just in my mind but regardless you guys are doing awesome, awesome stuff.

Mark: Yeah I'm just going to record that. I'm going to put it on a loop and I'm just going to send it to Joe a few times so he can hear that over and over again. You need to submit at some point we've been adding these movie quotes to our intros at random so you need to listen to those and tell us what you think it is and we'll give you a shout out. I don't know what they are myself so I'm excited about this. I'm excited to talk about this year's report because you always come out with just some really fascinating bits of data. And I'm going to start with one that I've run across a decent amount because I think it really speaks to a lot of buyers are thinking about when they're evaluating an online purchase and also sellers who are looking to scale their business and this is what is providing the best return on investment at this point in terms of advertising? Facebook is often quoted you know if we could just unlock Facebook and this is something that I want to get into a little bit here but your report showed some surprising numbers with where the most value is and where some of the lowest hanging fruit is for advertising.

Andrew: Yeah so there are a couple of things that are new this year. I wanted to take a look at what merchants are using the most in terms of promoting their business; so what's most popular and then also what's the most effective because often those are not the same thing. And so you look at the most popular marketing channels and we just ask people what are you using and in the number of popularity 1st was email marketing, 2nd Facebook ads, 3rd was Google AdWords, 4th was SEO, and 5th was Instagram. And so then we—of course, it was a popularity—to get a sense of what was most effective we looked at okay, of the people that are using every single one of these things we asked about which, how many, what percentage of them ranked that specific one as the most effective? And the one that came to the surface wasn't even the top 5 that we talked about. The number one most effective marketing channel reported by merchants was Amazon Ads. Over half of people running Amazon Ads said it was the best highest ROI marketing channel to use, number two is e-mail marketing, three was SEO, 4th was Google AdWords, and like a distant 5th not even like a close 5th, but a distant 5th was Facebook Ads. And another thing that we explored was the average return on Ad Spend for Facebook Ads versus Amazon and Google and they had the lowest return on Ad Spend at 3.4 compared to Amazon at 4.6 and Google at over 5. And they're increasing of the costs on the Facebook platform were growing up the fastest as well; almost 20% versus 16 for Amazon and 10 for Google. So that was kind of the Facebook—I think a lot of people, so many people are doing it and it's easy to have like almost some fear of missing out if you're not doing it or if you're doing it like you're not getting the secret when everyone else is. But I think it's a harder nut to crack than people like to admit. And those were some of the numbers based on the advertising.

Mark: Yeah there's a lot that I want to get into on this here and let's see if I can remember all of it but I want to 1st talk about the Facebook ads because you put it in that way; it's a tough nut to crack. And I wonder if that's really maybe some of the secrets that's going on behind these numbers with the EBIDTA ROIS and also the effective marketing channel. We've had Ezra Firestone on the podcast here before. He's a friend of Quiet Light Brokerage. He obviously is a big advocate of Facebook advertising. I've seen some other people who have been doing Facebook Ads with a lot of effectiveness but and this is the big caviar, it takes a while to figure that part out. And a lot of these guys have gotten there where they're seeing these ROIS of five plus, they've taken months—literally months and lots of dollars down the drain to really get to that point. I'm wondering and maybe you looked into this a little bit with the survey; did you look into people that have tried Facebook marketing and maybe gave up after two or three months because they couldn't get it to work or did you not look that deep or ask that deep of a question?

Andrew: Yeah I didn't go quite that deep. And it's always tough designing the survey because it's already like 50 plus questions and I'm trying to balance—making sure we get people who get all the way through it with you know what are the critical things we get. So sadly I didn't get that kind of data. A lot of the kind of the fox and the stories behind people getting into Facebook and having a hard time with it are more anecdotal that I hear from people. And so sadly yeah I wish I had some good numbers and data behind it but it's more anecdotal than anything else.

Mark: I mean look there's a couple of things on here on your top; 5 Amazon Ads, e-mail marketing, SEO, and Google AdWords. So let's go through here with Amazon Ads, SEO, Google AdWords; those are all high intent advertising channels, right? So if somebody goes online and says buy shoes or buy cheap shoes or best running shoes; that's a really high intent search, Facebook Ads not so much of a high intense search, e-mail marketing side if they're on your list that already a warm contact. So it shouldn't be too surprising that we're seeing that but the other side of this too that I would say is like if you're looking to create a market and let's say you have kind of an odd channel, maybe you take a spin on a new type of ice cream scooper that doesn't get stuck ever. So the ice cream never gets stuck in that ice cream scooper and you've invented this and you're going to sell it; well nobody knows that it exists. So it might take a while to build that market and so Facebook Ads might be a good source for that because you can have that proof of concept and really kind of educate the marketplace. But it's also going to take a little bit more work to get people to really peak their attention.

Andrew: Yeah Facebook is just a totally different mindset for advertising. It's really great if you're good at targeting if you're good at—the way you build a funnel is just totally different. It's more so about you get to be able to catch people when they're doing something else, get their attention, pull them off the platform or engage them for a while and then pull them off versus being able to drive a sale short term. I think it's a longer term game and just a different mentality you need to have if you're going to do it well. And targeting too with Facebook I think is getting trickier [inaudible 00:12:57.7] that some of the targeting the traffic that Facebook had been sending hasn't been converting as well for some members and some people I know. So that's a big part of Facebook performing well as them sending you people that are based on their intelligence they know are going to work well. So yes it's interesting.

Mark: Yeah talking to crack I think is the best way to describe it. So I do think it's a viable source but you've got to have the right type of product and you really have to know what you're doing with it and be patient. I mean that's just a lot with these; Amazon I'm not surprised at all, still a very young marketplace so I think we're still seeing kind of those numbers equalize out. Talk about a high intent marketplace and high intent searches so I think that makes complete sense they're number one on the list. And let's give a shout out to email marketing probably the old man in the room there, right?

Andrew: Yeah although it's funny I think about if you look at email and even email it's still of course you know the number two most effective marketing channel and it's still highly—super valuable but I feel like even probably it's getting harder. I think advertising, in general, is getting so much more difficult because we've had so much of it—a part of it is fatigue; just advertising fatigue. And you've got three main giants who control so much of it and they're kind of squeezing all of the juice out of it they can with rising ad prices but even my email inbox I don't know about you Mark but I'm way more ruthless now with my email. I've got a ton of filters set up. I have used like unroll.me to unsubscribe from a lot of stuff because you have to. Because I'm looking to change my email address in the next couple of months to just have a team address to really focus on because it's—the levels most of the messages coming at us are increasingly just –they just keep going up and up and up. And so I don't know, it would be interesting to see if anything comes up in the next two, three, four years where—that it makes it able to get through all of that noise. Because it's getting—just any advertising, in general, is just getting a lot harder because there's just so much out there.

Mark: You know I really think it comes down to the personalization. Email marketing, you're right I mean email it's a complete mess and now I use Gmail, we use Gmail, Google Apps throughout Quiet Light Brokerage and they tab everything down in that promotions or updates or forums tab. And I'll tell you what I don't look at promotions ever. Basically, its spam light is what it is and so you just throw all that stuff away. I go through it every few days and select all and hit the archive. Coming through that though like having personalized messages, very, very hyper focused hyper personalized messages I think that's really the only way that people are going to be able to survive with that email marketing. That's tough, that's not easy to do.

Andrew: You know I agree and I think—you know I did a podcast with somebody earlier this year and they have an antiques business and every week they send out an email on Saturday and at the click through rates are like 25%. I talked to him about how he was doing this, I mean trying to get some secret out of it and there wasn't any secret. It was that he spent hours and hours and hours on an email that was totally unique and it was amazing deep interest level to the customers and people open it. And like I look at the email that we have that goes out to our private communities [inaudible 00:16:34.2] it's not nearly as good as his is but just that so much smaller group only about a thousand people but we're able to get it. It takes a lot of time to put together but it gets generally open rates of close to 50%.

Mark: Let's move on here to another thing. I want to talk about the anatomy of a store owner. You put together a really nice simple graphic on the link to the report and I will link to this report here in the show notes and we'll also throw it into an email as well. So people listening to this take a look at the email coming through from Quiet Light Brokerage but I want to talk about the makeup of the store owner. Drop shipping seems to be kind of on the losing end of things these days.

Andrew: Yeah I feel like it's had some pretty strong headwinds for the last couple of years. And this year the number—every year we ask and we look at what percentage of store owners is a certain type of business model; drop shipping, manufacturing, private label, hybrid, or reselling products. And this year the number of drop shippers that reported got cut in half. So only 8% of people this year down from 16% last year were drop shippers which is a pretty huge—just a massive cut. And if you look at the number of manufacturers that we're reporting that reports for the survey that was up by almost a 3rd by 32%. So it seems like a lot of those—this has been a couple of narratives that have been talked about for a couple of years now but it's really playing out in the numbers.

Mark: Yeah I think so as well. What's funny though is we had somebody on recently to talk about drop shipping and they were killing it. They were doing a great job with drop shipping. So I feel like it's one of these areas where for a while there were Ad Sense sites, a pretty number of Ad Sense sites all over the place, a bunch of those got wiped out and the general thought was this is kind of a dead business model. Well, I've seen some of them come by and those people that actually survived through that and how they got some strong, strong businesses. I feel that way with drop shipping a little bit. Like if you can survive these head winds you've got something good.

Andrew: It's funny you say that Mark because when I looked at the revenue growth by business model and the income growth by a business model guess who was leading the pack on both of those metrics? It was drop shippers. And I think what happened is exactly like you said there's a little bit of a Darwinism at play here where a lot of the herd got thinned out and the people that were left were able to make it work well. And I think you're actually right it definitely can work in some models. I think it's much harder to get the things to all align and get a model where it works well for reasons that—I guess I don't want to get into on the show right now but if you can get it right I mean it's a great business model because no inventory, no upfront cash, no cash flow issues, location independent. If you get it to work right it's a pretty good gig.

Mark: It really is but it seems to be so dependent on the product and also your relationships as well because obviously, the problem with drop shipping is competition. It's so easy just to spin up something and compete directly with you and you get the sort of you bicker with a sort of marketplace of every product that is exactly the same, same images and everything else. It's tough to work in that area. On the flip side—so like I like to think about this on a spectrum. On one side we have drop shipping where you can see the products sometimes you get into reselling which might be a little bit of a step away from that drop shipping where you're still doing with some physical product but it's not yours. And then you go all the way over to the other side of the spectrum and you get these unique manufactured products, some of them private labeled but the most extreme would be hey I invented something or I've created a product and you're seeing some pretty big gains in that area.

Andrew: Yeah I mean the number of manufacturers like I mentioned was up a 3rd this year. If you look at also not just the number of people that are doing it but the benefits that they're seeing and the pay off, so we tracked gross margin, net margin for those—for all these different types of sellers and manufacturers and by far the largest gross margin at 53%, the highest net margin at 21% and those were up year over year too for each category. I think the gross margin for manufacturers was up from 45% percent up to 53 and the net was up as well. So yeah I think manufacturers are—it's a harder business, there's less of a roadmap, it's more capital intensive, it's more stressful but if you're able to crack it more and more people are going that way. It's really the only way I feel like you can play on Amazon these days because if you're going to try to go resell someone else's product on Amazon you're going to get destroyed. And it's where a lot of people seem to be going and getting paid for.

Mark: Yeah I think all those things that you talked about; the stress, no roadmap, everything else there's a flip side of that. It's defensible, right? Because there's no roadmap you're not going to have everybody saying oh I know exactly how to do this. It is difficult to do and figuring out how to get that manufacturing [inaudible 00:21:21.3] done is tough. Did you ask people and if you only have just kind of from what you've heard in the community obviously China I would guess would be the number one sourcing location for most people manufacturing, what other countries are you hearing from some of the members on the community that—where people are sourcing products? Especially when we're recording this—I don't know when we're going to air this episode but when we're recording this we're staring down potentially more tariffs going on with China. Obviously, this is going to impact everybody selling from China so finding other sources would be great. Have you heard of any other countries that seem to be emergent?

Andrew: That's a great question and the honest answer is no. I mean there are people in Asia—I hear occasionally about people sourcing in Taiwan which depending on who you ask is China or isn't. Vietnam is another one that comes up but apart—and you know some people I know occasionally hear their source from India or make their things in Canada or someone I met with recently is building some footwear in Mexico. So there definitely are some other places people get certain things but in terms of a potential runner up to China that could even remotely start to be an alternative to where people are manufacturing 90% of things I don't think of someone who's pulling away or even you know accelerating at all. It's kind of just a whole bunch of a lot of different options all over. So not really an emerging source for manufacturing that I'm seeing.

Mark: That's a little disappointing but not surprising. I mean wouldn't it be great to have something on this side of the ocean where we could maybe just pull up from Central America instead of having to—I talked to some of these store owners and they're talking about three months plus lead times where you're committing capital and then that goes on the ocean and it takes—I can't imagine how difficult that would be.

Andrew: Oh yeah it would be really hard and you know it's one thing we did ask this year was did tariffs impact your business and granted I know we're talking you and I are both in the States, I know a lot of people listening aren't in the States but probably the vast majority of 85% or so of respondents for the survey are US based or 75% rather but we asked did tariffs impact your business this year? And over a 3rd of people, the 36% said the tariffs meaningfully hurt their business this year. And like you just alluded to they are only getting more from slapped on. So it's a big deal and it'd be nice to have a silver lining; maybe be that sourcing out of some of the countries closer to us maybe, maybe get a boost.

Mark: Yeah that'd be interesting. Hey if anybody has an idea on where we can craft and not let me know. That'd be great to get that part out. Let's go to like some of the Sunday news here and that is everything seems to be growing. You know I started Quiet Light Brokerage right before we hit that great recession so a lot of my entrepreneurial journey has been slogging through a difficult economy. It seems like from what we're seeing we're in a bull market right now.

Andrew: It seems really strong. So we—looking at growth rates over time, and again these are the average merchant—the average e-commerce store owner reporting for the survey was right around 3 million. So that's relatively small when you look at the macro economy, if you look at e-commerce trends, in general, they're probably could be growing closer to 20% plus or minus but for this segment of store owners if you look at the growth trend over 3 years, 2017 it was about 25%, last year it jumped way up to almost 37%, and this year it's down a touch to 36% but still meaningfully about the same. So revenue growth is good, income growth has also remained real strong and if you look at the conversion rates too and it's just continued to go up the last two years. I mean the conversion rate we're looking at this year was over 3% up from 2.60% last year. And in terms of like our earlier margins are up so all in all for store owners things are good, growth is good, margins are good, the conversion is great and it's kind of a boom time is the right word. But it's definitely—things are robust and healthy out there for stores in this segment.

Mark: Yeah that's fantastic. One of the surprising things that I've seen from the report and we talked about this last year and I know Joe tells me and we mentioned this in the introduction to this episode here that the very 1st eCommerceFuel Live that he attended he brought a book on 10 Steps to Selling Amazon Business. You asked at one point to raise your hand if you're selling on Amazon and it was only a small portion of the room that did so. And he was thinking oh man I completely missed the mark bringing this book. Well, we've seen this number increase over the years although this year from—unless I've got [inaudible 00:26:19.5] I'm not reading this backwards, it looks like you have a decline in people that are selling on Amazon and an increase in people that are not selling on Amazon. Is that really what you're seeing?

Andrew: Yeah I wouldn't say a decline but I would say a plateauing of something in the report that I wrote I call it like a plateauing Amazon—I hesitate to use the word peak Amazon because every time that I think that they've peaked anything they blow up and accelerate to the moon. But looking at like three examples here, or three data points; if you look at the number of merchants who just sell on Amazon or they don't. A couple of years ago 49% last year, it was 55% so a fairly meaningful jump. This year that number barely budged; it went from 55.2% to 55.8%. So up a little bit but wildly decelerating. Along the same lines if you look at group sales from Amazon last year, two years ago they were up really sharply and this year they barely budged; 27.6 to 28.2% of the total sales that all of the merchants generate coming from Amazon. And this is maybe the most surprising number. If you look at just the revenue growth of stores that sell on Amazon versus don't last year stores that sold on Amazon grew faster than stores that didn't. And this year stores that don't sell on Amazon actually grew faster than stores that do by a small margin which is just really, really surprising. So I think that there's so much here. We could do a whole episode on I don't think Amazon is going anywhere, I think they're going to be shaping the e-commerce landscape for the next 5 to 10 years. But I do think a lot of merchants are starting to really struggle with counterfeit issues, with increasing fees, with loss of control, with feeling like they're totally beholden to Amazon, and a lot of host of other issues. And they're not getting off the platform but the number of merchants that are saying hey yeah let's go hitch our wagon, go to Amazon and sell there—and some people are just deciding to leave the platform altogether. So one of my predictions and here I'm almost certain that it could be wrong because I'm going out on a limb is that next year is the 1st year we see the percentage of stores selling on Amazon actually decrease year over year. So we'll see when that happens.

Mark: Yeah that's interesting. I wonder if shopper's behavior is changing at all and just again you just can't draw any conclusions from this here but I know for myself I've become more of a diversified shopper than I have in the past. I still use Amazon probably like 4 or 5 times a week, I'm still a really heavy Amazon shopper but I'll actually look around a little bit off of Amazon as well. And if I get the chance to order directly from a store I do so. Now that's probably just because I worked with so many entrepreneurs that have these stores and I know the benefits for them. But there's something nice about that specialization, right? If you think about the big box stores and how they couldn't specialize in any sort of gear but if you want something high end and specialized, it makes sense that there is somebody that actually does specialize in that. It's pure speculation on my part of course.

Andrew: No. I think you're absolutely right. I think we're going to see in the next 5 years a real hollowing out of e-commerce where you have Amazon; if there's something you'd know you want to buy it's more of a commodity or a fairly inexpensive product that I think Amazon is going to be the place you go to get it quickly and cheaply and efficiently. But I think for anything else, for merchants I think the place to really thrive and survive over the next 5 years is to have a premium product or a very niched product; ideally, one that you manufacture. Like just for example yesterday I called up and I was in the market for a nice bike rack for my vehicle. And I went into a lot of research and the company I ended up buying it from I ended up talking to him on the phone for 35, 40 minutes. They custom manufacture in the United States, they ship that to me and it's that kind of thing. They have an incredible product and they don't sell on Amazon surprisingly because they don't need to. Because everyone that wants the site or this product they go right to them and they don't want to give up the marginalized control and guessing. And I think those are the kind of merchants that are going to do really well in the next 5 plus years. And I think that's kind of the best place to be going forward if you're not going to be on Amazon.

Mark: Yeah. I would agree 100%. I think just from a long term sort of defensibility mindset and that's what I've seen and I actually see it on Amazon as well, the companies that are doing really, really well long term Amazon really care about their products. And they're spending a lot of time on that product development cycle and doing their research and trying to make sure that they have something that's a high quality product. But then they're also looking outside of that as well and becoming specialists in that space which makes a big difference. With everything that you surveyed here was there any one or two things that really stood out to you as being surprising this year or would inform you if you were an owner of an e-commerce business yourself that you would definitely want to take action on?

Andrew: I think the big things were the massive shift and we kind of touched on this but the massive shift of people going away from drop shipping and into manufacturing. And the benefits financially that those manufacturers we're seeing. That would be a big one. The other one was the Facebook ones we talked about where Facebook Ads really are definitely at the back of the pack especially relative to their popularity in terms of effectiveness. So those would be probably two of the big things and then in terms of Amazon just I think it still makes—it can make sense if you have a great product that's proprietary. It doesn't—if you do it carefully I don't think you shouldn't go on Amazon but just the fact that so many people are kind of hitting the brakes on that or at least new entrance in saying aren't rushing in as head long as they were before I think is pretty telling. So nothing new there Mark that we haven't talked about but three things if I was in the middle of kind of defining strategy or starting it from scratch I think would be things I would think really carefully about.

Mark: You said earlier in the episode here with advertising how much more difficult it's become. And I generally think that what we're seeing with the Internet and Internet based businesses and we've been seeing this pretty much since the time I started as an entrepreneur 20 years ago now is this maturation of the businesses where I think they're all getting more difficult to do. And you look at this and you think oh man that's such a bummer. I know I talked to some friends who are entrepreneurs back in the early 2000s and we kind of reminisce about the quarry days of Amazon was a thing of the website waiting for the movie dance to happen and now all of a sudden they're making gobs of money. But what do we learn from all that? We learned that dries up and disappears pretty quickly. The people that are surviving are the ones that are embracing some of these challenges and looking at them saying I'm going to build something really sustainable, a real product and they're doing great. They're doing really good. And that bears out in some of your numbers.

Andrew: Yeah and one thing—it absolutely, absolutely does and I think one thing for you to touch on in terms of Amazon and in terms of sourcing in more of a macro level, if you look at one of the things we asked it was what are your most common struggles, what macro changes are you seeing, and what are your future plans? And one of the macro changes that came up the 1st time this year on the top top list was the number of Chinese sellers that were coming into Amazon. And I think I saw a stat today that 40% of the top Amazon sellers in 2019 are Chinese sellers versus 26% two years ago. And so A. on one level you have just a lot more competition directly from factories who are the low cost provider. Which isn't a bad thing for consumers in and of itself but it's harder for merchants. And if those sellers don't have the same kind of quality standards; some of them do, some of them don't, and you also run into problems. But you also have a lot of—one thing I've noticed is a lot of counterfeit issues. This has been in the news. We've had a number of members in our community who have had problems with this when they had a product it got knocked off and then these people—you know a lot of overseas sellers started selling this product directly in competition with the original manufacturer which was really problematic because the quality wasn't as good. And so consumers got it and it really hurt the brand because they assumed it came from the original source when it didn't. And so you see I think this also ties back into Amazon and why people are getting a little bit more careful about that platform is because there are some meaningful counterfeit issues out there that again going back to the difficulties of manufacturing that merchants are having to face that weren't really as much of an issue two, three years ago.

Mark: That would be interesting to see what happens with that platform. And also I'm going to touch on one last bit of the report here that you spent some time on and that is the impact of politicians and judges and we've covered two areas; we were already talked about tariffs briefly and how many were impacted by that. I think the other big elephant in the room and it's been there for several years and we've talked about it a ton here at Quiet Light Brokerage and that is the FBA Nexus. Do you have Nexus, are you filing those sales taxes in different states, and you still have a very small percentage [inaudible 00:35:49.6] to the speaking of your community that was paying those sales taxes. I think 21% is what I'm seeing is that right?

Andrew: Yup that's correct. So the percentage of sellers who have Amazon inventory that is filing for sales tax, [inaudible 00:36:04.0] sales tax in any state that they have "FBA Nexus" whether or not you agree that [inaudible 00:36:10.1] Nexus. Yeah only about a quarter of merchants are submitting sales tax to those states.

Mark: And do you have any idea why such a small percentage? I mean obviously nobody wants to pay taxes and that it's a pain to most people. I've run into sellers who make the argument that it's really not—oh there's no legal basis for it.

Andrew: I think it's a couple of things. I think one it's it is potentially disputable whether or not and again this is something I need to personally do a deep dive on but from the very—this is where things get dangerous when I talk but from the very little I know I don't know if it's—I don't believe it's that very crystal clear, there's a whole lot of present presidents that said yes this does definitively give you Nexus. And it could be a state by state issue as well. So I think that's part of it. I think the 2nd part of it is thinking about—so because it's a gray area you can have more people who start thinking on a risk basis. What are my risks I submit? What are my risks if I don't? Also relative to the workload because it's not just about the tax; I mean if it was mostly about the tax and the administering this and the managing of it was really easy and you didn't have any you know long term liability or exposure to being audited I think most merchants would say hey it's a little inconvenience but let's go ahead and let's set this up. You can snap your fingers I'll collect the sales tax; it's not a big deal. If it is a federal level it's much easier to do. I think you'd see that number jumped to 25 to 50% plus but that's not the case. Like you've got—it's hard to administer. You potentially open yourself up to dozens, hundreds, maybe even theoretically thousands of different municipalities who can audit you. You run the risk of getting on a sales tax agency's radar to come after you and maybe it wasn't before. So I think those are some of the reasons why people are not exactly thrilled at the thought of jumping in and waving their hand at taxation seasons saying hey here I am I'm not sure if I'm actually legally obligated to do this but come check me out.

Mark: I completely get it. I get the risk versus reward analysis and frankly if I were a seller I would probably be among that 75% that's not collecting. Not that that's what I would advise here in my role because I know that if you do want to sell you got to be doing that right. And most buyers are looking at that and saying we want you to be paying those taxes. We don't want that to come back after us [inaudible 00:38:31.9] later on. But I mean from my opinion I think it's pretty legally shaky ground to say that people do have that Nexus. But the best practice from a selling standpoint would be to be filing so we do—I mean that's our default position here at Quiet Light is that you should be filing for sure without a doubt. But I would love to see this resolved within the next few years because it as if Amazon sellers don't have enough things hanging over their head. There's this potential like you said of being audited by the state of California or all of a sudden getting a bill for seven, eight, nine years of tax—what a mess. They need to get it together and figure this part out.

Andrew: There's a little bit of encouraging news [inaudible 00:39:16.5] different sales tax issue we're talking about the FBA Nexus tax issue but the wayfarer versus South Dakota Supreme Court case that opened up the doors for states to tax inbound orders to their residents even if you don't have Nexus in the state as a whole opened up a whole other can of worms. And California I believe just passed some legislation that increases the threshold for—I think that the term for that is economic Nexus. They bumped that up meaningfully to half a million when before it was really low at like 100,000 and 200 transactions. So there's a little bit of encouraging news on some of that fronts and I believe there's been maybe half a dozen other states that either followed suit or are in process of doing that but its sales tax right now in the United States is just an absolute disaster. And I agree with you, I think we really need something at the federal level to clean it up because it's just a nightmare. I know people and I know you have to Mark that have sold their business not entirely based on but this definitely was a large part of the calculation thinking through I don't want to deal with this. I don't want to deal with the stress. I don't know with the liability and this is making business harder than it needs to be and I'm ready to be done.

Mark: Yeah absolutely. Alright, we got to get to the most important metric that you've got and then wrap this up because we're actually long already with the episode. And you know what it is, it's your KPI the thing that you're focusing on the most. And in the past, you've learned stuff about your community rather be attacked by a swarm of angry bees and a bear and you say that they're crazy. I don't know the bear sounds pretty scary. But this year you asked what luxury gift would you pick; unlimited use of a private jet, $300,000 in annual income, a monthly lunch with anyone, or a tropical island and a house. So that 300k of annual income is that like forever?

Andrew: That's forever. Yeah and I think overly weighted this one. I should have been all stench here with the annual annuity that you got because 2/3 of people picked the 300k income which yeah it's hard to argue against that. That's a pretty sweet little set up for life but like 10% picked the jet, about 13% picked the monthly lunch with anyone. That was my pick. I think like you can—I mean to be able to sit down once a month with the likes of U.S. presidents, heads of state, Nobel Prize winners. I mean you can't buy that. I think that'd be cool.

Mark: Do you have to buy lunch?

Andrew: You do. I should have included that. That was probably what the deal breaker was.

Mark: Right. Because it's got to be a pretty nice lunch if you're going to have lunch with these guys. You're not just going down on like [inaudible 00:41:45.4].

Andrew: That's a good point. And then the last one was a tropical house, about 30% of people picked that. But yeah I mean to me this is I feel like it's going to a cornerstone—I suppose we can lead with this one actually Mark. I think next time maybe we mix things around and lead off of the Kardashian performance.

Mark: You like to always put the best content at the end so that people will listen all the way to the end. Because where would your day be today if you hadn't learned that most people would take 300k annual income over a monthly lunch with anyone. I actually think you make a pretty valid point there. That would be pretty valuable. You can't buy a monthly lunch with anyone. That'd be tough.

Andrew: Buffet—I think you could buy lunch with Buffett for—I don't know it's in the millions I think to have lunch with him. And he's just—I can imagine he's a pretty cool cat but yeah to build it up monthly with anyone; that's pretty cool.

Mark: Yeah that is pretty cool. Alive and dead?

Andrew: No, I don't think—I think it has to be alive. I didn't put that in there. If we had some inane abilities to be able to resurrect people, that would be pretty sweet. I'd put that in there too. I probably would have bumped it up a touch but I don't know, that 300k was pretty [inaudible 00:42:53.4] people. People like their cash.

Mark: I think I could probably make 300k a year with some inane abilities. I'd be like one of those fortune tellers but I'm pretty sure I could spin that off into a pretty desk.

Andrew: I know you could too.

Mark: Hey thanks so much for coming on; tons of really good information. Go check out eCommerceFuel.com and the State of the Merchant Report. We will link to it in the show notes. We will be sending out an email to every one of our subscribers here on this. If you're not a member of the community are you taking applications right now Andrew?

Andrew: We are. Yes, we are.

Mark: Okay. If you're not a member of the eCommerceFuel community and you are an e-commerce seller you definitely need to check them out. I don't recommend a lot of groups. I don't recommend a lot of people or sites. We do so very stingily here at Quiet Light Brokerage but eCommerceFuel is one of our favorite groups out there. So please do check them out. Anything you'd like to end with Andrew?

Andrew: No. I think that maybe two quick things; one if you want to check out the report directly its eCommerceFuel.com/2019-report that'll link you right to it. And then if you happen to be a podcast listener which I'm guessing you are, we also do a weekly podcast, sometimes twice a week on e-commerce, e-commerce news, store owners, kind of cutting edge just whatever is happening in the e-commerce world and strategy. That comes out weekly as well so if you're interested in that you can check that out [inaudible 00:44:15.2].

Mark: Yeah and you guys also sent out really good emails. I know we talked about email marketing and there's not a lot of people I feel add value to my inbox. I think you guys do a great job of adding value to my inbox. So definitely check out the community, check out the podcast and the report. And once again Andrew thanks for coming on. I look forward to having you on next year for the 2020 State of the Merchant Report.

Andrew: Yeah. Thank you, Mark. I appreciate it. It's always fun to come on and great work with what you guys are doing in the online space with businesses. It's always fun to talk and I appreciate the invite.

Links and Resources:

Andrew's website

State of the Merchant 2019

Andrew's Podcast

In part two of the incredible exit of Mike Jackness's Colorit, we are hearing his first-hand perspective on what the process is like from the side of the seller. Mike honestly and openly goes through the process, from the letter of intent through due diligence, all the way to the handoff and transition. He reveals the humbling moments, the surprises, and things he would do differently.

This episode is for anyone thinking about being on the seller or the buyer side of the acquisition process. Ending your involvement in a business can happen more easily and smoothly if you are in a good position and absolutely prepared no matter what. The takeaway to all business owners is put your business in that position from inception in case of an eventual sale.

Episode Highlights:

• Mike's background and how he found himself in the coloríng business.
• How the due diligence process went and how in many ways it was harder work than running the actual business.
• The things that came up during the process that were surprising and how to approach number discrepancies in due diligence.
• The value of using a professional firm for due diligence.
• Why early preparation is critical.
• The creation and review of the asset purchase agreement and how it went for Mike.
• The small things he relayed to the buyer in order to make the transition smoother.
• Why in-person meetings are very important during the hand-off.
• The importance of doing everything you can to facilitate while still creating limits to your involvement in the process.
• What's next for Mike.

Mark: Mike Nuñez. Yes, Mike if you're listening to this podcast congratulations for sending in the right answer to the movie quote. And which one was it; that was the Boiler Room, right?

Joe: I think so. You expect me to remember. I don't know. We need Chris Moore our content director on here. Come on Chris.

Mark: Hey Chris, we need your show notes for before we actually record these. But I do know that Mike you sent in a correct answer. Thank you for doing that. I don't know the prizes although the next time I see you I'll buy you a drink for sending that in and getting the right answer.

Joe: For people that don't know, why don't we tell who Mike Nuñez is?

Mark: Yeah, Mike Nuñez is an old friend of Quiet Light Brokerage. He is also a buyer with Quiet Light Brokerage and what are we getting out Joe what am I missing?

Joe: Doesn't he run AffiliateManager.com?

Mark: He does run AffiliateManager.com.

Joe: He's huge in the affiliate space so if there's anybody out there with products that are looking for a great affiliate company to connect with look up Mike Nuñez on Linked In and connect with him. He's one of the nicest guys in the country and you'll love working with him and his company.

Mark: You know what this movie quote is going to become, right? All of the show vendors, all of the other vendors out there that want us to make a pitch on the podcast are going to start sending in the right answers to us here on out. So those of you listening whatever the movie quote was send us an email and let us know what that's from. We'll give you a shout out on the podcast. But now let's talk a little bit about today's podcast episode. I'm excited about this. I love the actual stories of selling some of his business. Joe, you've been working with Mike Jackness is on ColorIt.com getting his business sold and today we're continuing the story. We already have one podcast on this where we talked about getting the offer, preparing the business for sale, going through all that, and now we're looking at the other side of it. And that is preparing for the close and doing that due diligence and some of that stuff that gets pretty difficult towards the end of a sale.

Joe: Yeah the 1st podcast was right up until the letter of intent and now we're talking honestly and openly about the process that we had to go through; that Mike really had to go through with his team from the moment you're under a letter of intent all the way through the due diligence, that financial trusted exam if you will, negotiating the asset purchase agreement, meeting the buyers face to face, working with transitioning your virtual assistants over to them, closing, and training and transition after. We go through all of it. Nothing is left out. Mike is honest and humbled and surprised in some cases. I don't mean to plug people but Centurica did the due diligence and Mike—we'll let people listen to it but Mike made a promise to Bryan at Centurica and he said something about this process and his accounting and how it's going to work out and Bryan said yeah okay we'll see and Mike was a little humbled and surprised in the process.

Mark: Well, that's great. Mike is a good guy. We plugged him before. He's been on the podcast now a few times. Let's get over to this because I think anyone that is thinking about selling or even if you're a buyer and you're going through this process, it's so useful to get that perspective of what it's like to go through this process as a seller. Because boy it can be frustrating sometimes, it can be stressful and just getting to the psyche of what's going on there I think is invaluable.

Joe: And not to go on too long but one of the most important things you're going to hear is what Mark and I say all the time but you're not going to hear it from us, you're going to hear it from Mike. He's built, he's bought, he sold, and he's gone through this process most recently as a seller. And there are some things if he could turn back time that he would absolutely do and he would have made more money. But he was at a certain emotional state and life state where he wanted to sell and we made that happen. And we achieved his financial goals but if he could turn back time that would have changed things a little bit. So we're hoping that the lesson that you'll get out of this is planning; planning your exit eventually. If you may wake up one day and decide okay today's the day I need to reach out to Joe or Mark or anybody at Quiet Light and begin that process what will you plan well in advance for that? That's part of the mistake that we talked about with Mike. So that's it, let's go to the podcast.

Joe: Hey folks it's Joe Valley with Quiet Light Brokerage and we have another great episode of the Quiet Light Podcast here with our good friend Michael Jackness. How are you today Mike?

Mike: I'm doing good man.

Joe: It's good to have you back. I know that we've been chatting a lot lately because we just closed a transaction together.

Mike: We did. It's good to be on the other end of it now.

Joe: It is and it's been a process. We're recording this folks on April 18th and we started in mid-December. And we ended up closing the transaction on April 5th. So giving you a little bit of a recap; this is Part 2 of the process of selling Mike's business Color It. Mike those that are just tuning in and didn't hear it the 1st time why don't you give a 60 second background on yourself so they know who you are.

Mike: Yeah. So I always joke that this background story gets longer and longer as I get older but the short version is that I have a background in IT. I'm an entrepreneur by heart and was doing affiliate marketing. I quit my day job in 2004 and I've been out on my own doing various things since then. I got into e-commerce in 2012 when we bought Travelo.com and sold that—had an exit to that in 2015 in January. Four e-commerce brands one of which we just sold through you. And we've been blogging and podcasting about that journey since 2015 at EcomCrew.

Joe: And you're being a little humble there because you really travel all over the world and speak now. Not just with EcomCrew but also on your email marketing campaigns that you do with Klaviyo. So I'm going to boost you up a little bit.

Mike: Thank you.

Joe: You're famous man, I'm humbled just having you on the podcast and to call you my friend I think.

Mike: Inaudible[00:07:06.7] has this show notes that say famous on Amazon I had one that says famous in my own head.

Joe: I'm famous in my house but the least famous according to my family. There you go. Alright, so just a quick recap; again we launched Color It for sale in mid-December against my better judgment but you're influential and you pushed me and we did it anyway. But we try normally to have three to five conference calls in the 1st 30 to 45 days and at least one acceptable offer. We had three or four. We can't remember. We talked about this the other day and I didn't bother looking it up. But we had enough so that we got two offers. We ended up under LOI on Feb 5th, intentionally chose not to close for 60 days so you could move three of the brands out of the seller account into other seller accounts and that was a fun process, right?

Mike: Oh yeah. Lovely.

Joe: And then we ended up closing on April 5th, roughly 60 days later after going under the LOI. So we talked about the process, getting to LOI in the previous recording. Let's talk about what happened afterwards and talk about due diligence. How was your experience in due diligence; how painful was it, how good was it, how easy, all that good stuff?

Mike: It was a lot less enjoyable than receiving the wire.

Joe: Is this a yes or a no that you really worked harder getting the business sold than you did actually operating the business?

Mike: I'd say absolutely. It was a lot of work. It was stressful just because—I kind of strive for perfection and I wanted everything to be exactly what we had communicated in the preliminary process. But Centurica is really good and they found stuff that I didn't even know about my own business which was really frustrating for me. It was a little bit unnerving. I was worried about how that would be perceived if it would—how it would affect the deal. What I realized I guess eventually was that every one of these deals I think that goes through due diligence stuff comes off and we were kind of within that normal boundaries of acceptable tolerances I guess or whatever they would call it and I probably was making [inaudible 00:09:12.1] but for me at the moment that it was happening I was pretty upset.

Joe: Yeah so we had two or three things that came up where the P&L wasn't exactly right; the discretionary earnings wasn't exactly right for the trailing 12 months. And it's funny I had a call this morning, I'm working on launching a listing tomorrow and the owner of that business said well what happens in due diligence if that happens? And he was worried that the whole deal would just fall apart and you start from scratch. That's not normally the case. Normally you just use logic and math and say okay if you're off by $1,000 and your multiple is a 3 time you take $3,000 off the contract price of the business. That's really important when you build that trust that you've built over the last two or three months with the buyers of your business Mike. But in your case we didn't make any adjustment at all even though your numbers were not exactly the same as in discretionary earnings, right?

Mike: Yeah and I think a few things kind of happened and number one as we were going to do diligence and working towards closing our January numbers came out and our February numbers came out and eventually we kind of knew what March was looking like and we were up significantly year over year. So I mean it was getting to be to a point where in some respects I was kind of hoping the deal will fall apart just like be realistic for money.

Joe: Yeah.

Mike: Obviously, that wasn't what I wanted to happen because I didn't want it to go through [inaudible 00:10:37.3] but that certainly probably helps. And I think a little of the trust kind of was established like you said that they knew that there was nothing the fairest going on there or at least they hope that that's what they were thinking. I'm sure that's what they were thinking obviously. And I also think that just based on talking to Bryan over at Centurica like after the whole thing was done it was basically like when a report comes out it's always going to be—there's always something that's kind of found and I just—it's kind of like a home inspection. When you go buy a home there's going to be a home inspection and there's always going to be stuff that that guy finds. Some of the stuff you can try and negotiate for to lower the price of the home but a lot of it you just accept. It's just like there are things that you're going to just go okay well I didn't know that when I signed the agreement to buy this house and put it in Escrow but I want to buy the house nonetheless and here I am and I'm going to just go ahead and still do it. So I think all of those things combined and I just I mean legitimately was willing to walk away. I wasn't willing to sell it for less. Because I feel like the number that we picked in my mind was the least I was willing to sell the business for. I was willing—we had talked about willing to—because we had already started separating our companies and making things better that if we waited another year we would have gotten more money for it. But at the same time, I also had set my mind to sell it. So I mean there was a bunch of things going on there but luckily all kind of worked out in the end.

Joe: Yeah, you were emotionally ready to sell. There's no question about it. I talked to you three times about waiting; separate them all out, wait another year or so, and you definitely were ready.

Mike: It wasn't about the money. I mean it was just a lifestyle adjustment and realizing we had too much going on and leaving some money on the table for this transaction to almost certainly put us in a better situation moving forward. So all and I think we're going to do much better by selling one of these businesses.

Joe: Yeah, and you're going to be able to narrow your focus with the sale. So with regards to Centurica; for those that are considering using them or are fearful that you're under LOI and your buyer is hiring Centurica. I've never had a deal go sideways with Centurica. What they do is they find out like Mike said what the issues are with the business and really what it is, it's a little scary but for the buyer of the business it's really things that can be fixed and it's a path towards future growth and making the business stronger. So I like it when somebody else steps in on a buyer's behalf and really digs into those numbers. It helps the process and instills confidence in everybody that it is a good investment and that nothing's going to come back to you Mike in this situation after the sale if you closed and the buyer found something after the fact. It's better that they find it during due diligence like we did here.

Mike: I think the only reason you really need to be fearful is if you are hiding something and you know it. And these guys will find it. I promise you—I mean they're incredible. And if I ever go buy a business I will absolutely hire them. They are incredible. I almost want to hire them just to tell them to come do an audit on our existing businesses to make sure we'd get things fixed before we go sell it—another piece of it a year or two from now. They're really good.

Joe: It's not a crazy idea preparing in advance for the sale of a business 12 to 18 months out. You know now that that is critical. We've talked about it recently. You got a good value for Color It but I think realistically if the brands had all been separated out and you had clean tax returns, a staff that was delegated just towards Color It, it's possible you would have gotten a higher multiple. And with your January, February growth numbers and December was just killer, there's no doubt that the buyer of your business is really excited and didn't even think about making an adjustment because some of the numbers were off by a little bit. Because the numbers were so high for January and February he knew that he was getting a great business. And he told me personally that he thought that this one is probably the best of the three Amazon FBA businesses that he's bought for me in the last eight months. So we got through due diligence, it was a little painful, a little tough. Centurica helped. We had some trust built early on so we didn't make any adjustments and mostly because of that trust and because of you keeping your foot on the gas in terms of the numbers and the growth of the business. The worst thing you can do folks is once you're under LOI have a bad month or two during due diligence. It scares the buyer. They're making a lifetime investment putting their life savings on the line and they want to see positive numbers, not negative numbers. So we got through it and the next phase sort of when we got most of the way through it was to end up drafting, editing, and signing a 30 to 45 page asset purchase agreement. And that can be kind of scary and overwhelming in itself but the situation was pretty smooth, don't you think Mike?

Mike: Yeah. I mean it was incredible. I expected it to go one way. This is actually funny, I expected due diligence to go one way and it kind of went a different way because I was building to Centurica when I had did the kickoff call that this will be the most accurate—I forgot exactly how I said but I really hear myself on that [inaudible 00:15:57.3] accurate company that have ever gone through diligence with you, you're not going to find anything off here by a penny. He was like yeah we'll see about that. That went one way and then the legal actions in my career and the ones where the other party drops the agreements are usually just an awful experience of their lawyer is dropping the agreement on behalf of their clients and all the things that they would want in a perfect world for their client with complete disregard to what the other party would want to see in that agreement knowing exactly what they want. They already know what the 3rd party is going to want but they don't care about that. They hope that of a hundred things that are in there you only asked to change 50 or something and the other 50 stays in the other party's best interest. So what I got was an agreement and—so I'm not a lawyer and I've been through these a million times and I don't really get emotional about this. I just send it immediately off to my attorney I was like let me know and I was expecting pages of stuff that were going to be really difficult to go back and forth on. And I really hate this part of the negotiation process because you've already signed a deal and now you're negotiating over a bunch of other points that you weren't expecting to have to fight over and there was none of that. Like she just like make sure you fill in the blank for this number and they haven't created this LLC that they're talking about in the agreement and make sure that that's done so it's actually a legal entity before you sign. I mean there was little pebbly stuff like that, there was a couple of small things that had some substance but it made me so happy not to have to go through a tough process. It kept our legal fees down only spending 2,500 bucks reviewing and editing the APA which I was expecting 10 or 20k just from previous experience of having to go back and forth. And it was such a great experience. I actually emailed the buyer afterwards and I was like dude I just want to let you know that I really appreciate this because somebody along the way from your team said do not send an agreement off to Jackness and Terran that's just lopsided. Like, make this a middle of the road agreement from day one. Like that was clearly someone communicated that because otherwise, I think it would have been the other way.

Joe: Yeah. This is the 4th transaction I've done with Matt and his attorneys; the 1st one years ago and the last three within the last eight months. And every one of those contracts had been fair and balanced and turned around very quickly. And we actually have an attorney referral list now where we just want people to have good attorneys because we've had situations where people have awful attorneys. So we started gathering a list and we put this firm Jones and [inaudible 00:18:35.7]. if anybody is working on an asset purchase agreement and doing it directly with another buyer or seller and you want a referral to an attorney, shoot me an email at joe@quietlightbrokerage and I'll be happy to send it off to you; I'm happy to do that. So that's good, we got through that APA and we actually signed it. It's interesting because we signed it on the 14th of March and normally when we sign it money goes into Escrow and then we're right off to closing. But in this case, we waited almost another three weeks. So it could have been even longer.

Mike: It did [inaudible 00:19:16.7] Escrow. You might not recall but there was like a $25,000 deposit.

Joe: Yeah because of the request—actually it was necessary because you moving things out of the seller account. It was a nonrefundable $25,000 earnest money that was put in Escrow after signing the asset purchase agreement. I think it was nonrefundable. But that went to the attorney Escrow agreement and then the balance was sent in just prior to closing. It all worked out very well. We ended up closing on March 5th. But prior to that, we had to have some calls and some meetings and doing some planning but there were times when you were a little nervous because there wasn't a whole lot of planning and a whole lot of conversations going on.

Mike: Yeah, and it was from my point of view like I wasn't worried about me because like I knew the money was going to be there. But I'm the kind of guy as you know that I'm looking out for the other guy. They just spent a lot of money, I want to make sure it's a good experience for them. And I was just like guys you're buying this business in a couple of days and we haven't talked about changing passwords and billing and things are going to just start breaking if you aren't paying attention to them and the team needs kind of a handoff to know exactly where to look for things etcetera. So it was a little bit weird to me that it didn't seem to be—like they were the kind of guys like everything was like T's crossed I's dotted, really highly motivated and passionate about everything that they're doing but that didn't seem to be as big of a concern. And I think we were talking a little bit—I think it was a combination of they just purchased another business like right before that.

Joe: Yeah.

Mike: I was also coming to visit them for two days like a couple of days after closing to be with them two, four days in person which I think probably they were just mostly waiting for that to happen. And I think the last part is that they just basically trusted me by that point that I was a good guy and wasn't going to rake them over the coals. But there were definitely some moments where I just like I—if I wanted to like really screw these guys [inaudible 00:21:09.4] kind of I was like thinking that and more just from the perspective of I think they probably should just be more careful because not everyone is a good person and I've seen scribbly stuff happen.

Joe: And remember you didn't read every line of the purchase agreement. I'm sure whatever the potential screwing was or could have been was covered there.

Mike: There's probably, I did not read the agreement. My lawyer read it but yeah I'm sure there was some legal stuff on there that had I screwed them—I mean again that wasn't even like—I was [inaudible 00:21:39.9] that I was just more—I'm worried for them.

Joe: Yeah.

Mike: The biggest was that if a wire did come in and we still had that lump in the Amazon accounts and—who knows someone could just like catch a fly out of the country and really see it later and it was a little bit scary for me on their behalf. I just worry about stuff like that.

Joe: Yeah. Well, I think that the last minute stuff was due to they had just closed one so they were busy with that and they also knew what was coming. And they are so busy they have so little capacity for anything about what's in front of them that they were like we'll get to that when it's necessary and it's necessary just after closing; after the money is wired. The other thing you mention was that you went to meet with them in person. You happened to be going on a road trip and going to be in their neighborhood just after closing. So that worked out perfectly.

Mike: Yeah.

Joe: I always recommend to people, to buyers in particular regardless of the size of the transaction that if you can; if there's any possible way, you get in a car, you get on a plane and you go visit your seller during due diligence. Once you're under a letter of intent get in front of them; have lunch with them, have dinner, get a tour. You don't want to let the staff know that the business is forsold, the large part until the APA is signed. But you could go in as a consultant or at the very least meet them so that you can gain that level of trust because it makes a huge difference. The worst situation I've ever had—I actually had a guy from San Diego where you're from. Early on when I 1st started back in 2012, he bought a business from me that was $35,000 and there was about $40,000 worth of inventory. He flew from San Diego in January to Minnesota and he didn't have a winter coat and I was trying to talk to him because I grew up in Min and I'm like you really—you don't know what 10 degrees is and with the wind chill factor of 20 below but it worked out. And he said to me later, he said look if I hadn't met them in person and learned everything I learned in due diligence I would have walked away because due diligence was tough when you've got a business that's $35,000 and there's $40,000 worth of inventory. But he met them in person and that made a difference. He still owns it today. I saw him at the Prosper Show a few years ago. So definitely in person meetings are really, really important. So let's talk now about those two days; in most transactions, there's a transition period, a training period that is part of the purchase price. The standard asset purchase agreement says up to 40 hours over the 1st 90 days after closing. I don't think you're going to use 40 hours or they're going to use 40 hours from you but you put in a couple of very long days right after closing, right?

Mike: Yeah. I mean I don't know that it was required and I committed to be there whatever but I'm again that type of guy and I want to see them have success with this business; bottom line. And part of it is just treating others like I like to be treated. And I have been in transactions before when I bought Ice Wraps on the wire hit the guy ghosted me. It was like I literally never heard from him again.

Joe: That's why we do hold backs people.

Mike: Yeah but I mean it was a $50,000 purchase. It was actually the exact same situation as going—I went to Michigan, it was also in January. I also didn't have a winter coat. And I was also [inaudible 00:25:13.8] I thought you're talking about me for a second. But the employees did help me with the transition. The owner just was gone. And there were a couple of things that I could have used his help on that would have just taken him 30 seconds to answer. So again I just would never want to be that guy. And there is a lot—I mean a lot of things are going on in our business that I probably needed to hand off you realize it is all complicated; they are but it seems so easy to you because you learned them one day at a time. And when you're trying to take five years of something that you learned one day at a time that for me they're like sending orders into Amazon or you have something come from our 3PL or coming from China go to a 3PL and go to Amazon or deal with the customer service issue or do Facebook Ads, I mean all the different pieces of the business it all just seems so 2nd nature to me. It's no different than breathing. But when you try to start explaining to somebody you realize like just how much there is. And so I actually made a list of like 40 items as I just started thinking of them over and above what they were asking for or things that I thought that I needed to explain to them. And I just I wanted to feel like when I left there that I felt good about myself that they had everything from me to make sure that they were going to be successful. Now what they do with things from here on out isn't really—I look at that and that's not my problem. I mean I've done everything I can it's up to them now if they want to end to the ground there's nothing I can really do about that. I'd rather that they'll make a billion dollars with it. I'd be much happier with that result but I want to tell they felt good about me. Like I gave them every tool possible to be successful and I'm still there for them. They still have been in contact with me but they've been really good about it and respectful. And I've been spending 10 to 15 minutes a day maybe since I left there helping them which I think is completely reasonable. And I see the light at the end of the tunnel in that within two to three weeks I'll probably never hear from them again other than to say hi and maybe have a drink some day because they're really awesome guys. I really like them and I'd love to hang out with them just on a personal level next time we're in the same city. But they're obviously not going to take advantage. That's when I would get upset is like if the other parties are taking advantage and like asking you to continue to do stuff and spend eight hours a day helping them and just taking advantage. And they're not doing that and again I just want to make sure that I do the best that I could and I can feel good about myself with the hand off. And that's kind of how things transpired.

Joe: Yeah. And that's why as far as the taking advantage that's why it's called transition and training. It's not operating the business.

Mike: Yeah.

Joe: So we've always got a certain period up to and over, the reality is that even after three months they may send you a note, a Skype message, a text, an email with a quick question that you're going to respond to. It happens. There's just no way that you can pack everything that's in your head inside of a two day training period. Because they're going to come up against something that may not happen for four months and it's new to them and it wasn't covered in training. It's just the nature of all of the pieces and parts. But at the same time, it's not overly complicated. These businesses are fairly easy to transfer and the training is fairly easy. It's just running on its own now and it's the key thing that I always tell people is especially people that are leaving the corporate world and are used to working 60 hours a week and they take over a business like yours that might take 15 hours a week on a high side that just put in 30 but 15 working in 15 observing and training and don't fix anything that's not broken. I see that happen too often. People come from the corporate world and they're just fixers; they want to fix things even if it's not broken so they do break it. So that's the big piece that I try to have them not do which is really important. Okay, so we're doing a video here. Most people listen to audio but you've got the EcomCrew shirt on so I want to talk about that a little bit. I want to know; we've closed, the money is in the bank, you've dropped one of four brands so you've got a little bit more free time. Not a lot, I know you're crazy busy but what's next for Mike Jackness?

Mike: Well immediately following as just I have the EcomCrew shirt on is because we're doing an EcomCrew webinar right after this. That's what's immediately next but I think you're talking bigger picture. I'm trying to get—I have some life goals, I do a podcast every year about yearly goals and a couple of big themes are less is more. I think that would be just trying to do too much. We've been successful in spite of ourselves, in spite of running at full scene. I'm concerned about burning out because I've been there before and I can kind of feel that coming to [inaudible 00:30:01.6]. So before running off the rails and feeling like I'm completely burned out, I wanted to make some changes. And one of those things was selling one of those businesses to make sure that the burnout thing doesn't happen. And overall like the thing that I really enjoy doing is the teaching and education part with EcomCrew. It's just been awesome. I talk about how I feel like I have enough in life. I mean it's always nice to make more money. I'm not going to be one of those guys that's like I'm not going to take any money when I have enough to make money but there's different ways to make money. And one of the things that have been really cool is just to help others while doing that. It might be a situation where I might make 10,000 instead of $20,000 but somebody else might make $100,000 so it's like a net win for the role and it's still good for me and it's still in an environment where I get way more enjoyment out of it and it's a lot better than coming to the office every day and just kind of grinding which is not really for me. That was the reason why I left my day job in 2004. So those are kind of some big picture things that we're working on. I also want to get into an e-commerce business I have just a personal interest in. I think that that's really important after just being in e-commerce and business stuff over a long period of time. The things that you are personally interested and passionate about are just way easier. And Color It was an amazing business, amazing brand for a whole bunch of reasons that we don't time to get into here but it's just not something that I'm personally into. And the same thing with Ice Wraps and Tech Miner and Water Baby, those are just things that they make money. I'm an entrepreneur at heart, I think a really good business person at heart like I am very strappy. I will figure out a way to make money doing just about anything but it's not just about that. It's doing something that I actually have an interest in and enjoy which I think will be a lot better. So those are some big picture things for me.

Joe: But I think a lot of that estranged and left comes with age and experience; hustled in the past and you did what you had to do and you got ahead and you're giving back. For those that have not listened to EcomCrew, the podcast, I highly advise it. We talk about it often here on the podcast for people that have just purchased businesses or even those that have them and are trying to expand their channels either to Amazon or email marketing or anything like that. You got to tune in and listen to Mike and Dave on EcomCrew. They've got a great series, Under the Hood, we're going to try to do something like that on valuations here at Quiet Light someday but Mike is one of those guys that has been there, done it, and now he's helping. He's not teaching because he had nothing else to do. He's teaching because he's been very, very successful in sharing his experience with others. So I appreciate that. Mike, any last thoughts, any last words in terms of what you'd say to people that are thinking about selling in the future and how to prepare?

Mike: Specifically, on thinking about selling and how to prepare, the 1st thing I would say is that everything comes to an end at some point. So even if you're like I'm never going to sell my business that's complete B.S. because everything comes to an end. And what I've learned in life, entrepreneurial life is a lot of times it sneaks up on you. You think you're in a good spotting and you're happy with what you're doing but there's a lot of things that happen in business that are irritating and wear on you. And eventually one day you might just throw your hands up and you'll be like I've had enough of this. And if you're in a better spot to sell and you're prepared to sell all along the way that can happen a lot easier and smoother than if you haven't prepared. And you'll also get way more money for your business if you have prepared. So it's something that you should be thinking about at all times. It will probably make you a better business person and make your existing business better anyway because if you're always thinking about it from the perception of I might need to sell this business any time it will force you to have better procedures in place. It will force you to be looking at your accounting every month and scrutinizing all your expenses. Making sure that your net profit is always as high as possible. There's a lot of [inaudible 00:34:09.9] benefits having that thought process. And even if you "never do sell" it will probably put you in a better position no matter what. So if there are things that I wish I'd—if I could go—if you try and go back and change things and I was thinking a lot about this; our plan was to sell the whole thing as like a big conglomerate originally. But things changed and so I wasn't—I had been marching towards to sell everything as a conglomerate goal, everything was together and I thought one day e when I was done with e-commerce I would just be done with e-commerce. But that's not how it worked out. What ended up happening was we got too big for what I was comfortable with in terms of risk to reward and I want to take some money off the table and I still immensely love e-commerce and I want to be involved in e-commerce. So I could have better prepared ourselves for that by having multiple LLC's for each brand that maybe one LLC owned each one of those and it still would have been that conglomerate thing and structured in a better way. You can't foresee the future all the time but you can definitely plan—put yourself in a better position when the unexpected comes.

Joe: I don't know if I could have said it any better than that so we're just going to wrap this up, Mike.

Mike: [inaudible 00:35:20.4]

Joe: It's about a complete pleasure working with you. I'm glad to have been your broker in helping you achieve these goals and maybe another year or two we'll do it with the next one.

Mike: I'm looking forward to it.

Joe: Alright, thanks, Mike.

Links and Resources:

ColorIt.com

MIke's Podcast

Email Mike

Centurica

A great deal of the businesses we sell at Quiet Light are founded by entrepreneurs looking for the rush of finding the next thing. Sometimes they look to sell because of burnout and sometimes it's just boredom. Today's guest's business is designed to help entrepreneurs really question the goal of the businesses they run.

Jason Zook earned social media fame and experienced that burnout while on his first entrepreneurial ride after walking away from his day job. For five years Jason ran IWearYourShirt, creating thousands of videos, photos, posts on social media, and had countless media outlets talking about IWYS during the early days of social media marketing. At some point, Jason realized he had almost created a self-made work prison for himself. He and his creative wife started their company to guide owners towards financial freedom and a business they actually want to work on. Jason's focus is now on working to live rather than living to work. He strives for entrepreneurship with a healthy balance.

Episode Highlights:

• The backstory on Jason's current company, Wandering Aimfully.
• Why the t-shirt business had to end.
• The things Jason learned from that business and his subsequent years of starting and growing companies.
• How Jason and his wife formulated the idea for the business.
• The importance of setting a mark and working towards it.
• What the "enough" number means to Jason and his wife.
• How to create the balance between getting ahead and falling behind.
• How that balance applies to the business creep that can often take over work-life balance.
• Ways Wandering Aimfully helps people build their business impactfully based on what they need,
• How Jason uses challenges to create habits.

Joe: Most of the businesses that we sell Mark … well maybe not most but a great deal of them are businesses where someone bootstrapped it, put all their energies into it, got it up to a certain level, and then looked around and thought "man, this is kind of work now I'm not loving this day to day anymore; I'm not happy with this challenge and I'm getting burnt out". It happened to me. I had a cushy gig, I was working 20 hours a week, easy business, recurring revenue, and I looked around and said this isn't fulfilling me, I'm burnt out I need to move on. A lot of buyers that are from the corporate world don't understand that. Those people that are in the entrepreneurial world know that they need that new challenge, that exciting challenge. And as I understand it you had Jason Zook on the podcast; a husband and wife team actually and they talked about working to live not living to work and trying to overcome that burnout challenge.

Mark: Yeah, Jason got completely burnt out with one of his 1st businesses and one of his 1st businesses; really simple concept, he would wear a t- shirt that was a sponsor. It would be their company on the t-shirt and he would wear a t- shirt every single day and put up a YouTube video of that and the prices increased every single day for that sponsorship. And so as he put it he said I was doing daily videos before Casey Neistat made that cool to publish daily videos on YouTube. He said it was great initially and he was making money by just wearing t-shirts and having people follow him around with cameras. But then this organization grew and it grew more and more and his whole life every single day was being documented and he built this prison. And I think as entrepreneurs a lot of us can relate with this idea that you build prisons sometimes for yourselves with the businesses that we've built. And so he naturally got completely burned out on that and now his whole focus and life as entrepreneurship but with a healthy balance in that life and understanding what are the real goals of your life. What do you really need and why are you doing what you're doing? And I think these are really important lessons for all of us just to keep in mind and have as a focus when we're pushing that entrepreneurialism envelope like why are we pushing growth, why are we adding this new feature to our business, and really understand what is our goal as an entrepreneur? Maybe you want to be a billionaire and if that's your goal all right then go for it but I think most of us get into this entrepreneurship game for the lifestyle. We get into it for the freedom. We get into it to be able to do what we want to do by our own rules. So are we actually doing that? Are you doing that? And is what you're doing fulfilling you today? So this whole podcast … Jason is somebody that I did not know before this podcast. He and I had never talked before and … just a fascinating guy, an absolutely magnetic personality so I'm excited to share this interview with everyone today.

Joe: I don't think we can have enough people on the podcast talking about work life balance. We had Ezra Firestone; Ezra's got a staff of 25 or 30 VA's working all over the world and his work life balance is his primary focus. He and his wife they've got a certain lifestyle that they want to live and he is growing the business but at the same time making sure everybody within the business understands that work life balance. So I'm excited to hear what Jason has to say, it's always interesting to hear somebodies approach in what they do on a day to day basis. Let's go right to it.

Mark: Jason, I'm super excited to have you on the podcast. Thank you for agreeing to come on here based off a completely cold and random e-mail that I sent to you.

Jason: It was a good cold and random e-mail. As someone who has sent thousands of cold and random e-mails in my time as an entrepreneur, it was a good one. You didn't just kind of like lay out exactly what you wanted, you were kind, you were nice, you really presented yourself well and I was like yeah I'll say yes to this interview. I have no idea who you are, we're meeting for the 1st time in this conversation which I think is fun.

Mark: Yeah absolutely and I'll tell you why I wanted to have you on the podcast. I think I said it in an intro e-mail that I sent to you. But on your website, you and your wife have a phrase on there and it's actually one of the core values that I consider my company Quiet Light Brokerage to have and that is that we work so that we can live we don't live so that we can work. This idea that hey we're entrepreneurs, we get obsessed, we love the grind, we like that sort of thing but at a certain point it's got to have something else beyond just the work itself; right?

Jason: Yeah.

Mark: I would love to get your story, have you share your story real quick with the listeners as to how you kind of came about this with Wandering Aimfully and this new mission that you and your wife have.

Jason: Yeah sure. My entrepreneurial journey actually started kind of way late in life for a lot of people who are entrepreneurs like had lemonade stands and they like went door to door and did all those things and started businesses super early; I didn't. I started my 1st business when I was 27 on a whim after leaving a full time job that I in all essence liked it just was a very boring job and I didn't see a lot of potential for myself there. And I really felt this drive and this pull to do something better and something else. I started my own design company. It was just two people and from there I had this kind of crazy idea to get paid to wear t-shirts for a living for no reason whatsoever other than I just thought social media is kind of growing. This was 2008, 2009 I just … I don't know there was just something about it that seemed interesting to me and it struck me one day when I was literally standing in my closet looking at all these clothes that I had paid brands to own and then walk around and kind of schlep and promote. I was like wait why am I doing this? This is so weird. Could someone just pay me to wear their shirt? So that idea did not take off. I launched a website called iwearyourshirt.com five people showed up on the 1st day. I think three of them were my grandmother like refreshing the page, no joke. And then I really had to start doing the entrepreneurial kind of hustle and sprint that we all do to get things started. I was e-mailing friends and family and I was getting on Twitter and jumping in conversations back when Twitter wasn't just a barrage of political nightmare that it is now and that's not to say there's not some still good stuff on Twitter but this was 2008 so it's very different; a very small community. And yeah that idea just kind of took off on its own after a lot of hard work putting in a daily YouTube video. So I recorded 889 videos straight every single day before vlogging was a thing before Casey Neistat was recording videos and we were all watching them and loving them all I was making really terrible videos every day. But yeah that led into a couple of different ventures along the way. I created a software company to help people build and sell online courses because I wanted to build and sell online courses I just wasn't a good one at the time, a couple of other little random things and then yeah just a couple of weird different changes and ebbs and flows. My wife actually worked for my I Wear Your Shirt business and when that had to shut down in 2013 after 5 years she was kind of left with like I don't wanna go back to the nine to five world, I'm going to start my own business as well and so she started a business. So we kind of worked like 12 feet from each other but we always chatted and then we kind of came back together this past year on this Wandering Aimfully project.

Mark: So why did the t-shirt business has to end?

Jason: So many factors that we can dive into, I'll lay down on the couch and we can talk about them all. Truthfully it was my 1st business and I think so many people can resonate when you start your 1st business you don't know what you don't know. And I didn't know about managing people, I didn't know about managing money, the pricing scheme of I Wear Your Shirt was very poorly designed for paying people at a consistent salary. So the 1st year it was just myself and it was a dollar on the 1st day, $2 in the 2nd day, $3 in the 3rd day and so that pricing scheme is cool because it's so low barrier entry in the beginning and towards the end of the year once you build momentum it makes sense and it adds up. It made $66,795 in the 1st year which is really cool. But when you have five employees as I grew the company too because I thought I had to scale up, I thought I had to grow, I'm reading and watching all of the things that we're all reading and watching and I'm thinking that's what I have to do. I ended up having $30,000 in salary in January when my business only made $800. That doesn't work out well and so it was just a lot of those things where I just was so new to things; we had billables, we were printing all of the t-shirts through an outsourced printing service. I didn't know about just like paying invoices and all those things and so I got very back on bills and I actually built up a $100,000 in debt not overnight but in about a year and a half and it just it was so crazy to me because Mark it went from I was making almost $100,000 with literally no expenses, literally getting e-mails from PayPal like "hey there's a $100,000 in your PayPal account what's going on" to people e-mailing me and going "hey what's going on you can't pay your bills or you're 30 days late in your bills". And so eventually I just saw the writing on the wall and I was just like this isn't sustainable. I tried this thing, it kind of grabbed its moment in time in social media and the landscape of it and I just wanted to move on to other things plus I really overworked myself every single day running the business, wearing a shirt, managing people, doing all of the marketing and sales and interviews and things. It was just time at the end of five years to move on.

Mark: Five years is a long time to be wearing other people's shirts.

Jason: And I'm still wearing other people's shirts if you think about it I'm just not talking about them at all. And almost none of them have a brand name on them because I'm just so burnt out from that. But yeah I actually don't regret any of it. I think I learned so many unbelievably important valuable lessons that I continue to use to this day in everything that I do. So while it ended not on a wonderful note and I don't feel like I have like this crazy awesome success story I also have a really relatable story that so many business owners can kind of stand behind me or stand with me and go "yeah my 1st business didn't do well either or my 2nd, or 3rd, or 4th it fizzled out or I didn't manage it properly" and you just learn from those experiences and you kind of take those with you and you kind of take your lumps and move forward.

Mark: Yeah you know I would disagree I actually think the idea that you were able to take something as simple as wearing a t-shirt and having somebody paying for that and turning that into something that actually generated revenue is pretty remarkable. Now obviously is it sustainable, eventually, you're going to run into the problem that you ran into which is I don't want to wear your shirt anymore and I don't want to be on TV … have a video done every day and everything else that you ran into. You said something in there in that story that you were reading and listening to what everybody else was reading and listening to, there's a sort of like momentum that's out there in the business community where there is this almost like a psych guy stuff here's what you should be doing and it's all towards drive, drive, drive, grind, grow, expand, and all this sort of stuff. What are some of the things you've learned over the years with all the different ventures that you've been in about listening to that or not listening to it?

Jason: The 1st one is more money more problems and as silly and as dumb as that sounds it's true. I mean it's just I don't know any business owners that have taken their business from one level to another level whatever that means and not encountered so much more work, so much more stress, so much more all of the things. And I saw that with myself like in that 1st year of I Wear Your Shirt I was making almost $100,000 because I had some other sponsorship stuff in there. There was literally almost no stress. I mean the daily creativity and all the things I had to do was a lot of work but in the 3rd year of I Wear Your Shirt when I had five employees, we had five sponsors per day, we made almost $600,000 that year; I was so much stressed. It was a nightmare almost. And I'll tell you I made $30,000 that year. I got paid the least as the person who was doing the most. And I think so many people can relate to that and so I just saw all of these things that I was latching onto of like I wanted a million dollar business what does that mean? I wanted this big house, why? I don't need a big house, I actually like having a small place where I know where everything is and I don't have a lot of stuff. And so I really just started to look at a lot of these different values that I was buying into or believing into especially the ones that society puts pressure on you and when you read Entrepreneur.com, or Business Insider, or Forbes, or whatever you're reading we all read these stories of millions and billions and all this stuff. It's like where are the people who are just making $100,000 or a couple $100,000 or $50,000 that are super happy? And it's because those stories don't sell. Those headlines don't get clicked and I really just started to reevaluate all these decisions and it was through a lot of conversations with my wife and we just kept saying this phrase what is it all for? Like what is all of the work for, what is all of the time for, what is all the energy being put into this for if at the end of a day or the end of a week or a month or a year you're so tired and you don't enjoy the life you've created? Why are we doing that? I should just go get a nine to five job at Target and clock in and clock out and leave and that's it like I don't even think about it. And so I do think there's just a lot of misnomers that go on with this like buying into up into the right mentality and you should always be growing and social media landscape can change so you got to grab all the Facebook advertising stuff you can do. It's like no you don't have to do that. You build the business around the life that you want and you really figure out what that means to you and I think that's so personal and subjective to everybody that's starting a business.

Mark: At what moment of your life did you really start to formulate that when you and your wife were thinking what are the values that we actually want to have? Because look I agree with you 100%, this idea of I want a million dollar business and once I get a million dollar business I want a 10 million dollar business. When I talk to some of our clients, some of the people that are preparing to sell and I ask them what are your goals, why are you thinking about selling? Because one of the things that I try and impress especially on sellers … I'll tell you a quick story here; the 1st client that I worked with, a good friend of mine he had a company and he came in and said "Hey would you help me sell my business?" Well this is how Quiet Light Brokerage started and I went through the process, we got it sold. I won't say exactly for how much but you know what he was in financial trouble just a couple of years later. He gave up a lifestyle business for a big pile of cash today thinking this is going to set me free only to find out that he was back in the grind that he was in before. And so I'm curious from your standpoint what was it where you started to question that up until right mentality and same maybe it's on up into the right maybe it's whatever is right in front of me today?

Jason: Yeah it's funny I get chills because I think back to the exact moment. I was in Fargo, North Dakota speaking at a very small conference called Misfit Con; they don't even do it anymore. And this is like literally 120 people and I was a speaker. No one knew who the speakers were so it's just a group of us sitting in this really cool yoga studio actually kind of converted into this space. A guy stepped on stage and he had well-coiffed hair and he had skinny jeans and he had really nice boots and I'm like this guy's going to tell me all the secrets that I need to know to succeed. And he started telling the story and it was eerily similar to mine of trying to grow, being focused on the money, the big house, the things, the stuff and I come to find out that was Joshua Fields Millburn of The Minimalists and his story was so akin to mine. And then when he started talking about these specific values and these specific things and really questioning all of the stuff that we buy into both societal and personal and these things it really hit me. It hit me hard sitting there and I remember sitting with my wife at the time just looking at her and going like uh-oh we got to rethink everything. And I think I spoke like two or three spaces after him and I just remember spilling my guts about how everything wasn't perfect at the time for my I Wear Your Shirt business and yet I was there to talk about this is a business that was supposedly doing so well. And that flight home after that conference we basically sat down and were just like what do we actually need to live? What do we want our lives to look like? Then those questions are so big and they're so heavy and they're scary because you tend to find yourself thinking well if I'm going to make a decision that's the decision forever. That's just not true. It can be a decision for the next three months, six months, a year, two years, five years, whatever it is and we've changed so much in that time since that conversation; that was 2012, 2013 and it's just been really big for us too at every turn and every opportunity where we can do more or we can sell more or make more is to ask ourselves hold on what is this going to add to our plate. And just like your story with the client that you worked with I find that question to be so interesting to me, I was like if I sell a business or anything I'm a part of, like I have a software company, the online course business, like if I sold that business and I made X amount of money from it what would I do with that time? I like working on that business. I actually enjoy it and I want to invest in it and so if I just sold it for a small chunk of cash which is a sizable chunk of cash, in a long term it's not really that big of a chunk of cash I'm going to have to start over. And I think we see that with so many people and you suppose this way more than I do but so many people sell a business that they actually enjoyed working on only to then find themselves a couple of months or years later bored out of their minds wishing they had something that fulfilled them to work on every day. And that for me is kind of where this comes from too of like I want to make enough money that we don't have to think about money and truthfully we're not there yet. We don't make enough money every month. We were just like we don't care about money but we've set what mark looks like and we're working toward that mark. We call that our enough number and once we hit that number we're just going to stop trying to make money. And you are going to have to fill in gaps [inaudible 00:08:45.1] we have a lot of monthly recurring business stuff. And so it's always going to be a game to just kind of stay around that enough number but I love the work that I'm doing so I'm happy to do that.

Mark: How would you balance out the difference between … I think there's two motivations for working hard, right? One is to get ahead the other one is to not fall behind.

Jason: Yeah.

Mark: Because oftentimes in business I've seen it some of our clients that come to us with distressed businesses where they got to that enough number or probably more than enough and then they're like I made it and then they relaxed and then a year later they're thinking oh my gosh my business just completely fell apart underneath me. How would you approach that in your own life when you get to that stage of having enough to make sure that you're also not necessarily falling behind?

Jason: Yeah I think it really depends on your lifestyle and I think lifestyle creep is such an interesting idea that we all run into and just like you started saying earlier it's like well you create a million dollar business and then you want to make a 10 million dollar business or even just a two million dollar business and the reason that that tends to happen is not because you need that money, you don't need the money, it's that you go oh well now I can afford this and so now I'm going to … I need more money to kind of balance that out. And so I think for Caroline and myself, my wife, we really just started to try and define what are the things that we love and want in life and if we don't have those now what does it actually take to get those things? And to really put a price tag on those and then to question those things and to go … for one thing for us has been looking at buying or building a dream home and for most people, that's in like the millions of dollars. For us, I think we could actually do it for a couple hundred thousand dollars. Like we just want a 1200 square foot cool modern pretty fab place and we keep going through the effort of that and just going you know what though the cash that it would take up from for it, the time and stress to deal with everybody building all the things right now in our lives it just doesn't fit. And it may be something we do down the road but it just is not … I don't want to creep into that and have that completely change our life. So to answer your question I really think it's about checking in constantly with the things that matter to you and then really questioning every single one of those things and just going like do I need more money to do this or do I just need to change something in my life or change something in the way that I operate because I kind of … I tend to find for myself at least like flexibility and control of my time is the number one thing I want. Of course, I want more money in the bank but if I can make a little bit less money and have a little bit more time because I'm not working to make more money I'm happier because I can then choose my schedule every single day of my life. I don't have to give up and sacrifice things at the whim of making money and that to me becomes a really important discussion to constantly be having with yourself and thinking about. Because just like you said with that client you can reach your enough number and then just fall back and go okay I'm good like I don't have to do anything anymore and it's like yeah but that's not how business works. You just don't get to a finish line and then you're done and you won the race. You kind of have to stay in the race at a certain point and you find that pace that you can kind of go at that makes sense with you.

Mark: Yeah I think something that's interesting with business as well because you talk about lifestyle creep and that's obviously a problem. I think anybody can relate with that but there's also business lifestyle creep that I've found where when you start up a new business some of it … a lot of it is bootstrapping, you're going out there and you're figuring out how am I going to make this business work with whatever little money I have and then you get that client they pay you less money and like awesome I can now pay for ads. It how you start paying for ads, you have an ad budget and then you hire a few employees and now have those employee … the next thing you know your monthly budget is ramping up and you have the added stress of I got to keep layering on more and more revenue to be able to cover this monthly budget as well. I think it's an interesting concept to say core value is both for the business core value is also for yourself and keep reminding yourself of those core values in order to stay true to that and have a balanced life. That's what you question, just kind of riffing on what you're saying there.

Jason: No and I do think it's a really valid one because we've thought about that. My wife and I, we live and work at home so where we would have a dining room table we have our desks and it's been that way for the past six years, five years something like that. And for a lot of people that would probably be the worst thing ever. They'd be like oh I don't want to look at my work I want to be completely separate so I need an office or I need a studio or whatever. And so I do think there are some decisions you could make for your business being separate from your life if that really matters to you. For us we run very creative businesses, we love the community that we built so I don't hate my e-mail inbox. I don't loathe looking at these things so for us it is such a blend and lifestyle career business creep for us would potentially be like oh we want like a really cool office base like we've talked about this before. And it's like yeah but we have that in our home it's just not a full dedicated space and we don't actually need that. So it's continuing to come back to that and then honestly I think a big part of it too is not watching all of the videos and reading all the stories of the cool office spaces. Because then you just get stuck in that mode of like oh yeah but I really want a ping pong table and the full living wall and it's like I don't need that. That's just a cool thing and I can appreciate someone else having that.

Mark: I do want to nap pad. I'm just going to say it like I want a nap pad in my office because that would be awesome. I've got a glass door you can actually see it. If you're listening in your car you can't see it of course but I have a glass door behind me so I can't really take naps in my office. Let's talk a little bit about your community. I love what you guys are doing with the community over at WanderingAimfully.com. Tell me a little bit about it and who it's targeted towards and what the whole purpose of this is.

Jason: Yeah I think it's a really good question of who it's targeted toward because when we started to blend Caroline and mines two businesses together in March of 2018 … and actually the conversation started many months before that. We weren't sure who to target because her business was targeted to soulful creatives which is kind of general in a way and my business was targeted to business owners who just want to get better at taking action. Again very general audience it's not like stay home moms who love to cook vegan meals. It's like it's not as focused as it could be. And so when we started Wandering Aimfully it was very generic of like independent creative business owners and that's designers, musicians, artists, [inaudible 00:24:57.5] and we really found that it was tough to get people to identify of like hey I'm raising my hand I fit within Wandering Aimfully. They kind of felt like they did but it just wasn't kind of niche enough if you will. And so in the past couple of months we really decided to hone in further on okay who have we attracted over the years that we've made the most impact for? And what we found is that that's service based business owners or like client based business owners; so that is your designers, that's your developers, that's your coaches, that's people who have clients and that they want to move away from selling their time one on one to building digital product businesses. So it's having online courses, books, workshops, membership communities of their own whatever that is. And we went back to the root of what did we do when we were getting started and that's exactly what we did. We were service based business owners and we wanted to stop trading our time for money and we want to try and reach more people and make more of an impact based on what we had learned and experienced. And so now that's essentially who Wandering Aimfully is for and there are some fringe benefits to people who are not those people but if you run a service business and you want to transition into selling digital products we're the perfect community for you because we ourselves have had that exact experience. We know exactly how to help you. We built now a six months program that helps people really do that without burning out because we just decided the people need to slow the hell down and not try and transition their entire business in 24 to 48 hours or a couple of weeks. And it's been really interesting to shift the focus on this is exactly who we are for and it's a smaller audience and you have people who self-identify much faster than we did before where people are like I don't know if it's right for me it's like now they know that it's right for them and then for everybody else they can still kind of try and figure out if it's right for them but we can now more clearly identify.

Mark: That's pretty cool. I've kind of poked around through your website and you guys have all sorts of prepackaged courses and checklists and everything else. One thing I love about this and I can relate with buyers who are acquiring a new business or anyone growing a business as well you get into something and there's a sense of I've got to be doing all the things all right now. I got to have my Facebook marketing strategy, do some CRO, get an Instagram account going because it doesn't have that and it's this long list of things and you're going to just kill yourself in trying to do that. What you guys have through this community, I saw you have a bunch of checklists and action plans for some pretty normal things that a lot of different companies are going to have to deal with as well. And it seems like the entire goal and correct me if I'm wrong but the entire goal is just that breaking up these projects into bite sized pieces.

Jason: Yeah absolutely and we just want to help people navigate. Like you said when someone is running a business or starting a business or making that transition from clients to products there's a lot that can be done and really what we try and do because it's what we've done for ourselves is to identify what do you need to do. Like what is actually going to make an impact? Because for so many people a Facebook ad campaign or an Instagram account is not at all what they should be focusing on. What they should be focusing on is creating some type of really valuable content that can be searched for on the internet because Google is still the number one place that people go on the internet and that is not going to change for quite a while. And so we've just seen through a lot of experience that people want the shiny new and fancy and we've been there as well, we've been one of those things too but you find that they actually don't make that big of an impact on your business and it's a lot of time spent without a lot of return. And listen I'm all for branding, I'm all for hitting the word out about your business and going where people's attention is but I think that there's a lot to be said for having a good foundation for your business, making sure that your ducks are in a row and so much and you probably see this so often is as business owners a lot of times we don't even know the basics of expenses and cash flow and I know that stuff can sound really silly to people like oh how do you not know that? It's because it's different for every business. So what we're taught about how to run a business may not be applicable to the business we actually create and start. And so I think that so much of that we've seen is just trying to help people navigate their own journey based on our experiences, experiences of community members, identifying bigger tasks like you said that people want to do like if you want to start a podcast that's a pretty big task. There's a lot of things that go into that that you don't see and so we've broken it down. I think it's in like I don't know … I want to say less than 100 steps and that sounds like a ton but some of the steps are like name your podcast step cool, check it off the list. But it gives you this incredible bite sized thing and people find it so helpful to just have this list to be able to like yes I did that, yes I did that, and go through and knock it all out as opposed to having to think of everything themselves.

Mark: Yeah it reminds me of a couple of other episodes that we did here at the Quiet Light Podcast. One was with Bjork Ostrom who owns Food Blogger Pro and a few other pretty big food blogs and he talked a lot about … he's grown that company from nothing into a significant enterprise and he talked a lot about this idea of I'm not going to try and double my business tomorrow. I'm going to try and have this single daily marginal improvement and the compound in effect of this on a day to day basis. The other person … you talked about going back to the basics and focusing on those things that really work well the person you're agreeing with right now Babak Azad who grew Beach Body into a billion dollar business that was on the podcast and he told me … he said people are focusing on way too many advertising channels. He said that you should really be focusing on just a few; probably one, maybe two because if you're focusing on six that means you're not doing any of them well. You've got to focus on those basics so I think that's fantastic advice. Okay, I'm going to round this out with a final question here for you and this is really the content on your site. I absolutely love … I've always liked this kind of I'm doing this productivity experiment or just whatever sort of experiment.

Jason: Yeah.

Mark: You recently rode a stationary bike at your standing desk for 30 days and I haven't read how it finishes out but how did that go?

Jason: Cliff hanger, okay, so the reason why I did this experiment … why I love doing 30 day challenges specifically is because it's just like you said with like you do these little daily things that can add up and incrementally make a big change or make a big impact. And it's hard to change, it's hard to build habits, it's hard to do those things and I highly recommend a book Atomic Habits by James Clear; a friend of mine and just a super smart guy when it comes out. So if anybody is like I'm bad at habits James will help you, that book is really great. But for me, I just always like breaking these things down into 30 day challenges. So to round this out I rode a stationary bike at my standing desk every single day for 30 days. I just wanted to know could I get a little bit of exercise every day because I'm just at my desk. I didn't want to sit at my desk and do those things and I ended up burning 18,339 calories in 30 days. It's insane. And I wrote this at the end of the thing and I talked about this in the video that I kind of recapped and put it all together it did not feel like I was working out. It felt like I was sitting at my desk very slowly methodically riding this bike while doing e-mails and bunch of other admin tasks and the average amount of time that I rode the bike a day was one hour. It didn't feel like I was riding an hour because I would break it up into different chunks throughout the day. I rode an average of 25 miles a day and at the end of it my pants fit better, I had more energy every day, and it really became a good solid habit for me. So it was super … just a weird random thing I wanted to do but now like I still have the bike we're now a couple of weeks after that I've finished up I'm still riding it. It's great. My wife is starting to ride it and it's just one of those things that's like challenge yourself to do something for 30 days that you might think is weird or out there are different and see what kind of tangible result you get cumulatively over the time and you might realize like wow yeah in a couple of days of course I didn't get like six pack abs from riding this bike but I think if I do this for six months I'm probably going to be in a better shape than I would have been than just if I'd continue doing at the gym and eating better and all those things.

Mark: That's fantastic. I absolutely love everything that you guys stand for. I think it's so easy for all of us entrepreneurs to build businesses but at the same time build little prisons for ourselves as well because we get so driven by productivity when we worship at that altar and then also by just having more and more and more instead of thinking about like you said at the beginning that focus on the goals and ask yourself a question and I'm encouraging everyone listening that's thinking about buying a business or maybe you want to sell the business or you're building something right now to ask those questions; why, for what, what are your goals, what are your values, what do you value in life, a really good advice.

Jason: Yeah, absolutely. Great chatting with you.

Mark: Thanks for having … thanks for coming on I should say. Way to end that professionally. Alright, thanks for having … for coming on Jason.

Jason: Yeah no problem.

Links and Resources:

https://wanderingaimfully.com/

Atomic Habit

The purchase process for first-time e-commerce buyers is rarely stress-free. Today's guest is here to take us through his acquisition from inception to completion. He openly talks about the vetting, the financing, the due diligence process, and the seller/buyer relationship. We also discuss the wins and losses, and how they played off on each other in the six to eight months after the purchase.

Finding himself near the end of his career, Rocky Cleborne was looking for something else. As an almost-retiree from the automobile industry, he decided to purchase his first business. Rocky reviewed numerous businesses and performed extensive vettings of fourteen of them before finally deciding on an e-commerce jewelry business. As we've mentioned before, surrounding yourself with smart, experienced people and being the right type of person yourself are often the keys to successful acquisitions. The highest offer is not always necessarily the one that wins the bid for the business.

Episode Highlights:

• The vetting process Rocky went through before deciding on Novadab.
• How many offers he made out of the 14 businesses he considered buying.
• How using Centurica services helped Rocky through the process.
• The SBA lending process and how much Rocky had to come up with in his deal.
• Rocky's business model and where his e-commerce products are being sold (hint, it's not all Amazon).
• Mistakes he made in the early days of the transition to e-commerce and sourcing.
• The customer experience Novadab provides for their 12,000 orders each month.
• Rocky's email marketing strategy.
• The business's growth percentage since the purchase.
• How he's formed a partnership with a surprising partner and how that partnership is fueling growth both in Novadab and beyond.
• The losses and wins Rocky experienced during the transition process.

Mark: Joe over the past several years I have sat down and had coffee with people who are looking to buy their 1st online business and we talk a lot about what does that process like. How do you go about finding that right opportunity? How do you vet that opportunity? And then even afterwards what does it look like after you do the acquisition and are spending the 1st several months in there what you would be expecting as far as wins and losses. I love it when we have the opportunity to bring somebody on who has gone through this process and they're totally an open book willing to share what they did. You had Rocky on who you sold a business to to talk just about that.

Joe: Yeah and actually I wasn't the broker. I had Rocky make offers on several of my listings and he wasn't the winning bid or the chosen one and eventually he bought one from Amanda and he openly talks about that process of buying the business, the successes that he's had, the financing that he did, some of his big wins and some of his big losses, and how they sort of played off on each other in the six to eight months after he bought the business.

Mark: Well, it's great. Now we also have a really exciting announcement here. We had somebody guess one of the movie quotes from the intro Mike K. right? It was Mike K.

Joe: Come on now.

Mark: I can't pronounce his last name. I'm sorry Mike. Chris, our producer is in here with me; what's his name, Chris?

Chris: Koregnept.

Mark: Koregnept. Alright, so Mike Koregnept Big Short from the very first intro that we ran. Thank you, Mike, for doing that and hey guys if you're listening and you know the quote send us an e-mail. C'mon send it over. Let us know where it's from and if you use Google tell us; be honest because that's the only way I can ever guess any of these movie intros. I'm not going to at game at all.

Joe: Let's do one more thing though Mike I want you to call me, leave me a voicemail message with the proper pronunciation of your last name and we'll air in on one of the upcoming episodes.

Mark: That's a really good idea. So let's get back over to the actual topic let's talk about Rocky and the process that he used to acquire his business.

Joe: I'm recording; you can see that in the corner. Hey folks, it's Joe from Quiet Light Brokerage and this is another episode of the Quiet Light Podcast and yes you heard me say I'm recording right at the beginning because I have Rocky on the line with me. Rocky pronounce your last name for me; go ahead.

Rocky: It's Cleborne.

Joe: Cleborne; so easy, spelled funny but so easy. Rocky and I have talked twice in the last week because yes I recorded the best podcast ever last Tuesday with Rocky but I didn't actually do what Rocky?

Rocky: Hit the record button.

Joe: Exactly! So we're back at it. In the podcast world, everybody has a story of at least one time forgetting to hit record and it happened to us last week. So I'm glad you're back; glad you had time but I think it's appropriate that we didn't do it two minutes after I realized when we were wrapping up that I forgot to hit record. Okay, enough babbling. Rocky Cleborne tell us about yourself; who are you what's your background?

Rocky: Well, my name is Rocky Cleborne and after I graduated from college I ended up starting some businesses that I turned around and then sold. I got into the automobile business in the late '90s and became a general manager of a number of large automobile dealerships; some of which were selling over 600 cars a month. I've been doing that for over 20 years and then decided that I wanted to retire but knew that I didn't want to just sit around and do nothing because that's not who I am and so I decided that I would buy a business. At first, I looked at brick and mortar businesses and then I said I wanted to be more cutting edge than that and decided that I would look at e-commerce businesses. I did some vetting and some research. I came across Quiet Light Brokerage and the rest is history as they say.

Joe: So you are an almost retiree that is in the automobile industry which is about as old school as it gets and you do what? You buy an e-commerce business and it's not only that but it's a jewelry e-commerce business.

Rocky: Yes indeed and the company is called Novadab and I wanted to end up getting a business that had higher margins and that the jewelry business definitely has and I wanted to be able to end up operating the business with my daughter and so she has joined me in this venture and we really, really enjoy it very, very much.

Joe: Well, good. So I want to take your life experience in terms of being in business and talk a little bit about the search process that you went through, the vetting process because I know you looked at a lot of deals; we looked at a few together, and then your financing; how you decided to pay for this business and talk a little bit about some of the wins and losses you've had along the way. But before I do that folks I want to say that you've heard me say it, you've heard Mark say it in the past that who you are as a buyer and how you behave as a buyer makes a huge difference in terms of getting the deal done not just with the broker. Well we're here to help both sides of the transaction no matter what and sometimes it does matter in terms of the likability of you the buyer because if we're in a multiple offer situation our client; the seller is going to say who do you like, what do you think, who are we going to get through due diligence with and all the way to closing, and they're going to say who do you think would be better to work with after closing in transition and training? And Rocky is that type of guy. You struck me … well, what you bought this last fall, in fall of 2018 and we've talked a few times before that and then lo and behold I hear you're under LOI and under contract with a deal that Amanda had and excited about it. I even got an e-mail from her and from the lender Stephen Speer about what a great guy you were; so good for you and folks this is what it takes some time. So again, alright Rocky tell us about your vetting process. How long did it take you to find Novadab and how many deals did you look at, and how many deals did you make an offer on? And I know you're going to come up with ballpark numbers because you probably looked at more than you can remember.

Rocky: Well, that's true I did look at quite a number of them actually. I started the process February of last year and I looked at quite a few businesses. As a matter of fact, I did do some research and found out that I had actually in-depth researched over 14 businesses that I was trying to end up purchasing. I utilized a company called Centurica with Chris Yates. I actually did quite a bit of study for me because I learned early in life that you want to surround yourself with people that are knowledgeable of the businesses that you're looking to try to purchase and also know what you don't know and I certainly … and I was very, very glad to end up having Chris being part of this search process as well as helping me do the analysis because two heads are better than one and he provided me some great insight and as a matter of fact prevented me from … or didn't prevent me but certainly lend some insight as to why I wouldn't want to purchase certain businesses out there. So we did some due diligence together. I ultimately landed on Novadab and then through that same process and through a podcast I was introduced to Stephen Speer and Stephen really again if you want to surround yourself with really, really smart people that are hardworking and I give it back to you all at Quiet Light and also Stephen Speer and Chris Yates in guiding me to a purchase that ultimately I've been very, very happy with and have enjoyed as I say operating with my daughter.

Joe: So you started in February 2018, when did you close on Novadab?

Rocky: August 23rd.

Joe: August 23rd, so just about eight months … no six months.

Rocky: Six months.

Joe: I always … I actually did this today, I talked to a buyer today and I said look man trying to find that perfect business is like looking for a needle in a haystack inside of a giant big ass haystack and he said absolutely. He's looked over 53 cases; he looked at 53 of our listings in the last I think probably 12 months, so a lot more than you've probably looked at. How many of the businesses that you looked at did you … you said you looked at 14 in depth; how many of those did you make offers on?

Rocky: I actually only made offers on five of them and one of them actually was one of your offers where I was reaching for that brass rain if you will but because I hadn't been in the e-commerce business previously we felt that it wasn't something that we could end up doing and securing the financing ultimately with Stephen. So while I reached for it and wanted to try to do it I'm certainly glad that we ended up where we did in purchasing Novadab.

Joe: Good. Alright so quickly and I don't mean to plug Centurica, we don't get any referral fees. They're not an advertiser but what I've talked about historically with Centurica is that once you're under a Letter Of Intent they will help you with due diligence. We give a great deal of information on our listings but no matter what you're going to want to dig deep. You're going to want to look at bank statements, vendor invoices, Amazon statements, credit card statements, all of that in due diligence and when you do an SBA deal like you did Rocky with Stephen at First Home Bank and they've got a 3rd party valuation team, they've got an underwriting team, and they're going to dig in and vet the business as well. So you've got lots of people that are helping but one of the things that Centurica did for you just to make sure if I understand it is that they didn't just help you with due diligence once under LOI, they helped you with the search process as well and it made sense in advance of making the offer and going under a Letter Of Intent; correct?

Rocky: Yes, indeed they did. In fact, Chris and I took a look at a number of different businesses together and looked at the attributes, the positive things about the different businesses and how they might indeed tie into my skill set or not necessarily tie into my skill set. And by doing that he really helped guide me to purchasing a business that fit my skill set that I could then expand upon and ultimately grow the way that we actually have grown the business over the last six months. So he was involved from day one with the search for a business and really provided me that hand holding that when you're investing the kind of money that you invest in these businesses really gives you somebody to lean on and obtain incurred information.

Joe: Cool. I want to get into the growth but let's hold off on that just for a moment because I do want to learn there. Stephen Speer of Bank United another great one that they're working with is Bruce Marks at Radius Bank for those listening. And if anyone listening has an amazing SBA lender please shoot me an e-mail at Joe@QuietLightBrokerage and make an introduction; the more the merrier. Bruce and Stephen though are top notch. I don't think you'd go wrong with them at all. Okay in regards to the SBA lending process we're not going to talk about the purchase price of the business here but generally, depending on the deal size the lenders are looking for something from 10 to 25% equity infusion and that can come from the buyer and the seller or from just the buyer. Rocky in purchasing this business how much percentage of the overall deal did you have to come up with?

Rocky: I ended up coming out with approximately 20% of the overall deal including the inventory and there were some reasons behind that that I did not want to end up pledging my home is a security with the SBA which they looked to try to do and so in exchange for that I put up some additional equity in order to not have my home secure. And it was really quite interesting, the sellers also took back a note for 15% of the total deal and it was interesting in that when we did the interview as you mentioned previously on this podcast how important it really is to end up building a relationship with the seller. Everybody thinks that when they're a buyer that they're in the driver's seat and when you have as much demand for e-commerce businesses particularly the good e-commerce businesses that you really want to buy; you're the one that's being interviewed as a buyer to end up buying that business and you really should treat it as an interview because you are being interviewed by the seller. They've taken a lot of their hard work and really it's their baby if you will and they've owned it and brought it to where it is and now they're turning around and trusting you with it so you want to end up making a good impression and certainly during that interview process you want to make sure that you put your best foot forward. What ultimately happened for me is that I … like many others faced a situation where there were multiple offers on the business; mine was not the highest of offers, in fact, mine was about $50,000 less than the next offer.

Joe: Wow.

Rocky: He took my offer and it's great because the two of us are still talking with each other on a regular basis and in fact, we've formed another business that we could talk about later.

Joe: Good for you, you found another business together in your retirement years.

Rocky: Yes indeed.

Joe: Crazy Rocky that's what I'm going to call you from now on. It's interesting being likable on those calls gets you … obviously, you got the deal $50,000 less than the highest bidder but also a 15% seller note. That's not standard. I think the highest I've seen and I've done a fair amount of SBA deals is 10% so good for you. This total 35% equity infusion is interesting; 20% from you, 15% seller note for the seller and it's news to me that the equity infusion that you brought to the table scratched the requirement by the lender to have your house as collateral on the business so that's fantastic, good news there. Let's talk about—

Rocky: That was thanks to Stephen as well. He did the negotiation for me with that as well.

Joe: That's terrific. Let's talk about the transition and training period here. You've got a physical product business, the business model itself is not your standard typical e-commerce business where you're selling on let's say a Shopify store and Amazon you're also selling on I don't want to call them daily deal sites, how would you classify Zoot Wulily; hold on let's just talk about my mispronunciation. I said Zoot and Wulily, I meant Woot and Zulily and Groupon, things of that nature. Okay enough, we can make fun of me all day long; it'll be a long podcast. Tell us about the model where your products are being sold so that everybody understands the business model itself.

Rocky: Sure our biggest partner happens to be Groupon, and Zulily is our 2nd biggest partner. We only do at this point about 10% of our business on Amazon, the rest are on deal sites as you mentioned. We have a company called MobStub that we do business with, OpenSky and some of Walmart of course and some of the other platforms that really are great opportunities for growth for us but our … what's called a preferred vendor on both Zulily and on Groupon and it works out very, very well for all of us.

Joe: We don't have enough conversation about deal sites like Groupon, Zulily, Woot; all of them and I think the key … tell me if I'm wrong and expand on if I'm right but the key to success on deal sites like that is SKU counts and new SKUs and being able to present new products on a regular basis. Is that right; is that what sets you apart and allows you to do business with them on a regular basis?

Rocky: Very much so; they are looking for new products to list on their sites and what we do is we try to do three new products a week on each on the Groupon site as an example. And by doing that we can end up growing along with them and they can present fresh products to their customers on a regular basis. So we vet the products out, we put them on their site, and ultimately we get orders from their customers of course and it helps us grow our business on our home site because they'll order their initial product from say Groupon or Zulily but because we send our product out branded with branded boxes or bags they then could come to our website and we really have done quite a bit of growth through our website and our e-mails because of those different vending platforms.

Joe: That's fantastic. So in this situation are you using a 3PL or are you fulfilling orders yourself?

Rocky: We fulfill our orders ourselves. I've got a wonderful team of people here in New Hampshire. In fact, we moved the business from Texas to New Hampshire over the Labor Day weekend and did not miss any orders that were placed with those portals that were wired to ship within a certain period of time. And the women that fulfill our orders here do an awesome, awesome job and we're very, very glad to end up being able to provide not only jobs for them but also we take real care in presenting our product to our customers. And because we have control of it we really feel as though it gets into the hands of our customers in a timely fashion and also with it having looking its best.

Joe: Did the company come with any outsourced VA's that transferred with the business or did you take it over with your daughter?

Rocky: Well, my daughter and I took it over and she does the day to day operations but we ended up having a wonderful team in India. As a matter of fact, we're going through some of the mistakes that I made in why that team ended up being so very important to our ultimate success. When I bought the business we had just about 510 SKUs, during the last quarter of the year I increased those number of SKUs from 510 to over 800.

Joe: Wow.

Rocky: And it was … I thought pretty easy; you just go out, you source the product, you bring it in, you just get some pictures, put it online, put some marketing behind it and you're all good to go.

Joe: Simple; I mean its e-commerce, that's all it takes right?

Rocky: That's all it takes.

Joe: So I'm sensing we're going to have a valuable lesson come out of this.

Rocky: Yes very much a valuable lesson but out of a few mistakes comes your biggest opportunities as well and what happened was I would go out and I would source all of this product and be bringing it in and bringing in and it was a little bit overwhelming to our people at the warehouse as far as stocking it in; having the SKUs. You have to create those SKUs, you have to end up picturing them, get them on the website, and so our team in India provided us with all of that necessary grunt work I'll call it to be able to assign SKUs, to be able to get our pictures taken, to be able to help us with the marketing of the product, and ultimately our customer satisfaction as well because with this size of business that we have we ship about 12,000 orders on average a month.

Joe: 12,000 orders a month; that's amazing.

Rocky: Yeah and in doing that we certainly have customers that we want to make sure that are taken care of and so we have four customer service people in India, we have a graphics designer, we have a website developer, and a number of other people that help us really execute the plan. We couldn't be where we are today and have experienced the growth we've experienced without their help.

Joe: Rocky, you're in 12,000 I mean that's 400 orders a day are you capturing e-mail addresses for every single one of those customers?

Rocky: Almost all of them.

Joe: Are you're doing any e-mail marketing?

Rocky: Absolutely we have about 125,000 e-mail addresses at this time and we e-mail market every single day; Monday thru Sunday.

Joe: What software are you using?

Rocky: We're using Mailchimp.

Joe: Mailchimp; you need to go to EcomCrew.com and listen to Mike Jackness talk about his e-mail campaigns that he does on one of his businesses. I actually just sold up listings of business of Mike's and it's that business that he talks about. He goes all around the world speaking about it. He doesn't use Mailchimp, he uses Klaviyo and the getting 400 new email addresses a day 12,000 a month is gold to somebody with the skill set to be able to send additional e-mails. And with the volume of SKUs you have I would think that that's a growth opportunity; a huge one for you. Not that I know anything about it, Mike knows everything about it. So EcomCrew.com for anybody listening that wants to do e-mail marketing and Klaviyo as well I think you should check it out. So I know you love listening to the Quiet Light Podcast but I'm going to point you over to EcomCrew too. Let's talk briefly about your growth, I mean 12,000 orders a month is great; how many orders a month was it doing when you bought the business eight months ago?

Rocky: We've actually experienced about 60% growth overall.

Joe: 60% growth and you used to run automobile dealerships; you had no … other than e-commerce websites for the auto dealerships, did you have any e-commerce business experience?

Rocky: No, actually I do not.

Joe: What is fueling that growth other than your wisdom and your brilliance Rocky? What is happening here; how are you doing this? Let's just say it's your daughter man because she's going to listen to this.

Rocky: Yes; absolutely. It goes back to realistically I was able to purchase a business where the gentleman who sold me the business is still actively helping me run the business. And so that really helps quite a bit. It goes back to the relationship that he and I built when he was selling the business to me.

Joe: Is he being paid for that beyond the sale of the business and the transition and training period? Is it a consulting deal or he's just a really nice guy?

Rocky: No, he is a nice guy; I will say that he's not being paid to end up doing the consulting work. What happened was we ended up forming because of my mistakes of adding these 300 SKUs at the end of the year we formed some businesses; two businesses together and so he wants to end up helping me continue to run Novadab and the growth of Novadab and in turn the two of us are helping each other grow these two new businesses.

Joe: I think this is a 1st where we sold a business and then the buyer of the business starts another business with the guy who sold it. I think that's fantastic. And it goes to the relationships and being likable and connecting. I guess it's not always going to happen for sure and sometimes people just want an exit. They want an exit; they want to be done. They go through that initial transition and training period which the standard folks is up to 40 hours over the 1st 90 days. And if you don't have a seller note like Rocky did there's something called a hold back; a certain percentage of the funds just reside in Escrow and then are released in 90 days after that transition and training period is over. Alright well, let's … you've grown it 60% is that what you said?

Rocky: In the last quarter of the year, we grew at 60%; the 1st quarter of this year, year over year growth was 40%.

Joe: Wow, unbelievable. Alright so … but those 300 and something SKUs that you added; the big win big loss, what was the loss and what was the win?

Rocky: The loss was definitely that I overwhelmed the team. Again it's just to add that many SKUs in such a short period of time during the peak quarter if you will; a mistake on my part and it definitely was too much too fast. And while they were very, very helpful in trying to get them launched we actually didn't get them up quickly as what we would want to. At the same time three of the SKUs that we didn't end up launching I know it's not a great percentage but three of the SKUs ended up selling over 20,000 pieces during the month of December. So it really provided some real good growth to us and the other SKUs some of them are working some of them are not but you have to try. And ultimately we're going to end up having most of those SKUs work and retire some of the older SKUs. You have to refresh your product up on a regular basis. I just try to do it all too quickly that's all.

Joe: Oh that's alright, that's just part of the learning process at least you know it's a product line that doesn't go bad and you can sell through them, discount them, and maybe retire a few but that's pretty awesome. The big win; let's talk about what you're doing with the guy who sold you the business. You have started two new businesses together, what are they?

Rocky: We started two new businesses; the 1st one is called Profinac and it stands for Professional Financial Accountants.

Joe: Okay, I just have to say that sounds like prophylactic; how did you pick that name?

Rocky: You and my wife said the same thing actually.

Joe: She's a brilliant woman let me tell you that right now.

Rocky: I will have to say that's part of why we're partners. I did not pick that name, Ashish picked that name for me or for us but the reason it stands for as I say Professional Financial Accountants and so we ran with that and see we're having an impression on everybody just as this [inaudible 00:30:44.2].

Joe: It's now unforgettable to the thousands that are listening. So Professional Financial Accountants, you are doing online bookkeeping for e-commerce businesses?

Rocky: Yes, we do online bookkeeping for e-commerce businesses. We also do sales tax management. We end up doing payroll services for people as well, income statements. We'll do anything that they need to in order to offload what I feel that many e-commerce and really small businesses don't want to end up doing. They get so bogged down in being a business operator they don't end up being a business owner and so by taking off the real necessary, you have to keep score somehow and if this way somebody else can do it it ends up being or allowing you to end up focusing on the growth of the business.

Joe: And there's … in my experience I mean growth is important if and when … you know what it's really when; when you decide to sell the business and it may be 15 years from now, it may be passing it on to a family member but they're still going to want financials when you decide the business you've got to have good clean financials. You can't co-mingle it with other brands and things that you want to keep. You're just going to get less value for the business and the time to start planning that exit even if it's in 10 years is now by getting good clean financials. So I think the prophylactic company, the Profinac is a great business. I'm sorry I won't do that again. What's the other … is it Profinac.com I assume?

Rocky: Yes, it is.

Joe: Alright. We'll put that in the show notes.

Rocky: Okay. I appreciate that. The other thing is that's what you and Stephen taught me as far as the businesses were concerned in the sense of being able to provide a clean settled financial so that when you end up wanting to sell your business you have those financials that can end up getting that SBA approval ultimately.

Joe: Let me ask the question because I think it's probably on some folks mind in the event they need these types of services and are doing it a little bit themselves right now are you using Xero or QuickBooks?

Rocky: We will use both.

Joe: Really?

Rocky: Yes. We'll do either one for them. The team is well versed in both. We feel though that Xero will end up providing them with much more in depth information.

Joe: I agree; I hear that a lot. The one thing that I wish the developers of Xero would do is allow a Profit & Loss statement to be run with a longer date range than just 12 months. When someone sends us the Xero reports we have to merge all of the years together in order to get to a running P&L which we always want to present with Quick Books; it's easy. And also the Xero folks they're not US based, I don't think because all of the dates are reversed of what we do here in the States which is the reverse of everybody else in the world I'm sure.

Rocky: Yeah very, very true. They're an e-commerce based platform and they were founded on the e-commerce platform or in the cloud if you will, that's one reason why we feel that it provides us with a lot of [inaudible 00:34:10.3] that way.

Joe: Good, what's the 2nd business that you're starting with your new business partner?

Rocky: It's called Supportab and that is S-U-P-P-O-R-T-A-B.com.

Joe: Only one T?

Rocky: Only one T. We don't know how to spell either.

Joe: It's giving you support to your abs; that's what this one does. Okay, what does Supportab do?

Rocky: Supportab basically provides again a lot of the necessary support that an e-commerce business needs. This is going back to my big mistake of introducing those 300 SKUs. I needed to end up having a team; a website developer, for example, customer satisfaction people, graphics designer, marketing person. That's what we provide to people that are in the e-commerce world. And what we do that's a little bit different than some of the other businesses out there is that we have it all and we call it omni channel instead of multichannel. And omni channel basically is the integration of all of those different facets under one roof where your customer satisfaction team or your customer service team, your website developing team, your graphics team are all working together and that way they communicate with each other and interact with each other as far as what the overall goal of the company is. Whereas if you do it multi-channel you might go out and hire a bookkeeper, you might go out and hire customer service people but they never talk to each other so they don't get that common feel of the business going forward. We have it all under one roof and we also provide the supervision and management of that team. So we interview the companies and we ask them what their goals are and then we then convey that and manage the team towards those goals, talk with the owner of the company on a regular basis, and then we make sure that we're doing what it is they want to end up doing and more to achieve their goals.

Joe: Based upon my experience in doing thousands of valuations I would say it's a very needed service because a lot of people that sell their business sell because they're just pulled in too many different directions, feel like they're going nowhere, and just need to cash out and get some emotional satisfaction because they're not getting any. Because they're working in the business instead of on the business, so Supportab; support one T ab.com sounds great. But Rocky you don't have any e-commerce experience, you're an experienced business person who's been managing a very difficult niche in the automotive world for 20 plus years now you've got Novadab so I guess that brings that life experience to starting these two new companies which are essentially service agencies which are definitely needed. What about your business partner before Novadab, what kind of e-commerce world experience does he have?

Rocky: Well, he founded Novadab and certainly brought it to fruition and then before that he works for AT&T for a period of time in website development and was doing a lot of computer work himself. So that's one of my partner's—

Joe: So he's mature, he's not in his early 20's that started his 1st business sold and is doing more business with you? He's got some real world experience behind him as well.

Rocky: Very much so and the other partner that we have is actually his brother who is located in India and is heads of the operation over in India for us so that we have someone who has experienced … he worked for Pfizer for a period of time and did marketing for them and spends the time building our team in India and sourcing all of our employees that we end up hiring in that area.

Joe: Wow. Is he and his brother originally from the States or born in India and relocated to the States?

Rocky: They were born in India and Ashish came over here. He came over here to go to college, graduated from college and wanted to stay for a period of time and has now located in Austin is where he is.

Joe: Oh, that's great. That's great to have a direct contact there that is an owner of the business, a relative of one of the owners of the business as well so it's fantastic. Well, Rocky, this is a great story; we're running out of time here. I appreciate you coming back on and actually allowing the team to record this one. Thank you very much for your humor in that regard and your time. I'm very impressed that you've taken this and grown it to the level you have in such a short period of time just for your daughter's sake. He's given you all of the credit in case you're listening; Rocky is just showing up every day. I'm kidding of course. The next time we have you on I want another update maybe in another 12 months we can get you back on, maybe have a daughter on as well what do you think?

Rocky: That would be awesome. I couldn't do it without her that's for sure. She takes care of the day to day operations and allows me to end up working these other businesses and really without the team that I have I wouldn't be where I am so I really appreciate all of their hard work without a doubt.

Joe: And we appreciate the type of person you are, the type of buyer you are, and the fact that everything has gone so smoothly. I'm so glad to hear for your success. Thank you for coming on the podcast and I look forward to doing an update with you sometime in the future.

Rocky: Thanks very much for having me, Joe. It's been a real, real lot of fun.

Joe: Take care, you too.

Links and Resources:

Novadab

Profinac

SupporTab

Centurica

StephenSpears

BruceMarks

Austin Meetup

When they've gone door to door to sell a product for any amount of time, a salesperson truly learns what they can take. Being a good sales rep can absolutely be nurture over nature and with the right processes in place, any company can turn out a good sales team and garner great results.

Today's guest, Ali Mirza, comes from a pure sales background. These days, he is mixing his true old-school sales experience with expertise in the online world. He started Rosegarden consulting about 8 years ago and now focuses on helping SaaS businesses build out their sales processes. Rosegarden helps set up a salesforce that does what they need to make the sales while following a set of parameters that can be repeated over and over again. Each of his custom sales processes is tailored for the client to achieve consistent, long-term growth.

Episode Highlights:

• Ali's sales background and how he got into his current business.
• His beliefs on natural-born salespeople.
• How to find and hire rockstar salespeople.
• Where Ali starts in creating sales processes for the client.
• How much the process changes from client to client.
• The amount of flexibility given to sales reps within an organization in order for them to be able to do what they do best.
• The correct balance of product knowledge for the reps who are selling the SaaS product.
• How SaaS business owners can achieve continuity between the sales reps and the backend team.
• When a business should start to think about systematizing their sales processes.
• How the process is measured by Ali and his team.
• Some standout successes Ali and his team have achieved

Joe: Mark I understand that our friend John Corcoran referred someone to Quiet Light to be a guest on the podcast; Ali Mirza. He's from Rose Garden Consulting. First of all, John thank you very much and if anyone else has suggestions for a great guest like Ali please send us an email. We'd love to have some people on that can help you grow your business or sell your business or even buy your business. Now as I understand it Ali is in the SaaS world helping people optimize that sales process, that onboarding process which is kind of challenging and critically important in the SaaS area right?

Mark: Absolutely and John and Jeremy I think they're just going to become our new podcast guest sourcing agents because they've been referring so many awesome people over that have really added to the podcast quite a bit. But Ali comes from this traditional sales background and he and I talked quite a bit about this because that's my background as well. When I was a teenager my very first job was a telemarketing job. Yes, I was one of those guys. And then I also did B2B door to door sales for long distance optimization. I mean talk about some of the most brutal conditions for learning basic entrepreneurship. Ali comes from that background; he's really good at it. He's a killer sales person and so what he does now is he works with SaaS organizations to help optimize their onboarding processes. And how do you set up a sales team that is both free to do what they need to do … is it not this tight like script that a sales person has to have but still have these processes that are repeatable and can be optimized so that you're not losing money through your onboarding process. It's the same thing as like CRO; Conversion Rate Optimization. So many people have these leaky conversion funnels and just by optimizing those they can increase the revenue substantially. This is the same thing with any group and any SaaS business that has an onboarding process for potential clients. So kind of an old school soul … young guy but old school soul when it comes to the sales process and mixed it in with the online world.

Joe: I'm looking forward to listening to this one myself, let's get to it.

Mark: Ali, thank you so much for joining me I appreciate … first of all your patience because I cancelled this podcast on you twice both for totally legitimate reasons. My mom's basement was flooding the first time. I was literally like outside shoveling snow when I was texting you saying I can't make this one and then the last time was I a little bit lost my voice. And it's still kind of gone but thank you so much for joining me. I really appreciate it.

Ali: No problem. I appreciate you having me.

Mark: Do me a favor and let our listeners know basically why I'm having you on the podcast; what's your story and what do you do.

Ali: So what I do I'm still trying to figure that out half the time but my story … so I got in the sales when I was 19 years old. So I was a guy that would go door to door at Sun Life insurance. I did that for four years. I built up a team. I was the number one agent in the country and handled about 50 sales reps under my belt. Things are great and all but as a true entrepreneur, I knew that that wasn't exactly where I wanted to be for the rest of my life and obviously my [inaudible 00:04:19.6] wasn't fulfilled. Long story short we have decided to start my own company; Rose Garden. That was almost eight years ago now. Originally we started off as kind of like a hired gun. I didn't like the bureaucracy and all that stuff that came with selling insurance and so I just hey I'm a salesman just let me sell that's all I want to do. So we'd go into companies, you put us on retainer and we could sell for you and when we close the deal you pay us bigger. That worked out great for a while; 2 ½ years or so then one of my clients this is great but if you get hit by a bus tomorrow we're back to square one. And I said yeah you're right about that and then he said well why don't you write down what you do for us. I said well that wasn't our original engagement so why don't you pay me for it? And so he said yes. And that's kind of when the light bulb went off and I understood that wait hang on, building people sales processes is infinitely more scalable than me actually selling for people. So that's about five or six years ago or so we pivoted. And since then we've almost exclusively been building out sales processes for our companies.

Mark: That's awesome. So I actually come from that direct sales background as well; like I cut my teeth my very first job. And most people's first job was like McDonald's or something like that right, fast food? I think at the age of 12 or 13 I made a promise to myself I would never work in fast food and so my very first job was a telemarketing position. And boy you learn pretty quickly how to deal with that and I think probably … I'll put this as my worst job because I was kind of burnt out at this point. I was in that for about five years of doing telemarketing in some of the worst stuff out there too. I did door to door business, door to door telephone long distance service sales. They would send us down, it was a team of us, we'd go down in like teams of three and we would really hit like a downtown area and some small town, knock on doors to come see a long distance bill. All these are … oh my gosh man that was brutal but it was an awesome experience as far as learning how to A. be an entrepreneur but also B. how to sell.

Ali: Yeah.

Mark: A great background for an entrepreneur.

Ali: Yeah I know I mean going door to door that will put some hair on your chest. And once you do that I mean you don't really fear things anymore. I think a lot of what holds people back as entrepreneurs is the fear of what could or what realistically what will happen right? If I take this risk will it pay off with, will it break me? I don't have that anymore. When you have to knock on someone's door and try and sell them some life insurance it's … all inhibitions … when you do that for a few years all inhibitions are gone. You just have enough wee care anymore.

Mark: Yeah you learn how to laugh off the nose and actually appreciate the guys that just like in telemarketing the best thing that we could have happen is somebody hangs up on us right? Because that's a very quick no, I can immediately get on to that next prospect. And you get kind of this cold like I don't care if you do that. There was one guy at the door to door telephone long distance company where he actually had somebody throw a wrench at him so that's actually a little bit more aggressive. Hopefully, that doesn't happen but yeah you're right that puts hair on your chest. You learn very quickly to lose that fear. So alright today I want to talk … you do a lot of consulting for SaaS companies and helping build their sales processes. And this is obviously really important for just lowering that cost of acquisition. If you have a more efficient sales team you're going to be signing up more people. So I want to get in that. I'm going to kind of open up with a question here that … I don't know maybe it's a softball question but aren't there natural born salespeople? I mean isn't it really coming down to … and I know what you're going to answer on this but doesn't it come down to … again I did a little show prep; thanks me. Doesn't it come down to finding just those rock star sales people?

Ali: So those are two different questions right? So a natural born sales person in my opinion and my opinion is always right of course.

Mark: [inaudible 00:08:11.9]

Ali: Yeah exactly, right? I would do it. I think it was the Charles Barkley book where it was like I may be wrong but I doubt it. But in my opinion, there's no such thing as a born sales person. The only things that are born are baby boys and baby girls. Sales people are trained. No different than there's no lawyer gene, there's no doctor gene, all these other things. There's no sales gene as much as people would like to believe. A lot of what we attribute that to is people that are just outgoing, charismatic, extroverts. That's learned. That's nature not … oh, I'm sorry that's nurtured not nature. So it depends on external environment built, factors and things of that nature of what your personality ends up to be. That doesn't necessarily guarantee that you're going to be at closing and actually bring money in the door. We know lots of extroverts that just talk, talk, talk, talk, talk and burn deals. So there is no such thing as a born sales person. Now, looking for a rock star that's a different thing; you're looking for someone that's … you may not know what you're asking for but really what you're asking for is somebody that's already trained that someone else has put the work into and now you're going to … you're fixing to benefit off of their work. That is more reasonable than looking for a natural born salesperson because at that point what you're really saying is someone that doesn't have sales training but just going to sell. And so looking for a rock star is someone that has that sales training that you can vet their experience. Now that being said that's incredibly difficult to find especially in today's market. I mean if you can sell your … sales is the only money side of the balance sheet. Everyone else is an expense we're the only income, right? So sales … when someone can sell someone's picking up your company, you're not going to let them go. So good salespeople are golden handcuffed in. Of course, there are founders and companies that drop the ball with great sales people but the likelihood that you're going to find that person on the open market is next to none. They know people that know people that don't land on their feet pretty quick.

Mark: Yeah I think one of the problems I see with a lot of companies especially as they're scaling is the founder might have that ability to sell the product but they can never really expand beyond that. And I actually have this problem with Quiet Light when I started initially. I went through … I think it was probably within the first year of Quiet Light, I went out and I hired five people that I thought were going to be really good at this but they ended up not really working out. Some of them did a little bit but not really, they all kind of phased out. It wasn't until Jason joined the team that I stumbled upon I would guess in your world the sales process. And I never really thought about in terms of a process because we don't think about in the same way here at Quiet Light but I'd like to get into this a little bit as far as finding out what that process is for your company. I would imagine depending on what you're selling and within the SaaS world specifically as well. The process is going to differ quite a bit from if you're selling say a $300 a month SaaS product versus … I think I just talked to somebody yesterday where his average price upon is $20,000 per year with three year minimum commitments. So what does that process look like when you're going into an organization and you want to start to identify A. the characteristics of that sales process and am I even putting this in the right way or do we talk [crosstalk 00:11:35.1] skill process?

Ali: That's exactly what we do. So every sales process we build is custom and unique. Now at the surface level or at the face value after the fact there's only so many ways to skin a cat and so I could just turn around and be like oh you know what Company A sales process looks quite a bit like Company B but we can't start there, right? So we have to treat everything unique and custom from the beginning. And then it may end up looking somewhat similar to someone else's but we arrive at that independent of that. So we're not trying to predetermine. Yeah, so our process of how we do that is first thing we do is we do an assessment. So we'll actually go in there and spend a day on site and work with their sales leader, the founders, work with the sales team and really understand everything that they're doing right that they need to continue doing, everything that they're doing wrong that they need to stop or change, and everything that they're not doing that they need to be doing. And so we start at a very high level, they walk us through their process, they walk us through their typical deal flows and cycles and so we start to really pick out things from there. I'll get them into one of those three categories and then from there we get very granular and look at all the tactics. Then we build a report and say step by step right if I was your VP of sales or if I was the founder of this company or you know I had to build a process this is what I would do. So you get a little diagnostic and I basically can walk you through it step by step. It helps you understand what you need to do in what you do. Because sometimes even if things that we're doing is right it's just having that extra validation from someone who sees it from … we've seen hundreds of SaaS companies do it the right and the wrong way. I've seen crazy growth, I've seen two, three, 400% month over month and I've seen one or 2% year over year. So you can pick out patterns pretty quick.

Mark: Yeah. How much has that sales process changed though from one organization to the next? I mean for example Quiet Light Brokerage, when I hired on those first five people as brokers I took on somebody who was really good at relationship based sales and was fine with taking that sort of long term sort of approach and then I also hired somebody who is the number one salesperson for Quick Books Online but he was much more close. He was a closer and that's what he wants to do and frankly, he struggled a lot and didn't really do so well. So at one point and more specifically for the people listening here and they're thinking about the sales team that they have how much do you look at the company, what do you look at with a company I should ask to start to determine okay this approach is right versus this approach is wrong as far as what they're doing?

Ali: I mean you got to start with who they're selling to because even within a particular company between the service, offering, product, solution, whatever it is that they're selling depending on which market and depending on who is buying that sales process very well could change. So I'll give you a perfect example, one of our clients a SaaS company sells into the education or is an education platform. Let's call it an online education platform that sells to large organizations. But they also have individuals, freelancers, people like … let's call them hobbyists coming in there and buying their solution as well. So it's an online learning platform but their goal is to sell large organizations packages and number of seats but they also have one offs coming in as well. So the sales process is completely unique for the one offs and the people that are buying less than five seats, a small organization that has one, two, three, developers or just someone that wants to up level their own development game. I'm not a developer so I don't even know if I'm using the right terminology but that's irrelevant.

Mark: It sounds great.

Ali: Yeah exactly there isn't enough coloring right on a black screen with green—

Mark: Just like the Matrix.

Ali: Exactly, yeah. So the sales people what we have to do with them was we have to get that stuff off the sales people's plate because we're paying our sales people too much, in my opinion, to sit there and sell a $49 a month deal. It's pointless, right? We were losing money at that point on that sale if we had to not only pay the sales person salary because there was some cost to fulfillment even though it was SaaS and then pay him a commission off of that and then it was just annoying the salespeople. Now you got to look at opportunity costs. So what we did was we segmented them completely because the guy that's buying one or two seats is going to ask maybe not all of the questions but they're going to ask a fair bit of the same questions that the person that we're selling one to 200 seats too and I want all my sales people focused on that. So we have to segment that out, we have to change up the sales process, there was a lot of things that we did there. So even within the organization, the sales process changes. Now again we had to build that unique for them and we have to look at their … we started with their who's buying, what are they buying, why are they buying, how are they buying, etcetera and reverse engineer the sales process that way. And you could look at that sales process and probably compare it to 10 other clients that I have and say well there's a lot of similarities. Well yeah, there's only so many ways to skin a cat but at the end of the day, if I had been like wow who does this client remind me of, it reminds me of this person let me bring this in here then you're … it's like renovating a house. I mean yeah you can put lipstick on a pig but at the end of the day, it's still a pig.

Mark: So how much of that sales process vary within an organization, the concern I would have would be having a one size fits all sort of a strategy when different clients are going to be coming with different needs. So how much latitude do you give the sales people within an organization to be able to freelance that process or even within that process at certain steps?

Ali: A lot, so here's what we do if you don't have anything to benchmark off of how will you ever measure success? How will you know that … if you don't have a control group you will never know whether you're picking up all the money off the table? With that being said I'm not looking to handcuff and put my extra salespeople in a straightjacket so we give them parameters. We tell them here's what you need to do. And again what it's really used for is making sure that at first 18 months of a sales person they have more than paid for themselves. After 18 months, after someone's been working … selling for a year and a half in a company they've pretty much worked most if not all types of deals that walk in and they know what to do. What I don't want is oh you know this person … we say hey just go sell. What are they going to do? They're going to burn deals and they're going to flush out within six months so you have to give them something. But again if it's too tight they're not going to close or they're going to look for ways around it. And your best salespeople, that same part of the brain that it takes to kind of see the seams and run that route and through a sales process, the same part of the brain to get to that and score a touchdown is the same part of the brain that does it internally and tries to figure out okay how can I max out my commission, where do I need to sandbag, what do I need to do, what leverage do I need to pull to maximize it for myself? And sometimes … a lot of times it ends up being very detrimental to the company. So don't give your sales people enough rope where they're going to hang themselves with. So give them a process because they're going to go outside that process so anticipate that and say look here's what a typical process looks like you go from A, B, C, and D. Understand though if circumstance 1, 2, or 3 arises this is where you can jump to, this is what you can do, this is how you can do it. And now you're starting to turn their brain and you're designing where they can cut corners because they're going to do it anyways. So you at least design and you account for it. I always do … figuring out when your P&L six months later after John's left and be like oh shit all of his deals are about to fall through and we just … yeah. And then that happens all the time as much as … no one brags about that right? None of your entrepreneur friends are going to sit around and be like oh yeah I just got shafted for $50,000 of commissions that I paid some guy three months ago and now he's gone and all his deals are about to fall through, I'm about to lose a lot of money. No one brags about that. Everyone brags about the logo that they closed. But that stuff happens all the time I get to see it from the inside.

Mark: Yeah absolutely and keeping that process, you're absolutely right. I hated it when I was in sales especially in telemarketing. Telemarketing is really churn and burn, get through as many numbers as you can and if I did a telemarketing job and was handed a script I guarantee you I freelanced because you know … you hear it, we all get the call … those annoying calls and the person can't pronounce your name and they can't really even … they're tripping over the script and all that sort of stuff and that's an extreme example obviously but having that looseness. Now with a SaaS product, obviously there's a certain amount of expertise that somebody has to have, how important do you see that in the process of developing a sales team to make sure that you're front end people doing product demos and everything else know that product in and out and how much emphasis should SaaS owners be putting on that part of the sales training process?

Ali: It's a fine balance. So here is the thing, knowledge is ammunition and the more ammunition you have sometimes you might use like a tank to try and kill a mosquito because we see that all the time; it's the show up and throw up right? But on the flip side if you don't know what you're selling how are you going to sell it so it's a fine balance. Here's the way that I like to position in and I don't want anyone to get this confusing but I would like to teach my sales people everything they need to know about the product but also more importantly is teach them how to position it. It's more important than teaching them what it actually does and when to bring it up and how to bring it up. Because I think that that's important and once you start explaining that it prevents a little bit of that throw up and show up type of thing but on the flip side and this … everyone's going to freak out when I say this but you need to know this much more than a prospect in order to sell. I have sold things that I have absolutely no clue what I'm talking about for one reason and one reason only subtext. It's not what you say, half the time it's what you don't say. So if you're a really good salesperson you don't need to know anything about anything you just show up I mean not to toot my own horn but I mean like my head is already big enough as it and as you can tell I'm … no one is more impressed by me than me but I've closed seven figure deals not knowing what it was that I was selling. Because if you can ask the right questions not only are they going to tell you everything you need to know but they're going to answer their own questions and all … you just have to know so little and position things. And sometimes it's just as simple as nodding your head and be like "yup, uh-huh, yup" and it's just answering their questions. And then they're like you know what Ali I think I need to move forward with it. People do not understand the importance of subtext. Most sales people will never be able to master that so, as a result, it's very important that you need to be able to teach them. You need to not only teach them what the product does but then how to position. I think that's more important than the product knowledge itself but if we're going to get really philosophical with it in my opinion subtext is far more important than anything else.

Mark: The most valuable lesson I ever learned in sales was learning how to shut up. Honestly and I think it was in a Zig Ziglar book that I read way back in the day where he talked about that active listening and just being quiet and more importantly not just being quiet and looking and kind of blankly not listening but listening to what the prospect says and then being able to simply when you're invited to that point to respond, responding to what they actually say. And we've seen this at Quiet Light and this is completely unintentional, we have a pretty soft approach with our sales process. But what I've found in the past is that when I tell somebody not to sell their business which we tell people a lot because I honestly think it's in their best interest; oftentimes when we tell somebody not to do something the opposite starts to happen. They end up becoming more determined to do it and part of that is just dealing with entrepreneurs where all the smartest people are in the room and they wanted to … okay, I have one more question for you. I have two so if we can fit two in we'll do it but one more big question and this is something that I find to be a problem with a lot of online service based companies and SaaS companies and that is the continuity between the sales person upfront and the back end team; so pretty simple sales person is over delivering, over promising what's going to happen after. Do you consult in this area at all and how can business owners, SaaS owners look towards that continuity between their upfront sales person because not having to do the account management necessarily after the sale?

Ali: See both of that are training, right? A lot of times … let's call me an optimist in this and I believe that most sales people don't typically want to lie and so if they know that they're lying they'll probably shy away from it. Unless you get a shady sales person then all bets are off type of thing but I'd say the vast majority of sales people don't want to lie and it's just because you haven't taken the time to properly train them on what actually happens after the deal is done. So for us, it's very important to sit with customers of SaaS and really understand how because that's really how we create the pitch. So we sit with costumers of SaaS, we see what people are saying, how they're saying it, we interview customers, and once we understand that we reverse engineer the pitch. Once you give someone the pitch it's black and white; what we do, what we don't do, how we do it, and if you're going off script it's very easy to call you in and be like hey brother what's going on here? You're supposed to say we do X, Y, and Z why are you saying one, two, three, and then it happens a couple of times and you help them transition out. But you're 100% right it's all about setting expectations on the front end from a sales person with the prospect so that when they do become a client it's not a problem but you as the founder, business owner, VP, whatever, the sales leader have to also do that. You have to set expectations with the sales people because a lot of times you're like oh … and a lot of times this also happens, I'll be brief with this is the founder is this visionary, delusional, optimist who thinks their product is the best products since sliced bread and is pitching it that way and the salesperson gets all jazzed, full of piss and vinegar, gets excited and says the exact same thing to a prospect then the prospect comes and finds out that half the widgets don't work. I see that all the time too. So just be reasonable.

Mark: Yeah I know. I mean I dealt with that with a service company recently where the sales person showed me graphs and all these beautiful things and I'm like this is so clear like if they can deliver on half this and then I got into the account management stage and there's a lot of tampering of expectations.

Ali: That doesn't work at all. That's on our roadmap for Q4.

Mark: Yeah I'm like well at this point you need to just kind of sit back and just kind of wait for … that's not what I saw, that not what I was told upfront. At what should somebody be thinking about putting in the sales process and I'm thinking again about really early stage people here they're maybe just coming out of beta, they're starting to go off for a launch and they might be hiring one maybe two sales people here. When should somebody be saying we need to start getting this process honed in?

Ali: I'd say first few sell. As the founder, you need to sell. After you've sold a few and you've kind of figured out what happens, what's good, what's not good I'd recommend hiring two sales people; let them battle it out together. Let them feed off each other, learn from each other. The goal is not the strongest survives the goal is both of them steel … was it steel, sharpen steel or whatever. Get back going and before you go and hire employee number … or salesperson number three, four, five, six, ten, that's when you need to start the process. So after the first two people have started to prove it out then go from there. That's when you need to start building it out and systematizing and documenting everything. And now you have become … it makes your life so much easier after that because again sales process is not something that you build once and that's it. It's a living breathing document that's constantly being iterated but you need you to be the foundations start off of.

Mark: How do people measure this? I mean do you set up milestones along that sales process that you're going to be measuring kind of like a funnel or are you just looking at inbound and out as far as inbound calls coming in or prospects and actual conversion rate.

Ali: I mean it's both. I mean you're doing a qualitative and a quantitative. So overall you … I look at the quantitative just so that I can have … it's like a measuring stick but I really believe it's more qualitative. You've got to listen to the calls because there is no perfect closing percentage. And I'm always concerned when someone has too high of a close percentage. When they're like oh I close 80% of my deals I'm like something's wrong there. So you're either selling it too short or you're dequeuing people that you shouldn't be dequeuing, all of this other stuff. So the quantitative will only tell you what you're prepared to understand and what you're prepared to understand is filled in by the qualitative. So you got to listen to calls. You've got to figure out did we sell that for as much as we could have, was that too easy, was that too hard, what was going on in there. You got to figure all those things out and data can't tell you that. Data can only tell you if that improved or didn't improve and if you're not doing the qualitative you very likely are leaving a lot of money on the table.

Mark: Absolutely 100%. Alright I want to talk about some of the success stories that you guys have had at Rose Garden Consulting because really when you start to look at this again I think two of the lowest hanging fruit areas of any business would be conversion rate optimization and two if you have a sales process where you have this on boarding process and you're having that customer interaction improving that process as well because you don't have to do anymore as far as bringing in the inbound traffic, you're just optimizing what's coming in. So I'd love to know more about some of the successes that you guys have had. What are some of the things that kind of stand out in your mind as far as kind of eye popping numbers?

Ali: One of our clients in three weeks we … their average deal was 35k, within three weeks just changing out their process we closed three deals that I think is just over 70 something and then it just kind of stayed there. And it was just by changing up the way that they spoke to their clients. So right there from the qualitative standpoint, we 2X in less than a month. That was a good one. One of our clients and the cases are online and so one of our clients we took from 5 million ARR to 12 million in one year and rank 500 in the fastest growing company. We've got several stories like that but for me the numbers are great and all but for me, it's really … I just like going in there and proving things wrong because the best are the stories in where hey everything is great, we just need to go from 5 to 50 reps and then you start to find things that hey why are we doing it this way, why are we doing it this way? And all the sudden instead of going from 5 to 50 reps to hit their goal we go from 5 to maybe 15 and we're hitting their goal because there was so much money on the table. So those are the ones that I really enjoy.

Mark: Yeah just making the existing team that much more efficient and being able to find out areas where like you said some of that qualitative stuff, they might have a high closing rate but they're disqualifying people way too aggressively or they're just not selling for it as much as they possibly could be. This is fantastic information. Where can people learn more about you or reach out to you if they are interested in getting somebody in to take a look at their existing sales processes?

Ali: RoseGardenConsulting.com is our website. You can always email me at [email protected] rose like the flower. My podcast is For The Close; that's ForTheClose.com so anywhere shape or form hit us up I'm always happy to help and talking sales is my jam so I really enjoy it so anytime I can help I am always happy to.

Mark: And a huge shout out to Jeremy and John from Rise25, they connected us over at Traffic and Conversion. You're actually the second guest that I'm having on who they hooked me up with.

Ali: Second, how am I not the first? You got me right in my fiddles there.

Mark: You know what you're not the first because I had a delay. I had to cancel on you twice.

Ali: Who is number one? Who is first?

Mark: I just talked to him yesterday and you put me on the spot man so who was it? Oh the guy from Sourcify. It's a completely different area and he's talking about sourcing products from all over the world and manufacturing products and a fascinating, really smart guy. He made me feel like a complete idiot. But—

Ali: [inaudible 00:32:31.5] on me.

Mark: You know what I like about having you on is that you're a sales guy cut from the same cloth that I came from and so that's just … I don't know manufacturing like that other guy did. I feel like I could talk more with you although you know infinitely more than I do about scaling up these sales processes and I appreciate you coming on and sharing some of this information. I think you and I are probably going to talk for a full hour just because I could talk about sales forever. I think it's fascinating but yeah thanks for coming on.

Ali: Yeah, no problem. Thank you for having me, brother. I appreciate it.

Links and Resources:

Rosegarden Consulting

Email Ali

For the Close Podcast

For our first entrepreneur acquisition update episode, we are speaking to Nathan Singh, a buyer who made a purchase through Quiet Light eighteen months back. Nathan is a great example of how a buyer can get a good deal and beat out other buyers just by being personable and investing in the seller.

It turns out that it's not always the person who has an all-cash offer on the table that wins the deal. Having a Nathan was more appealing and likable to the seller, won out on a deal, and today we are hearing all about how the acquisition transition has gone for him.

Episode Highlights:

• Nathan tells us all about the two WordPress plugins he bought and what each does.
• Any regrets regarding the multiple and the use of an SBA loan for the transaction.
• The company growth rate and any challenges Nathan's faced.
• Where the growth has come in and what he attributes that growth to.
• Staff retention and how the transition is going within the staff since the original transition period.
• Nathan's tips for an easier transition.
• The importance of involving the customer in order to create a relevant product road map.
• The biggest challenges and successes of the businesses.
• Things Nathan has implemented to ignite that growth.
• Way's Nathan keeps his relaxed disposition.
• Growth Goals for the next 12-24 months.
• Nathan's 3P's advice to entrepreneurs looking to strike out and acquire a business.

Mark: Joe, about a year ago you had Nathan Singh on the podcast. Nathan was a really good example of how a buyer can get a good deal, beat out buyers that maybe have a little bit of a stronger position with their offer or if they're a cash buyer just by being kind and generous and investing more importantly in the person that's selling the business. And I guess it's time for an update from him.

Joe: Yeah, Nathan did a great job. His seller was Syed Balkhi. He owns Opt-In Monster. That's not the one we sold but we sold two of his WordPress plugin sites which are essentially SaaS businesses and Nathan beat out a full priced all cash buyer with a full price SBA deal where Syed agreed to carry a 10% seller note which was pretty substantial based upon the size of the business. And it's a story I've told often in the different events that we go to and here on the podcast so sorry for folks hearing it. I'm repeating it but yeah the first podcast we did with Nathan was all about that and the transition and training and things of that nature and we're doing an update. I think this is probably our first entrepreneur acquisition update. And he talks about what it's been like for the last 12 months; some of the wins, some of the losses, some of the challenges, the team and things of that nature. It's a great episode to see what people have done. I think really probably more like 18 months later. I think we sold it to Nathan in the fall of '17.

Mark: Yeah, I get asked all the time like do you guys follow up with people that have bought these sites and what does it look like a little bit after. And frankly, we don't do enough update follow up with people who have bought so this is good. I'm glad that we are doing this with somebody we're doing on the podcast live so that people can actually hear how the acquisition has gone a year and a half later. Let's get right into it I want to hear from Nathan.

Joe: One more thing I want to just shout out a reminder this new intro that we have, we've got some movie quotes in there. If you can figure out what the movie quote is for the intro go back and rewind, listen to it, put it down in the show notes and we'll give a call out to you in the next episode.

Joe: Hey, folks Joe Valley here from Quiet Light Brokerage and today we have our first ever Quiet Light update or acquisition update. We've got Nathan Singh on the podcast; Nathan, welcome.

Nathan: Hey Joe.

Joe: Good to be back, good to have you back man. I tell your story often. I share the story that it's not always the person who has an all cash full price offer that wins the deal and that being likable is one of those intangible very, very important factors. And for those that didn't listen to the podcast that we did with Nathan, he … I want to say won a deal where someone was bringing all cash to the table at a full price deal and Nathan came to the table just being more likable. He happened to go to the same school as the seller Syed Balkhi. I know it's the Gators, is that … wait a second, hold on, I'm going to put on the hat because I have it. I have it. There it is.

Nathan: There you go. That's the right one.

Joe: And I didn't plan this I just happened to have the hat up in the cabin. It's been there since fall of 2017. So it's … I'm going to get it wrong and Syed he should … he sighed so loudly when I got it wrong. Is it Florida State?

Nathan: No, I would have sighed again, real loudly. Yes, University of Florida.

Joe: I'm sorry.

Nathan: [inaudible 00:04:41.8]

Joe: There it is. There was obviously a quick connection between you and Syed on the conference calls because you both went to Florida State.

Nathan: University of Florida, not Florida State.

Joe: Okay. Folks, obviously I don't pay attention to schools in Florida. I'm from the Northeast originally and we don't follow our college teams at all. Now for those watching the video, my hair looks great. Okay, I just took the hat off. You connected with him on the school but you also connected with him in terms of the way that you wanted to keep the staff in place and take care of them and that it becomes a family or an extended family. And that just really resonated with him and he didn't want to call the end with you whereas the all cash buyer it was all about the fact that he was all cash he could do a quick close and these types of things but it was a little rough around the edges. Syed believed in you, trusted in you, and actually took an SBA deal where he had to not be all cash, he got 90% and so he carried a pretty substantial seller note that won't be paid in full for … I don't remember the exact terms of the deal but probably a balloon payment in year five along those lines. Does that sound about right?

Nathan: Yeah.

Joe: Alright. So you bought Soliloquy and Envira Gallery. Can you tell the audience a little bit about both of those businesses and what they're all about and what they do?

Nathan: Yeah sure. So both of those businesses are pretty similar in the sense that they are WordPress plugins. Envira Gallery is basically a gallery plugin. That's a really simplified way to put it but it's really a photo management system. And if you Google best WordPress gallery plugins you're probably going to see that in just about every result you see. Soliloquy same deal. It's a slider plugin. Essentially if you've ever seen sliding pictures and things like that in PDFs and videos that's what Soliloquy does. But essentially it just makes developers and designers lives a lot easier when they're developing this sort of thing. That's not something they really want to get into so it just streamlines the whole process. The whole gallery management system is there. And it can display multiple galleries in pictures and sliders in a very professional way. And especially for photographers, that's a big deal. And that's what Envira Gallery does.

Joe: Did you have a lot of experience, direct experience in WordPress and plugins and things of that nature before buying the business?

Nathan: Not at all. At least some people actually have worked in WordPress to some extent whether they've blogged or … I've had very minimal. I've looked at the backend years ago at one point I'm like no way. So WordPress has come a long way since then. A lot of people who have … who used WordPress and have been keeping abreast of that news, Gutenberg came out, what it did is essentially went straight for the head of Wix and Shopify and some of the really easy to use platforms for building websites. So Gutenberg is that which is a WordPress site builder. It's built in. It's made by WordPress. So that's the main thing for all users, now you can get in the backend. It makes it a lot easier. But no previous to that I was pretty new to it. I didn't really understand the dynamics and the market but the only thing that I had that was slightly close to that is I developed an app before in iOS. And so it was again it was being a part of this community and having some community standards when you have plugins that are uploaded to the depository.

Joe: Okay. So you were an entrepreneur. You did sell a business. I sold it for you prior to buying this one but no WordPress experience. You bought it … this business with an SBA loan and it paid a what I would say is a fair multiple. A lot of folks might say I think it's strong. I won't say it. You're welcome to say if you want to. But do you have any regrets in terms of the multiple and the use of an SBA loan in the purchase of this business?

Nathan: No I don't think so. Regarding the multiple, we did pay a strong multiple. I knew that going in but I also knew going in … I've gone through hundreds of business over the past few years, I talked to owner things like that. In order to get those businesses kind of like with Envira Gallery and Soliloquy where the churn was pretty good … it's essentially a SaaS business. It's been well maintained. It comes from a good pedigree by way of Syed Balkhi. So all those things played a huge part in me wanting to go ahead and stretch what I was looking to do in that multiple. But on the same end when you're doing an SBA it made that decision a whole lot easier as well. So given the SBA process, I mean I've talked about that in the last podcast that we did as well it was … it's come a long way. And so for me having gone through the trenches and years and years of trying to get SBA loans for businesses with no assets and getting to that point and seeing it streamlined with a guy like Stephen Speer and kind of what Bank United did, it's just … I mean it was like a dream to go through that really quickly. But yeah I mean we're here year later and I don't regret it. The only thing I will say that I kind of … was a thing I didn't sort of anticipate is how quickly the interest rate did change. And it does change year after year but it wasn't so drastic that it affected the business in any way. But it did increase just a bit there so.

Joe: Your loan had a variable interest rate.

Nathan: I think it was more as a result to the Fed increasing.

Joe: Okay.

Nathan: It was something that I was aware of but it was just political things happened and it increased a little bit there.

Joe: Okay. Alright so why don't you tell us how things are going? Are you seeing the business … what, we closed in the fall of 2017 so it's been a little over 18 months, have you seen the business grow? Are you challenged by anything or is it growing year over year at this point?

Nathan: Yes, so it is growing. It's a pretty healthy double digit growth.

Joe: Double digit growth, okay.

Nathan: So no complaints there. Challenges are really again coming and yeah I've been pretty much like industry agnostic every business I got into. Like I usually know nothing about it and I prefer it that way in some cases. And so coming in and learning it I've been attending the Word Camp. I went to Word Camp in US. I went to Word Camp Miami and really connecting with the people that are shaping where WordPress is going. And just some quick stats for people that like numbers, WordPress was around like 25% or so in all the websites in the world pretty much and now they're around 33 or 35% and that's continuing to grow. And just about every major web site that you probably visit is on WordPress. So the fact that that market share is growing there's … that's helped a lot with the organic growth as well.

Joe: Is that US growth or a combination of US and international?

Nathan: I think it's a combination of both it's like it's used in the world but definitely United States I think that WordPress has a pretty solid share there.

Joe: You know it's interesting that's not something that we zeroed in on in the client interview with Syed in terms of WordPress growth. Is it something you thought about prior to and during due diligence prior to the LOI and due diligence or is it just worked out that way that you bought essentially a SaaS business on a platform that is growing?

Nathan: Yeah, I think it was a little bit of both. So I understood that WordPress was … at that time the numbers haven't been released. The numbers are officially sold on Word Camp US or just before. So the actual numbers I didn't really know at what rate it was growing but I did know that just the nature of the open source WordPress community, the fact that they're building a bond and we talked about … a little about Gutenberg during the acquisition as well but just having seeing the route that they were going in relation to all these other paid sites, and what the paid platforms did to me it made sense that WordPress is going to continue to grow. It's got a foundation to expand on and so it did play a little … not a significant amount in terms of the actual business acquisition.

Joe: Excellent. One of the big reasons why you and Syed are working together now was that you were going to bring the staff over, keep everybody involved and you worked remotely from a home office whereas everybody else I think does as well. How has that transition worked out in terms of the staff and you and are you still working together?

Nathan: Yeah, great. Yeah, it's been great so we talked a little bit about this again in that previous interview but there was kind of a bumpy ride with the staff. Again full time they've been with the previous company for several years and they were part of a larger outfit. So there were some worry there that it's just going to be us, essentially four folks transferring over to a completely new owner; my smaller company, how is that all going to work out? I think that just … it was a trust thing and I think after a couple of weeks that they saw that I was in the trenches with them and I was really working to make their lives easier, making sure they're taken care of. You know we went on a retreat, we stayed in Austin, we stayed in a big house; an Airbnb together, really got a chance to bond and we're doing it again this year as well. I think those things all sort of helped build that trust. I mean from where we were to point one just like in any transition when you're taking people's livelihoods and basically giving it to this owner that's completely new and they've never met there's always that kind of anxiety and stuff. But we've come a long way in that time and I'm happy to say that pretty much the entire team is still in place. One person did move on to another opportunity but outside of that, the core folks are still there.

Joe: Oh, that's great to hear. Syed is probably happy with that as well. As far as the training and transition goes I know that normally it's up to 40 hours over the first 90 days after closing is the standard in the asset purchase agreement, have you needed to reach out to Syed and other folks that are in the upper level management side or were of this business beyond that transition and training period so that you just reached out if you had a quick question that didn't come up in the first 90 days?

Nathan: Yeah, I think it was that. It was the first maybe really the first month or two is the bulk of the questions and stuff. Syed was really good about it. We went through training together. Thomas the co-founder was there as well or actually the founder. And so we recorded those conversations, went through each one of the processes and so I had all that. That helped tremendously so if you are selling try doing that. Go through recorded conversations and go through the process of what you do day to day and that really helps for them to not have to ask any questions. They can just look at the video again.

Joe: Oh, it's a great idea and we use a Chrome extension called Loom, L-O-O-M on a daily basis when a broker has a question for me or I have a question for someone else they often just record their screen and send that. What software do you use?

Nathan: We use Zoom.

Joe: Better. Okay. We're on Zoom now and we're recording. Fortunately, as you all will hear in an episode or two I just did a podcast this week. I jokingly said it's the best one I've ever done but I forgot to hit record. So we'll be doing it again next week but I'm sure the guest will bring that up in the podcast for sure. Alright, let's talk about the biggest challenges that you have had since buying the business back in the fall of 2017.

Nathan: Yeah, I would say the biggest challenges for me just like with any other business is kind of getting on that horse and riding it. It was just that the day to day stuff, making sure there was no loose ends that I was missing. I think aside from that it was really that there was not a strong product roadmap going forward. So everything would have gone well until up until that point and I think the team was kind of like well we're just fixing stuff how long do we want to just continue just fixing stuff day to day? And so that was just like kind of shaving a product roadmap, again I'm coming in super fresh so there's not a whole lot I can bring to it in terms of this is exactly what we need to do to take us to the next level, right? But the great thing is since I run other businesses and you kind of get a process within yourself that you can apply to these other businesses and for me, it was like let's ask the customers. And that's exactly what we did. We went straight to the customers, put out a survey; short, less than 60 seconds to complete. What are the features you like most, what do you want to see, how are we doing, stuff like that and they let us have it in a good way mostly.

Joe: In a good way, okay.

Nathan: And so the great thing is that they were happy with this feature set and they provided some stuff that would make them much more happier. And so that is what we're working towards right now.

Joe: So they gave you that product roadmap and then your team is working on that. You're not working on it, you're just visionary and they're actually doing the actual work itself, right?

Nathan: Yeah, you're right the developers … you know what I did is basically help create prioritize the roadmap. And so the things we have to do first which is we got to rebuild some of our functions and things like that. That's the most important part; to keep … to build on that foundation. And then outside of that, it's going to be basically hitting those priority items and then doing those in truncheons as we move along based on that.

Joe: What would you say are your biggest successes or triumphs? Things that maybe they were a challenge but you've overcome them and see that it's maybe something that kept you up at night but it's changed and it's a big part of your business now. Anything like that?

Nathan: I think for me it's been a little bit of the marketing, kind of the way to take the market. WordPress is a little bit different in the sense that we have three versions that are on this .org repository. They've got somewhere in the range of 150 to 180,000 active users or active installs, probably more than that with Soliloquy. And so there's not a lot of data we can gather. And up until recently there wasn't a lot of … there's not a funnel that you can put them through to bring them over to the paid versions because again it's actively monitored and it's a lot different than if you have a trial version and you're moving them on to a paid version of the funnel. So I think the challenge was trading out ways to get around that and still playing by the rules. So again opt-ins we've recently put in opt-ins in the free version that wasn't something that we could do previously but things in WordPress community has changed. So that's going to be a huge boom for us. Aside from that kind of marketing directly to the WordPress base, a lot of designer and phyto developers that are used to a certain thing. So one thing they weren't used to was re-occurring payments, annual subscriptions and things like that but honestly, it's become something of paramount importance to anyone that's running plugins that they have to be running a SaaS type program in order to survive or else you won't be able to make it.

Joe: Have you changed the payment system with these two products? Have you changed the way that the customers are paying for it?

Nathan: The payments have stayed the same. I think a lot of it was showing them the value of continuing that.

Joe: Okay.

Nathan: Because again WordPress is a little bit tricky because once you pay for it once you basically own it for life.

Joe: I got you.

Nathan: So here that is really … is bringing in those value added updates and the value added support; the source support is probably like number two on our most celebrated feature of Envira Gallery and Soliloquy. We get it all and we saw it in the survey as well. So making sure that we're doing everything we can for that customer experience just from the support standpoint and not only at the stuff that we're doing as far as updates and things like that.

Joe: So you really brought your marketing experience and expertise into the business and that's how you're triumphing in a sense. Is that what it is attributable to the growth that you've seen, the double digit growth or is it that it was going that way and you're just on for the ride and making sure you don't break it.

Nathan: Yeah, I think there's a balance between those. So initially … mostly when I go into these types of acquisitions I'm looking for something that's like the first year I'm learning. It's not like I can insert myself and change things at day one like say if you got a content site when essentially you're dealing with software. So it's always very different, the base is different, and then the software base is different in terms of developers and things like that. So for me, it's applying the past knowledge of just making a great intuitive software, changing up the interface to what I believe is just a more … a better user experience, and outside of that applying some of those basic marketing things that just need to be done. In this case a lot of that, the basics have been done, but it's that out of the box stuffs that really needed to get taken care of.

Joe: I love that first year just learning approach. I see lots of these businesses that are listed and sold. There's a certain amount of year over year growth and the goal is to at least sustain that. And I had a call this week with someone that blew up the SKU count dramatically and it was his kind of biggest failure but at the same time it turned out to be a little bit of a triumph as well because there are some SKUs that are now generating an awful lot of revenue. But there's also a great deal of loss there as well. So I like that learn in the first year process. And what kind of things are you working on now that were never done before in the business?

Nathan: Yeah, so there's a couple of things that have also attributed to the growth outside of just again being a SaaS business with not a terrible churn. And the churn for WordPress businesses I think is probably a little bit above average of what other people see in WordPress. Again you buy one so you can potentially keep it. So outside of that, it's been growing. Our affiliate revenue, that's been increasing pretty tremendously. But we had a lot of articles that had been written that were getting pretty decent on the traffic, didn't have any ads on there, didn't have really any affiliate links things like that. So that's one of the things putting in those affiliate links, building more articles around those really high performing traffic. I think at the time this wasn't taken to do that and sort of nurturing that so that's … I've seen—

Joe: Are these affiliate links for other plugins or SaaS products or physical products or a combination of all three?

Nathan: So the shoe in for us really became the funnel editing tools. We did a lot of … there's been a lot of [inaudible 00:22:24.1] done, tools such as Photoshop and things like that. And so lot of traffic to that kind of stuff. And it just made sense to start saying hey if you don't have Photoshop and you want to do this stuff that you see in this tutorial here's where you can go. And that's pretty much it. And then building off of that and saying what are those Photoshop competitors are out there well there's Skylum Luminar, there is Capture One, there's all these different types of photo editing tools that are kind of riding on the coattails and maybe on the heels of Photoshop. So writing tutorials for those and the same type of strategy that was used and say hey if you don't have it you can go get it over here.

Joe: That seems like such a logical thing to do, slow down and read the article, what are people looking for, what can we … Do you know what you're doing? You're helping the audience. They're reading an article about editing and you're then offering them the best photo editing tools right there within the article and you happen to be making money off of it as well.

Nathan: Absolutely. And it wasn't the intention of just skyrocket the affiliate. It just made sense. I was like a rational person would mainly look at that and be like you know what this is already an article at Photoshop so you probably already have it. That's not true. There's a lot of people that wouldn't make something black and white and something color in the black and white picture but they didn't know they needed specifically Photoshop to do it. So they end up going … picking up the Creative Cloud plans 9.99 or 19.99 or whatever a month not three or $400 as it used to be. So it's just a lot more easier and accessible.

Joe: How did you find the affiliate platform to use, those affiliate themselves?

Nathan: Yeah. So share sell has already been in use in the previous ownerships so that's just one of those things. But in this case, it wasn't really even bad. It's just getting … just registering for the program and dropping them the wings and saying hey I should always focus on this some more too because it looks like to be growing.

Joe: Pretty easy stuff then.

Nathan: Yeah.

Joe: Now you mentioned an e-mail list as well; you've historically had lots of free users, a huge e-mail list. Have you ever done anything with that and if not are you planning to do anything?

Nathan: Yeah. So the free versions, there was really no list before because there's no way to collect emails from before. So we've started an opt-in for that which again I think is only … it's been a few couple of short weeks but already we're seeing the results come through. The only … the list that we do have is just essentially people that have paid the pro. But the great thing is we're able to cross sell with Soliloquy because generally if you need something like Envira Gallery you probably need something like Soliloquy.

Joe: Yeah.

Nathan: So that's continuing churn along as well.

Joe: That's fantastic. Nathan you look so happy and relaxed and just chill, are you always this way or is it you're just in a good position in right now that you're running this business and see the trends and whatnot? I mean what's the deal? Let's get simple.

Nathan: It's a little bit of both so I would be in positions where things were going absolutely terrible and so the short answer is I meditate every day so that I just accept things as they are so that makes life a lot easier for anyone listening. The second part is I think it is that I paid a higher multiple but I've got the security of if all else fails and I can't figure out what to do it will still follow some level of revenue that was expected. So outside of that, I was just building upon that success that's already sort of continuing as well.

Joe: Excellent. What's in the works of … goal eyes what are you looking at in the next 12 to 24 months? Anything that if we come back for the second update in another 12 to 24 months what are you hoping to achieve?

Nathan: At a minimum, I'd like to achieve that same double digit year over year growth. But I think again entrepreneurs try to go all triple digit all these different revenue channels. Again I opened up the affiliate revenue more and that's beginning to be more of a significant one. But a couple more like that I think would be interesting and just continued growth man. I mean the main thing is … this is one of the things we discussed earlier. It's just that focus on the customer; making sure they're happy, making sure that we're hitting all those needs and then the business kind of just takes off by itself if you're hitting all those things.

Joe: That's it. A clear and simple plan; not too complicated. Focus on the customer makes a lot of sense. Any words of advice from one entrepreneur to others in the audience; people that maybe they're working in the corporate world and want to be the next Nathan Singh. Any advice that you can give in terms of running your own business and overcoming challenges and things of that nature?

Nathan: Yeah, I would put it safely into patience, persistence, and presence; those three things.

Joe: Alright. Patience I get that. Persistence I get it. Presence … meaning?

Nathan: Meaning I think as entrepreneurs what we get into is too much looking around to see what someone else is doing or where they wanted to be in a couple of years and getting super stressed if they don't hit those goals. Remember that is just your perception of where you wanted to be, reality happens different things. And I think that if you're approaching everything in a present moment, I'm not trying to sound like a spiritual guru here.

Joe: It's just natural though. I like it. Keep going.

Nathan: If you're approaching everything in a present manner you're likely to focus on what you're doing at this point and not be so stressed about all those other stuff. Because essentially that's going to be what's going to mess you up; it is worrying about the future, worrying about how things are not going, things like that. Focus on what the problems are at the current moment and do those things at that minute, at that second and just kind of block everything out. I just feel like everybody is uniquely designed to run their own race. So don't look left and right just do your own thing and you'll get to where you're trying to get to.

Joe: I like it. I like it very much. Nathan Singh thank you very much for coming back on and giving us the first ever Quiet Light update. I look forward to doing this again. I wish you the best of success.

Nathan: Absolutely. Good talking to you Joe.

Joe: You too.

Links and Resources:

Envira Gallery

Solliloquy

When sourcing an Amazon business, there are many complex factors that go into finding the right product and getting the right margins. Today's guest founded Sourcify, a SaaS product that helps people source the product and improve the manufacturing process. Sourcify takes a look at every factor possible when building out margins and lead times to optimize the logistics behind the ordering process. By decreasing costs, revenue increases and therefore the value of your business goes up.

Nathan Resnick started this fast-growing b to b software-driven sourcing company in 2002. His fascination with e-commerce and foreign imports goes back to when he was living in China as a high school exchange student and started importing products to the US, making a few thousand dollars a year. He started a Shopify store at age 19 and reached his first six-figure income year. Nathan became fascinated by the process and the capacity of these factories. Sourcify makes it easy for you to bring products to the marketplace, streamline errors, and cut unit costs.

Episode Highlights:

• How Sourcify's offices are structured for optimal global presence.
• The current tariff policy issues and how Nathan recently landed in the press.
• Ways a strong team and strong factory relations benefit both sides of the sourcing process.
• IP protection and factory relationships.
• Percentage margins sellers should look for in a factory.
• Shortcuts to avoid with suppliers.
• The importance of having quality control parameters in place before shipment.
• Markets where Nathan sees production increases emerging apart from China.
• One of the most common problems with Amazon business when it comes to inventory management.
• Avoiding duties and taxes via Mexico. The domestic and international laws that can allow for this at certain values.
• Mistakes in creating and retailing that Nathan sees and his tips for going around them on the manufacturing side.
• How important/beneficial it is to visit the factories for e-commerce entrepreneurs.
• Scaling up and understanding the factory's capacity to match that scale.

Joe: Mark, one of the biggest challenges for startup entrepreneurs much like Amanda talked about on the podcast is sourcing great products. There's lots of experts out there with podcasts that help and they're very, very good information but sometimes people need a little bit of a boost; a little hand-holding. And I understand you had Nathan Resnick from Sourcify on the podcast to talk about just that.

Mark: Yeah, absolutely. So he founded Sourcify.com which is a SaaS product. They have thousands of pre-vetted factories, hundreds of product categories, and what they do is they help you source that product and also improve that entire sourcing process. Because there's a lot of complex factors when it comes to A. finding the right products and then B. making sure that you're getting the right margins out of those products and getting your timing right. I mean Joe how many Amazon businesses have you looked at where the owner says well if you could just figure out the inventory ordering system because I missed out and ran out of inventory business could have done so much more. It's like every single business, right?

Joe: Every single one I asked the question have you ever ran out of inventory? The answer is always yes, the follow up question is how much revenue did you lose during that time period and then how do you overcome that? And yeah it's often working capital, better planning, software, things of that nature. It's always a challenge though.

Mark: Well, so the software does this. It takes a look at … and he explained this. He says imagine you're selling watches; you're not just working with one factory because that factory might be ordering the wristbands from a completely different part of the world and so you need to factor all of this in when you are building out your lead times and also understanding your margins as well. And so we talked a lot about how do you negotiate better rates, when should you negotiate better rates, how do you establish good relationships with your manufacturers and other ways that you can really optimize logistics behind your ordering process. This guy … I'll just be blunt, he's way smarter than I am.

Joe: Okay, well that's not very hard though Mark. Come on now.

Mark: Well, that's not. That's like 95% of the people in the podcast.

Joe: I understand he had one really, really cool tip in terms of importing.

Mark: I'm not going to try and explain what it is here on the intro. You're going to have to wait and listen for it but he talks about using Mexico as a place to import products to be able to save a substantial amount of money on that importing process. So I'm going to let you guys listen to that and tell me … send me an e-mail if you found that tip to be absolutely killer because it literally … like you'll probably hear me in the interview, he threw me off my normal pacing that I don't have because I didn't know where to go. I was like wow that was really an incredible tip. So listen for that and … yeah, a really interesting guy who's done a lot in just a couple of years.

Joe: Well, I think any tips and tricks that people can learn to decrease their cost increase their discretionary earnings increases the value of their business if and when they ever decided to sell it so I'm looking forward to listening to this one myself. Just a quick reminder everyone, movie quote, if you heard it, if you want to rewind, if you know what it is, drop it in the notes below and we'll give you a shout out on the next episode.

Mark: Nathan thanks so much for joining me.

Nathan: Mark, it's my pleasure. I'm really excited to be here.

Mark: You and I just met. We met at Prosper Show. We talked for I think like two minutes before I was like you got to be on my podcast. I want you to come on board. And you were very gracious to agree. Would you mind giving everybody just a quick background on who you are, the company you're with, and why I asked you to come on the podcast?

Nathan: Totally. Yeah, I mean I run a company called Sourcify. We are the fastest growing B2B manufacturing order management system. What we do is enable companies to source out the best factories in the world as well as bring their supply chain online so they can be data driven and understand how their unit cost, lead times, and quality defect rates have been fluctuating per product and per factory. People always ask okay Nathan how did you get in to all this? And really it actually stems 10 years ago. I was living in China as a foreign exchange student with a host family that didn't speak English, attending a local Chinese high school, and started importing products from different markets in Beijing where I was living. So we import all sorts of products, sell them on e-Bay and Amazon. In high school, I think senior year where you're just making a few thousand dollars a month and then by the time I turned 19 I had my first low six figure year through my own Shopify store and really just became so fascinated by e-commerce as well as the power of these factories to produce all sorts of products. So about two years ago I started Sourcify and we've been on an awesome journey so far. I'm really excited to continue to help organizations streamline and optimize their production overseas.

Mark: Yeah, I just was doing a little bit of show prep here and people that listen to the show are probably going to laugh at that because we don't do a ton of show prep. That's why I don't do the intro. But you've gotten some really impressive press with what you're doing. I saw Forbes publish a piece on you and the growth in Shopify. Share where your offices are right now. You have multiple offices all across the world.

Nathan: Yeah, so I mean kind of crazy [inaudible 00:06:05.0] with us and press was last year, especially with this China trade tariffs. Everyone was talking about how these tariffs are affecting companies that are importing products from China. And for us we have offices in China, Vietnam, and India and run production everywhere from the Philippines to Pakistan; basically every country in Asia. And so we became a hot topic. We were on CNN, CNBC, and nearly all over the news and it was an exciting time and still is. I mean I think really if you looked at China as a whole it's gotten more expensive and so for us, we've got three offices overseas and then in America; we're headquartered in San Diego and have small offices in Las Vegas as well as [inaudible 06:43.7] Utah, right outside Salt Lake City.

Mark: Yeah the Las Vegas area, that's got to be just for all the conferences that are held there right?

Nathan: Yeah.

Mark: I mean we're always out there.

Nathan: Yeah. Not for all the partying.

Mark: Right. I wish I had known this a year ago … or not a year ago but when all the tariffs that was hitting. I had James Thompson who's the co-founder of Prosper Show. I had him come on the podcast and we were joking that we had to have a Canadian come on the show to explain US policy as it relates to China but cool. How old is Sourcify?

Nathan: So we started in March of 2017 so just about two years old and it's been a pretty amazing journey. We produce in over 300 product categories; everything from hair extensions to bags to bunk beds. I mean you name it. Our abilities are widespread and really that stems from having a strong sourcing team as well as strong factory relationships. So a lot of times organizations when they work with Sourcify they're able to increase their margin just by buying in volume through our customers that might be producing similar products and so that's one of the main benefits I think.

Mark: Yeah, I want to get into a lot of the kind of details of these … of sourcing products and also some of the differentiation. And you kind of … you touched on something that I was going to ask about so I'm going to jump the gun a bit here with this. Is this an open sort of book where you can see some of the other products that are being manufactured here and if so the question [inaudible 00:08:12.1] Joe's mind is protection of IP through your platform. What does that look like? How do you protect people's intellectual property?

Nathan: It's a great question. So first and foremost every customer that uses Sourcify has complete transparency. They can see who the factory is and our goal as a software driven sourcing company is to enable these organizations that work with Sourcify both buyers and factories to have better workflow management and a production process to actually understand what's going on in the production runs. Right now like pretty much every company we talk to is using e-mail and Excel spread sheets to manage production and that works to an extent but it gets very complex. And so from an IP perspective number one every customer keeps their factories in their own database and number two basically when we talk about IP it's protected at the borders. So a lot of organizations and a lot of people ask Nathan should we go try to file trademark, should we go try to file patents in China or through Asia and most of the time it's not going to be worth your money or time to go out and try to file those patents or trademarks in China. But what you should do is file trademarks and patents here in America on your products. So if a company is importing your products under your brand name or trying to sell on Amazon under your brand name a lot of times you can show the Customs and Border Patrol or Amazon themselves and say hey I own this brand, this company is clearly knocking me off. I did not authorize them to import or sell these products on my behalf. And the right thing that these law enforcement agencies or Amazon should do is to give you full control of your products to sell them yourselves.

Mark: Okay cool. So let's talk about you've already mentioned that some of these guys are kind of they're starting out with these in Excel spreadsheets and to control the manufacturing process and it works for an extent. I would love to know because in our world we're helping people prepare their businesses for sale. We run into this all the time. We have people who come to us with all the metrics that they think they should be presenting and all the metrics that they think are important when it comes to selling and then we have to kind of adjust their mindset as to alright that's a good start here's what we should be doing. So let's start with this, how do you find people mostly attack that product sourcing and product development?

Nathan: Yeah I mean I think first and foremost it stems from a vendor analysis. Are you actually working with the right factory that should be producing your product? Hopefully, you've done enough due diligence with your supply chain to understand if you're working with a factory or trading company or wholesaler or agent. Best bet is you're working with a factory that's great, that's fantastic. Hopefully, you haven't outgrown them. There's a lot of organizations that we see haven't renegotiated their terms or prices in two or three years and you've 10X the production volume that you're buying at and you're still paying a higher rate. I mean the smart thing you do is go renegotiate those existing contracts and prices with that factory. If you do an analysis and you find out you are working with a trading company or agent number one you've got to understand okay how much margin do I think this trading company or agent is making. We see a lot of organizations that a rep will say we see the factory numbers they're only making 1% or 2% on my production run. I mean unless they're a really large scale facility that's trying to just take up but like keep their production line going there's no business that's going to run off of a 1 or 2% margin. I mean you can't even put bread on the table with a 1% margin in most organizations. And so when you come with that perspective in mind and you think that you've out negotiated everyone and really have a strong factory it's not to say that they're not strong factory it's just to say that I mean I don't even think you should try to get your factory to run on a 1% margin because it's just not sustainable. They'll probably be even making quality cuts or messing up the lead times or working with the wrong vendors because I think what a lot of people and supply chain team members don't necessarily understand about manufacturing is that most of these facilities that are exporting products to America or Europe or wherever your products are going are dealing with a lot of sub suppliers. So they have suppliers that handle the different components that make up your products. So, for example, let's say you're producing watches. Those watch factories are going to have the watch strap, the watch taste, the watch movement, the watch hands; all of these little pieces that make up that watch are assembled and put together by the factory that you're working with. And until you get to a scale where you're spending at least a few hundred thousand dollars probably more so a few million dollars on production overseas you aren't going to dive into those sub-suppliers and really understand okay how much is each little component costing. And even then building relationships with those sub-suppliers to cut costs is not going to be worth your time until you're spending a significant amount of money on production overseas.

Mark: Yeah. So what margin should people be expecting there? You said 1% is probably not realistic. What should they be expecting?

Nathan: I mean we've had the opportunity actually to invest and buy factories at Sourcify and we haven't done that and I don't think we will in the near future. But I mean most factories that are attractive to us are running on at least 15 to 30% gross margins and I think that's sustainable. I think as a business you want to have some margin to reinvest in new machines. You want to have the margin to invest in your team. You've got to have margin there to grow and create a good environment. And I think that's a key dynamic of any business let alone factories and especially even factories when sometimes especially as your brand might grow you try to sell into larger retailers like Walmart or Disney or whatever it may be. Those larger retailers have their own requirements of your facilities to be able to sell your products in that retailer. So if your factory can't pass a Walmart cert or a Disney cert you're not even going to have the opportunity to sell into those larger retailers.

Mark: Yeah, so that makes sense to just be investing and making sure that … I think that the mindset that I hear sometimes from both buyers and then also some of the owners of these businesses when they're renegotiating these contracts over and over with their suppliers is forgetting that on the other side there's somebody still trying to run a business and it affects that downstream quality. I'm sure it's downstream, probably upstream quality of the product that you're getting in return and trying to sell which leads nicely into my next question which would be what are some things that people should be looking out for with their current supply chain and maybe trends over time? Everything starts out good with the first batch of products you receive and everything is going well, what should things that would people be looking for on a regular basis from their suppliers?

Nathan: Definitely. I mean I think first and foremost there's a lot of people that I think try to take short cuts in their supply chain. I think the biggest short cut that I see people taking is not booking quality control inspections before shipment and before you pay that production balance. I mean you can get a quality control inspection done through our partner for QC is Asia Inspection. They just rebranded to Qima. They charge under $300 or around $300 to send a person to the factory to inspect those products before shipment and before you pay that deposit. And if you don't have a quality control inspection process or program in place you're going to be getting a container load that might have defective products or might all be wrong and there's no reason for you not to put those checks and balances in place on every single production run. I mean I don't care if you've been working with the factory for two or three years there's always going to be some products that might be defective. And I'm not saying these QC teams are going to check every single product. They might check 10, 20, 30% of the products depending on the size of the production run but at least you have images and an analysis of what's going on with those products. And sometimes these are very simple mistakes or quality defects where like for example on … I know one of the production runs that we had going on this week there was threads that hadn't been cut on these bags. There were loose threads. We said hey before these are shipped we like all these threads to be cut. We don't want these bags coming into America with these threads hanging out. So sometimes it's very simple quality control metrics and other times you find out the code being on certain furniture or certain lamp is wrong whatever it may be. And so having that in place I think is really just a must. I mean there's no reason not to have quality control in place before shipment because you don't want your products showing up at an FBA warehouse or your own warehouse and you find out oh wow the 30% of these products are defective. So you've got to have checks and balances in place before shipment and then also one of the things that we do at Sourcify that I recommend everyone do if they can depending on their buying power is say to their factories and put in contracts, say we aren't going to pay for defective products. If the products don't meet our quality control inspection we aren't going to pay for them and we're going to discount them from our purchase order. So let's say 3% of your products have quality control defects, well now you're saving 3% of your PO because those products are defective. And so putting that in writing, making sure that's clear with the factory is really I think the biggest kind of misstep I see companies doing when they're producing products overseas. And then when we talk about trends it was really the last year it still is right now but transitioning and diversifying supply chains outside of China is huge. I mean so many companies literally every single day are talking to us about producing products in Vietnam, India, Bangladesh, with Philippines. I mean all across Asia. I was on a flight last quarter the Philippines back to Guangzhou from Manila and on my right and on my left were two Chinese factory owners that have just transitioned some of their facility to the outskirts of Manila to start factories in the Philippines. And the reason being is labor rates are more affordable in the Philippines and other parts of Southeast Asia. The biggest challenge stems from the operations of a factory which these Chinese factory owners already know how to operate a factory effectively and you know really just the raw material where do these raw materials come from or produce these products. These factory owners in China have that figured out and there are some free economic zones in certain parts of Southeast Asia where you can actually import products from other countries into this free economic zone, manufacture the product in that economic zone and then export it for free. The benefit of the country is just to really increase labor rates in that area. And so that's I think really the biggest trend and kind of what's most overlooked in current companies that are producing products overseas.

Mark: Yeah, you anticipated one of my questions which was the different markets where you're seeing production increase. I know with the tariffs were being threatened and imposed there was a lot of question about well where can we go if these prices rise up? And dump tell that in with some of the reality of the issues that Amazon sellers are dealing with producing China, right? This three month kind of standard lead times if you're shipping on an ocean it makes it really difficult for people to manage their inventory. So on this side of the ocean what countries are you seeing emerge at this point as potential viable players if any?

Nathan: Definitely, I mean I think right off the bat I want to touch on the inventory side in terms of inventory planning. I think we're both friends with Chad at Skubana. I think they do a great job of inventory management and helping you manage that across different channels. One of the key components that I think a lot of companies fall short on is how do you tie that data into factory lead times. And so when you can take lead time data from Sourcify and tie it into you inventory analytics that you have through a tool like Skubana that's a lot of powerful insight that you can put together. And when you're starting to diversify your supply chain outside of China you've got to understand that now the raw materials are potentially coming from a different country than your products should be manufactured in. So for example in Vietnam, we work with a pretty high end apparel brand and they get their fabric from Taiwan. It's about a two week lead time to get the fabric from Taiwan and put it to their facility in Vietnam and all the cut and sew there and so another timeline that they have to put into their analytics and planning. I mean I think forecasting is a huge challenge with any e-commerce business. Ad I think in any … I mean you probably see this all the time in any Amazon business or any e-commerce business a lot of times when you're going through a high growth period there's going to be a time where you're almost running out of inventory or you did run out of inventory either because you misplanned or because you're going to have to cash to put in the inventory. And so I think it's a crazy dance that these e-commerce companies play when they're trying to understand okay how much money should I put in the inventory, how much should I spend on paid acquisition. It's a balance that's really hard to figure out on the early days and until you have the data to forecast more effectively you're going to be playing that dance. And I don't know if there is like a one size fits all answer. I mean you might know … have a bit more insight in regards to that than I do but I'd be interested to hear your thoughts on that.

Mark: No. Honestly again I mean as I know a lot of the people that listen to the podcast here are looking for their own acquisitions and they're trying … they look to this podcast for some insights and if you can figure this one part out this is the number one problem that we … no maybe not the number one problem but one of the most common problems I see with Amazon businesses is that most have some level of seasonality; typically Q4 unless … but I mean not always but some have some sort of seasonality. And so we see one of two things happen either they run out of inventory at the most crucial time of the year on some of their best sellers or they overbuy or their shipment dates miss the seasonal period. And so let's say that you overbuy and you have a seasonal product where you're hitting December … November and December for that Q4 Christmas rush now January hits and you got to sit on a whole bunch of inventory for a year. Or even worse … and again this happens more often than people might want to admit, they get those shipments late. They get them the second week of January. And it could be even more difficult if you have spring seasonality because you have Chinese New Year in there. And if you get caught up in that well you can completely miss all of your windows there. So the idea of combining something like Skubana; yes Chad is a friend. I had him on the podcast. A great guy. Super smart. Combining that with Sourcify, anyone who figures that part out most of the businesses that we list are undervalued in some way given that they've missed their hot periods one way or another.

Nathan: Yeah I mean I think that ship times there is something that you should be able to control in terms of planning at an early stage. That could be a bit challenging, I could see. But in terms of your ship times I mean that's something that you should really have under control and under wraps with your freight forwarder and with your factory. What's crazy to me just talking about ship time briefly is that even a lot of freight forwarders they're getting looped into factories over e-mail and trying to go back and forth to schedule a freight pickup. I mean all of that should be able to be effectively synced up and e-mail is a fine channel to do that but I mean I think there's got to be a better method. I mean a lot of companies that use Sourcify they link in their freight forwarders so they communicate directly with their factory online and track what's going on. But otherwise it's just a bunch of people CC'ed on different emails and it's actually kind of entertaining sometimes to see the back and forth between a factory and a freight forwarder got to figure out when they can schedule a pick-up of products.

Mark: That's fascinating. Alright, I'm not going to skip on the other question though about this side of the ocean countries and emerging markets if any and maybe you are going to say this—

Nathan: Oh in terms of like North America?

Mark: North America or even South America, but [crosstalk 00:23:42.8] three month sort of lead time.

Nathan: Yeah. So I've actually been doing a lot of research into Mexico. We're headquartered in San Diego and so there is a huge amount of opportunity in Mexico just south of the border here. And I think it stems from … basically, it's kind of a similar dance that these companies play that are transitioning production outside of China is where does the raw material come from. There's a lot of … not a lot of raw material sources in Mexico and so a lot of those facilities that are doing injection molds or cut and sew are importing those products from other countries. But there are a lot of companies that are producing products in Mexico and I think it's a growing opportunity. The other dynamic that I want to touch on that a lot of e-commerce companies are starting to look into and I think it's a huge trend is actually handling their warehousing and fulfillment right out of Mexico just across the border from San Diego. And you can actually if you're doing pick and pack B2C shipments directly to consumers you can actually avoid duties and tariffs no matter where the product was produced. And I'll walk you through in how this works. So basically you can avoid duties and tariffs by handling your fulfillment and warehousing in Mexico while having the same experience as if these products were fulfilled from California. And the way that that works is there's two laws you have to know of. Number one is Section 321 which is an American law that says when you're importing a product that's valued under $800 you don't have to pay duties or tariffs and that product. The law number two that you need to know is the IMX program which is part of NAFTA; the North American Free Trade Agreement, and what that enables our organization to do is import a product into Mexico and export a product back into America without having to pay any duties or tariffs between America and Mexico. And so the way that this works is that you import your products from China or Vietnam or any country that are producing these products to import them in bond into the port of Long Beach, have them trucked down in bond across the border, warehouses directly across the border from San Diego, your warehouse and pick and pack your products out of there. Every time you have a customer and buy a product in your website it's pre-labeled in Mexico and there's trucks going across the border every single day and under Section 321 because those products are pre-labeled and each under $800 in value you don't have to pay duties and tariffs on those products. And it's basically these trucks go across the border every day, drop these products off at USPS, UPS, FedEx, there's distribution centers literally right across the border from Mexico and San Diego and it's been incredible doing research and exploring that dynamic down there. And there's companies that are literally wiping off millions of dollars in duties and tariffs from their balance sheets just by handling fulfillment and logistics out of Mexico. And there's a lot of big companies that we all know like Taylor Guitars, Bombas Socks, these hundred plus million dollar organizations have been doing fulfillment and warehousing in Mexico for three plus years now. I mean it's really a robust operation and there is one provider that I know of called Baja Fulfillment that handles mid to smaller sized e-commerce companies. But for the most part, most of these organizations are focused on larger enterprises because that's where you're going to get the volume.

Mark: That is phenomenal. It's actually such good information you knocked me completely off my game as to the other questions I wanted to ask.

Nathan: Well, I mean we can answer questions in regards to this because a lot of people don't necessarily understand the dynamics and how it works. It's nothing necessarily new but here's the key dynamic. So every drop shipping entrepreneur that's drop shipping products from China into America they're using Section 321. That's how these e-packet shipments work because you don't pay duties and tariffs on those products because each one is pre-labeled and pre-sold and shipped over via China Postal Service and then USPS into America. And the reason why those products are so cheap is number one those shipments are subsidized by our government. There's a lot in the air in regards of those if that's going to change but Section 321 is here to stay. I mean that's a law that's been passed through Congress even if something were to happen … would happen with our current Trump administration I mean he wouldn't be able to change it himself is basically what I'm saying. And so there are millions of packets that come into America every single quarter that are based on Section 321. The key dynamic here is instead of having to warehouse your products in China or wherever you're producing your products you can actually import the container duty free, truck it down to Mexico in bond, and then you're basically picking and packing those products out of Mexico with the same fulfillment experience as if it was out of California because these trucks are going across the border every single day. So it's pretty crazy dynamic and there's not many providers or even e-commerce companies that are really doing it right now. But being here in San Diego it's something that I've been spending a lot of time on and really just become very interested in.

Mark: That's fantastic; I'm going to completely shift gears mainly because I don't have any questions on that. That was a phenomenal bit of advice. I want to talk a little bit about that product manufacturing process and developing new products. Obviously most e-commerce businesses you need to be continually releasing new products or at least variations on that. What are some of the mistakes that you see from people creating and retailing some of these proprietary products in that process of looking for the factory, the manufacturer, and maybe shortening up that exchange that happens between the manufacturer and eventually getting it out to retail?

Nathan: Yeah definitely. That's a great question. I would say if it's a product under IP protection what a lot of companies do is have one piece made at one facility, another piece made at another facility, and then either have one of the facilities assemble it or assemble it here in America. I would not suggest really assembling domestically just the labor cost and headache is going to be too much. But sometimes it doesn't make sense to diversify your supply chain to have more IP protection under place. I think at the end of the day a lot of this IP protection in China really revolves around your factory relationship and dynamic with them. But then again if it's a really, really hot selling product like these fidget spinners or the inflatable chairs that came out the other year; those things shot up like a rocket ship and literally everyone was claiming to sell them and invent them and all this is craziness. So I think really when it comes IP protection it still stems from having that dialed in here domestically but overseas it's a matter sometimes of diversifying your supply chain, building a relationship with your factory, and I would also recommend visit them face to face. I mean I'm in China once a month at our office in Guangzhou and in Vietnam and it's a lot of travel but it really helps us establish a brand and connection overseas.

Mark: How important do you think that is? Because I've had clients play on both sides where they are there at least once a year, I've had other people say I visited once like five years ago and I just don't see the need to visit more frequently.

Nathan: Yeah I mean I don't think it's necessarily a need. I think it depends on your business. For us, we've got a subsidiary in China. We have a dozen or so full time employees in China and more in Vietnam and in India. And the dynamic there is mostly just our business puts me in a position where it's a lot of management and making sure things are operating smoothly there. But if I was an e-commerce entrepreneur I mean as long as I have my checks and balances in place, communication is fluid, and everything is going smoothly, there's not necessary a reason to go over there. All you're going to do is see the facility, probably have some tea at the facility, grab dinner, maybe drink some bijou or something and basically break bread with your factory which is awesome. It's a great experience and really a cool culture dynamic. But I think if you just … if you're really going over to optimize costs or really negotiate in person I mean that could be beneficial especially if you're having a challenge with kind of things getting lost in translation between communications with your supplier. So I think it depends on the business. I mean I know eight figure e-commerce companies where the founders have never met their suppliers before and do exceptionally well and I know eight figure founders that don't go … that go over once a quarter or pretty often. So it depends, I mean I don't think there's a one size fits all answer to that. I just think it depends how your supplier has been performing and I think it's the key question that you have to ask.

Mark: I want to talk real quick about scaling and also scaling up with the factory and their ability to match scale. Have you seen clients run into problems with that where they scaled so quickly manufacturers simply can't keep up and finding quality factories to be able to backfill that demand?

Nathan: Definitely. I mean I think there's two key ways for Amazon businesses to scale up. Number one is just increasing paid acquisition or ranking higher for keywords, the other is to diversify your product offering; start selling products and product categories that you weren't selling in before. And there's different strategies, I mean if you're selling products in new product categories you're going to have to do a lot of sourcing work to make sure you're getting those products made effectively and that's … it takes a lot of work and a lot of time. Whereas if you're scaling up with the same products every factory that you work with if you say hey I'm going to order 10 times the number of units they're going to be thrilled. They're going to be very excited. Does that mean that all those products can be produced at their own facility? Maybe not, there could be a dynamic where they produce products with sub-contracting factories that might not have the cleanest facilities, might have a higher quality defect rate. And so that's something to be aware of as really understand okay, what is my actual true factory capacity? That's hard to understand without actually going to visit the facility but there is … I think kind of the key way to understand that is what I call just the kind of white paper trick where you could basically have the rep that you talk with at the factory write your name and date on a piece of paper and have them go around the facility filming a video with that piece of paper in the video or pictures so you can actually see what that facility looks like without going there. And that way you know at least this rep that you're talking to you has theaccess to that facility. Who knows if it's the actual factory that is producing your products or not or maybe you'd be able to see your products on the production line but at least you know that that rep has access to that facility.

Mark: This has been really useful and we're unfortunately running out of time. So let's end it with this and I'm … you've offered a ton of useful information so let's talk real quick about Sourcify and the particular benefit that Amazon sellers are going to see from it. You touched on it at the beginning but this is a kind of chance to be maybe a little more direct with that.

Nathan: Yeah totally. I mean our goal is to enable organizations to optimize our supply chain. Typically when a company works with Sourcify, they save anywhere from 10 to 50% of their costs overall in their supply chain. The way we do that is either by enabling them to work more effectively with their existing factories through our software, diversify their supply chain across Asia, or diversify the vendors that they're working with in China if they're just producing products in China. So we got boots on the ground here. You're more than welcome to come visit us and we'd be happy to connect online. You can find me on LinkedIn [inaudible 00:35:18.8] just Nathan Resnick or if you go to Sourcify.com that's where we're at.

Mark: Very cool. Thanks so much for coming on and a huge shout out to John Corcoran and Jeremy from Rise 25 for connecting us actually at Prosper Show. I think I was talking to Jeremy and he's like hey you got to meet this guy. He's great you're going to love him. And he was right. So thank you guys for the introduction. Thanks for coming on and yeah I'm sure I'll be talking in the future.

Nathan: Awesome. Thank you.

Links and Resources:

Sourcify

Nathan's LinkedIn

Skubana

Can a plush slipper put you in a happier mood? Today's guest and Shark Tank dealmaker have been banking on that since buying the existing Happy Feet business in 2002. He is with us today talking about the wild ride that his kiosk, retail, and e-commerce business has been on with a single brand that now has licensing agreements with the likes of Disney, Marvel, and the NFL.

Pat Yates is another serial entrepreneur and e-commerce success story. Pat has the broadest experience in physical product of almost anyone we've talked with here at Quiet Light. From his early start in a retail golf shop, to selling coffee out of a truck in a one-man distribution venture, on to kiosk retail with Happy Feet which now has a booming e-commerce presence, Pat has done it all. He walks us through the Shark Tank process, the deal he struck, the risks he took in his first licensing deal with a celebrity face, and how he managed the rapid growth and cash flow challenges his business faced.

Episode Highlights:

• When the website for Happy Feet went live and Pat's vision to merge kiosk to e-commerce.
• The Snooki Story and how he took a chance on licensing for the first time when no one around him thought it was a good idea.
• His decision to apply to be on Shark Tank, the process he went through, and what his appearance did for the growth of his business.
• Rapid growth cash-flow challenges and how Pat overcame them.
• The importance of having good people around when growing.
• Ways to scale and grow creatively for success.
• Mistakes Pat made or was perceived as making in scaling the business.
• How kiosk business works and Pat's thoughts on the current kiosk climate.
• Pat's advice for those beginning as entrepreneurs and his key tips to being prepared to succeed.

Mark: Joe, Pat Yates is somebody that has been a friend of Quiet Light Brokerage for a long time and might have one of the broadest experiences in the world of physical products of people that I know. He sold everything from licensing products on retail, a whole kiosk business, e-commerce, and he was also on Shark Tank and you finally had him on the podcast where he can talk about some of the experiences that he's had and what it's like to grow a business that's as popular as Happy Feet.

Joe: Yeah I know. Over the last six or seven years I've probably talked to maybe a dozen people that have been on Shark Tank and Pat I think has had probably the most success. He got a deal with Robert. He talks about the process, the presentation, preparing for it, a little bit … he goes back into how he started in Happy Feet in malls, in kiosks; really his father bought the business and he tells some great stories about Jersey Shore and meeting Snooki and how he took a risk and did a licensing deal with her. And then really talks about the success after Shark Tank and how to manage cash flows. And then we dipped a little bit into the back side of it because I was at a Blue Ribbon Mastermind last summer and somebody that has e-commerce product talked to somebody that does retail up on stage and whether they should try mall kiosks and things of that nature. And because Pat has a great deal of experience there we talked about that a little bit at the end in terms of how to go from e-commerce to retail and whether he thought the kiosk business was a good option.

Mark: I know every time I walked through a mall … a few years ago when I was walking through a mall I'd always come across one of his kiosks and his giant stuffed slippers which is what Happy Feet is right?

Joe: Yeah.

Mark: They're these ridiculously oversized slippers and they're super fun and I know people bought them for Christmas presents and everything else. So I've always been fascinated with what he's doing. I do have to ask you real quick just changing topics, do you have any idea what the movie quote was on today's intro?

Joe: Not at all. No idea whatsoever so if anybody knows what it is rewind, listen to it again, put it down in the show notes, we'll give you a shout out and a thanks in the next episode.

Mark: All right why don't we get to Pat and listen to what he has to say about growing an e-commerce business and also the chaos side of things too.

Joe: Hey folks it's Joe from Quiet Light Brokerage and today I've got a Shark Tank alumni and we've had some on the past before but this one actually got a deal and has a great deal of entrepreneurial experience; Pat Yates from Happy Feet. Pat welcome to the podcast.

Pat: I appreciate you having me on and I'm looking forward to it.

Joe: Good man, all right so we don't do big introductions here. We want to hear a little bit of background on your story. Tell us about your entrepreneurial life, how you got started, and where you are today.

Pat: Well it's kind of funny. I started my first business pretty much directly out of college. I was actually working for a gentleman in a … when I got to college I started working in a retail golf shop. It's where I've worked in summers and they put me on as the manager in that location which sounded like a really important job at the time. When I got at a college I thought I was going to change the retail golf industry. But in an event when I was working there I had an opportunity through one of the customers I had to get involved in a business in Columbus, Ohio and I lived in Louisville, Kentucky at the time and he basically told me about it and I decided right on the spot to buy into this franchise deal that he had for a coffee company in Columbus. I went home and my wife of three or four months I told her we were moving to Columbus and she'd never been there. So it was kind of an interesting conversation. My first ever business was basically a one man, one truck. I would get up in the morning and I would sell coffee accounts to restaurants and offices and put in vending and just go out and hump it and it was me and that was it. I did everything.

Joe: Let me interrupt for just a sec for just a sec for those husbands out there that are newlyweds and still within that first year of that honeymoon, are you still married to the same woman and do you have children now? She actually wanted to go on it?

Pat: Amazingly it'd be 29 years this June and yeah [inaudible 00:04:57.3]. So yeah I was pretty lucky and she just had an interesting ride. You should have her on the podcast to talk about me. That would be probably better. But yeah we started … I started that business and 2 ½ years later I sold it back to the company that was a long … it was a long story about a father and son in federal court over their ownership and it was out in the press and we sold ours back. We had a contract. It was exciting. I moved out to Tennessee and started my own company. I basically have a 200 mile non-compete and I looked at the map 200 miles away and my mom lived in Nashville; I've lived in Nashville. We moved over there and started the same kind of company right after I sold it. So at that point, I started working a little bit also in the winner's pawn specialty retail so I would use carts and kiosks for a couple of months and make extra income whilst I was building that company and that's what led me to e-commerce which led me to Happy Feet. So the short synopsis is my father and his wife are trying to work and sell on kiosk too and they were trying to find products. So when they went to a trade show in Atlanta, the Atlanta Gift Mart one time and ran across a guy who had these slippers and he had a patent on them and designed them and he really wasn't selling any so they agreed to buy a container of them. A small container of 4,000 units and put them in a mall here in Louisville. They sold out that season really quickly. It was a great beginning and then we went out and started sending … giving off 24 people to get kiosks across the country. And in 2002 I bought it out from my family and started going in a little different direction, a trajectory on retail that aren't kiosks that turned out to be really big but then really catastrophic with relation to the growth pattern and then started to concentrate more on e-commerce. And that's obviously led me to a Snooki deal which I'm sure you're probably going to end up asking about which is the funny part of the conversation typically. And then it led me to Shark Tank and it has led us to every late night show, morning show, TV show you can imagine. So the press around the company was incredible and obviously, I'm still here doing it basically 20 years later.

Joe: That's an incredible story. So if you're focusing specifically on the e-commerce side of it when did you first open up the first web site for Happy Feet?

Pat: Well the first one was actually opened up by my dad when they had the business in 1988. They were … they started in doing very little stuff. I mean I'm talking like we packed two orders in the basement one day.

Joe: How much [crosstalk 00:07:08.6] 1998 is a lot of having, I think my first site was 50 bucks probably 1998.

Pat: I could guarantee that my dad would not have spent $50 on a website. So I don't know how much he spent but it probably was somewhere south of $50. They really weren't doing anything. I think when I bought the company they were doing $22,000 in web sales. They just … it hadn't translated but what happened was I had a little different vision. And my vision was that if I can get it out to people in kiosks and grow that funnel sale it would get the brand recognized by people and then they would continue to buy it online. And since our business was seasonal, two months a year they were coming to me. Two months a year they were going to the kiosks. So if the kiosks can say osh kosh wherever or from like Milwaukee, Wisconsin closed down and someone went back to buy and they didn't have them they see the name on the back of the slipper and all it did was that distribution funnel continued to grow. So my thing was to try to get it to a lot of places for me to market very quickly and try to build the e-com via that. And we went from 22,000 to about 100,000 to about 400 and we capped a million and now we're well over three million and it just shows no signs of slowing down. It's a fun product.

Joe: You know the way that you went about it is actually hard work and hustle. And that hard work and hustle got you in the right place at the right time which is not necessarily luck. It's because of the hard work and hustle but being at that trade show in Georgia where your dad was and meeting these folks and taking the risk in buying that half container load so good for you. But then there's a lot of work to do since then. And as we've talked and I've had a lot of people on the podcast and what I've experienced over the last seven years in the brokering side of it is that everybody has problems with cash flows. So I want to talk about that with you. I want to … first I want to hear the Snooki story and I want to hear a little bit of the Shark Tank experience but then I want to talk about how you've solved the problem of cash flow with a company that is growing so rapidly because everybody that's in the first 12 to 36 months of a business that's growing rapidly faces that challenge especially with the Amazon growth these days. But talk to us about the Snooki story did she just happened to have—

Pat: Well it's kind of interesting. It's actually my most fun story of all these and actually from many standpoints; number one from a standpoint of growth, second of all from a standpoint of trusting my judgment. I've had done many podcasts before and I've talked to a lot of people about the biggest thing with me is if I always trusted my judgment on what I first had an inclination on I typically had success. Now it's not always that way. Not everybody gets it right the first time but the 80-20 every time I trusted myself it was good. Every time I didn't trust myself it was the same 80-20 but the 80-20 was the other direction. Well, I'm sitting in my house one night and this is 2009 maybe. I'm guessing. I have to go back and look. But my son comes into my bedroom and I've said this many times so I'm sure people have heard it and he said dad your slippers are on Jersey Shore. Snooki is wearing your slippers on Jersey Shore. I said I only have two questions: who's Snooki and what the hell is Jersey Shore? I really had no idea. I had no idea what it was. I've heard of the show but I didn't pay any attention to it and this was the second season on Miami so [inaudible 00:10:13.8] rewind it and I look and she's bent down cleaning something up with our pink slippers on. It turns out she was just a fan of the product. She bought them and took them down there and thought it'd be cool to wear in the house. So we get all these emails and orders immediately as soon as it starts hitting the air. And we sold out of those pink slippers in like three days. So at that point, I knew I had something. So I being a ford motion guy; that's one of the words I use a lot being a ford motion guy, I picked up the phone and I called her agent and it turns out one of the guys is selling license agreements for her because they figured they could capitalize on her fame at the time. It was in Chicago so I got my car and I drove to Chicago four hours the very next day and I sat down and had dinner with her agent and we offered her a license agreement to design her own slippers. I can tell you that there was not one person including my current partner at that time that wanted me to do it. Every person said this will be a complete travesty. Why in the world would you put her in front of your product? I said well there are several reasons: number one, I saw what it did when we got the press and second of all you can always deal with those things. I mean there's no bad press. What you want to do is get it out there. So to make the long story short we sound this license agreement, we launched our product. Her leopard slippers is still probably all-time the greatest selling product we've ever had. The first time she tweeted out about it with only a million followers she crashed our site. So we got to learn really quickly how we needed to scale.

Joe: Wow.

Pat: Then she took us to trade shows. We went … she was on Jimmy Fallon playing slipper golf which is one of the coolest. If you ever get the chance you can Google it. It was really fun. I was there for it in New York. We were on Good Morning America, on the Today show, so all that stuff came from it and it turned out it was one of the best decisions I've ever made because of the way that it helped to get the notoriety around the product. And I just trusted my judgment because not one person really believed it was ever going to be something good for us. And it was exciting and since then I'm still in touch with her regularly and her management. We still do a lot of things together. So it's been a great relationship for eight or nine years now.

Joe: Wow that's fantastic. A fun story too. Is there any chance of Jersey Shore coming back on the air? Have you got any inside information?

Pat: They did a rewind this year but I don't know how it did. I know that she has got some other things she's working on so she's always … I mean the thing is people just … really it's amazing in our society how people sort of make quick determinations on small snippets of someone. She's actually a really sweet girl. Some people look at her and think she's this hard core partier; she really isn't. When we were in Vegas is a great example, we went out … everything she gets she gets for free. We went to a restaurant, she took a picture for Instagram, probably a $7,000 bill and with all these people. We went up to this nightclub and it was roped off area, bottles, service, everything she wanted for free. Her life at that time was just immeasurable with relation to the benefits and things she got. But what we ended up finding out was is that she was just this really calm, young girl. We went out to dinner and out to a club and she never had a drink. It wasn't the Snooki they sell on Jersey Shore; it was Nicole Polizzi which is her name. She's an adopted girl from Colombia and she has a great family and she does … she has great young kids now. She's actually a tremendous person. That's the one thing people would really be surprised at next door.

Joe: I believe it. Well, I know that you got connected with Quiet Light back in 2010, 2011 or '12. I know you had some conversations with Mark about doing a valuation for Happy Feet. And as Mark often did he probably gave you some good information and suggested you go and fix that or if you want X amount of money you got to build the business more. Not high pressure at all he did the same for me in 2000. I forgot, no it was 2010, maybe we called him about the same time. But at some point, you said okay this Shark Tank thing looks interesting I'm going to give it a go. Can you talk about your decision to apply to Shark Tank, what it was like being on the show, and what it's done for Happy Feet since?

Pat: Well I applied on season two originally and it was … I mean if people hadn't done the Shark Tank applications, it's like 50 or 60 pages of disclosures. It's all handwritten. You can't type it. It's so non-technical, you can imagine. And I got turned down that first year. I went to the interview process. We submitted videos and got turned down and I hadn't really thought much of it after that. I watched the show and I was a fan but I remember it they were getting ready to finish casting for season five and I get a phone call. And believe it or not I was actually on a golf course and I picked up the phone and they said look we'd like to revisit your application. We're scaling so fast. We're doing so many new things. We'd like to revisit it would you want to resubmit this application? I said well it took me days to be able to do the application and videos and stuff and I said like okay if you feel like there might be some fruit from it let me know. So I resubmitted the application, did the videos, it comes right down to the end. This is like in September of 2013 they called and said Pat look we have four or five slots left and about 18 or 20 companies where we got it narrowed down to. We want to tape so what we're going to do is we're going to bring you out to LA and we're going to let you tape in front of the producers. If they like you they'll keep you if they don't they'll send you home. And I'm like alright. So I flew out to LA and actually it's interesting because Snooki was sort of involved in this in a pseudo way. I went out and I taped my test and I went that night to Dancing with the Stars and I sat with her family and her agent at Dancing with the Stars live which was really cool by the way and [inaudible 00:15:25.0] I was done I got a call and they said look we're going to tape you tomorrow so be ready. We're keeping you, we are going to go ahead and tape it. So we taped in September of 2013. It aired in April of 2014. And I was also told that probably 30% of people they tape don't get on air. I've heard the number is less than that but there was no guarantee I was even going to get on TV. And then in April of 2014 obviously it aired and it was an exciting episode. It did not go well for a long time in there. And the way that the production was set up and the way they showed it, it turned out to be what I think is one of the better endings and exciting. So it was a lot of fun and obviously, it was a real whirlwind and since then there's just been nothing but great things that have come from it.

Joe: Well you got a deal from it. You're one of the first guys I've ever talked to that's gotten a deal from it. I've probably had conversations with five or six people over the last three years that had been on Shark Tank but you got a deal. Actually, I've got somebody else that got an offer but he didn't accept it which in hindsight he should have. But what was the whirlwind part? You were there for a long time it didn't go the way that you wanted it to but you did end up with a deal, how did it go?

Pat: Well you're in there … I'm just going to estimate, I'm going to say I was in there probably an hour and ten to an hour and 20 roughly. You get no break rights. There is no break. If you have to go to the bathroom or you have to get a drink forget about it. You're standing on your spot and you're answering questions and they're grilling you. And probably for the first 15 minutes to an hour, it just wasn't going well. Barbara didn't like me which most women don't like me when they meet me the first time. Then I don't know how it went, then Robert—

Joe: We'll do another podcast on that and again we'll have your wife on in that podcast.

Pat: Anyway it just … everything seemed to be going negatively and then I got an offer from Kevin which was one of his royalty deals which wasn't going to help me. And then Lori I really thought was going to do something then she hitched her wagon to Kevin which was really tough for me because I did not want to deal with that royalty agreement and that was really all I had on the table. And then about an hour and five minutes in I decided because Mark had made comments I asked him if I could tell him a story versus you know asking him. And I talk about my mom who had passed away and I talked about my passion as an entrepreneur and how this is a single product and some people don't do that as a company but I was going to get up every day to make sure it grew. And he made a quick comment which I'm glad they didn't cut out and he said you're the real deal and you have a great business but it isn't a fit for me. At the time I wasn't sure why I mean obviously he has an NBA franchise, we had NBA licensing, I don't know if that got anything to do with it or he just didn't want that kind of product. But either way what happened was it changed more of them because at the end of the day Mark controls more money than most of those people put together. And you're in a situation where if he is saying something like that it makes people view it different. And I think my plea is exactly who I was as an entrepreneur; passion, excitement, and getting people engaged where they feel excited about what they're going to do. Then all of a sudden Robert came back in and made an offer and then Lori and those guys wanted to counter. I gave him a maximum we wanted and understand we only took at our web addition we weren't a consolidated company with relation to wholesale and then all of a sudden Robert said I'll take that deal and I wasn't going to hesitate. I didn't even allow Lori and Kevin to react to it. I just said done and it was over. And the deal changed after the fact. It wasn't exactly the same on the show. It really wasn't anything near that.

Joe: There's lots of due diligence after you shake the hand I assume. A lot of verification and it takes process.

Pat: For us, it wasn't even that. Robert and I talked and he said you told me you didn't necessarily need the money and he says why do you want to do this? Well I said, first of all, I could use some money but it isn't that important now but I really need the connections and I'd like you to help me grow this company. That's really what I wanted. He said look let's just do a small deal without the money. If you need something in the future I'll try to help you but I want you to work with my Shark Tank group. We signed a deal and we've been working with him ever since. And they're fantastic. They have a Shark Tank division that's run by a really dynamic young lady and she's really good and anytime I need him I can get him. I talk to Robert occasionally. I was in his office four to six months ago before the launch of the Disney line and we went over some stuff but he's just a great guy and it's a great group of people. And honestly, I'm happy it didn't close at what it was before because it would have changed for both of us. There had been a lot more expectations on both sides and other than that Robert has helped me with anything I need from soup to nuts with business including we have so much press. Obviously, it led us to DreamWorks it led us to basically every license we want in the United States and the world for that matter. So it's really a blessing for me and it was exciting, it was stressful, it was fun, it was really scary to watch because I couldn't see the episode. I wasn't allowed to see it. I had to watch it like everyone else. And I swear to goodness I had no idea how it was going to look. And I honestly [inaudible 00:20:12.4] and I don't really get nervous. I've played basketball in a small college, in high school and I've been an athlete. I'm a very competent high playing individual but that one I was sitting there to win. I just don't know how this is going to look. But it was great. And then the one interesting thing that most people don't realize they will usher you off to an airport immediately. As soon as you get off sound stage they take you out of the sound stage into another stage. You do your post interview. They have to sit with a counselor which is required for an hour because they're afraid that some people would be suicidal. So you'll sit with a counsel when they feel like you're in good shape to leave they walk you out the door. This is not a joke. They put you in a van. They drive you to a hotel. You should have your bags packed and they will not put anyone that takes in the same hotel. They don't want you talking. We were originally in the same hotel before we pitched and afterwards they spread you out and then you fly back the very next day. So it was a real whirlwind and it was exciting but it was stressful. But everything that's come out of it has just been fantastic and it made for good television.

Joe: Okay I just have to comment on the counselor part and then we'll move on to your growth and then the cash flow challenges that everybody in the audience that's an entrepreneur faces, but does Mr. Wonderful have to pay for the majority of the counselor because he says you're dead to me more than anyone else?

Pat: Probably Barbara would be. She has I don't know … it was … again that part was a little odd for me. I didn't know they were going to do that but then they just bring it on me. So I'm like no, I'm in a great mood what do we need to do to get out of here now? They make you stay for an hour.

Joe: That's fascinating. Alright so how did it turn out and what kind of growth have you seen since 2014? And then we'll talk about how you dealt with that in terms of financial cash flow challenges.

Pat: Yeah I mean we jumped up 40 to 50% over the period of time from where we were in the baseline during at the time. It led us to get passed by DreamWorks to do a license which at the time was a very good thing but it was my first foray into a big license and it was a little challenging. You couple the fact that they were sold in the middle of it in DC universal which became very difficult because they were moving those assets in and they get people assigned, people to work with me. So the DreamWorks thing was an interesting lesson in licensing and how implemented and I didn't do a great job at it but it was a good license and now obviously we're working with Disney and Marvel and all those things came from Shark Tank so it's a great thing for us.

Joe: So when it comes to a business that's growing rapidly as many of the folks that I talked to on a regular basis are dealing with a lot of the physical product e-commerce businesses that we're selling, actually I'd say the majority of them are probably less than three years old. And the reason that I see that people exit, you know buyers always say well it's so great why are you selling? It's because for that three year period they're hardly taking any money out of the business. They bootstrapped it, they put it together, and then every penny that comes from the revenue of the business goes back into buying more inventory and trying to stay ahead of it and not have stock outs. What have you done in your business to overcome some of those challenges and what advice can you give to entrepreneurs that are eventually going to be in your position?

Pat: Some of it is … there's an easy answer and there's difficult answers. So the easy answer is I think anytime that you're facing cash challenges you should address that either one of two ways. Obviously, they jump off the paper to anyone. Obviously, there's banking that you get involved in but I believe that is really important to find someone who can add value to your company if you decide to do a strategic partner. Some people believe don't believe in partners but if you can find the right strategic partner that not only gives you a leg up in some of the systems and other things that you're going to encounter as you grow but also can help in the financial thing that's premium. What I did as we started to try to grow it is I partnered with someone that could afford to help scale that growth and make sure that we had a position to where we would have the product. But I also started to get creative with vendor relationships. For instance, there's a manufacturer that I work with on licenses that is one of the biggest manufacturers of plush in the country if not the biggest. And I went to them because their margins were really low when we talked about and I said what if we could raise your margins by you going ahead and using your scale and your manufacturing abilities. You send the product in, we have the ability to pay for it as we sell it almost like a consignment deal but we can help you develop a division where your margins grow if it's not capitally intense then it would make sense for both parties. So what I tried to do is be very passionate with people I could put around me in vendor partnerships to try to get them to help me with the initial product I needed to do anything. We developed a brand new credit slipper called zlipperz; Z-L-I-P-P-E-R-Z. That was a collaboration with a company on being able to develop the actual design and to make the product and then we didn't have to put a lot of money on the pocket because we're putting a lot into the system side. I think you just have to talk to everyone you can possibly think of. It doesn't have to be an investor, it doesn't have to be a bank, it could sometimes be your vendors, it could sometimes be family, it could sometimes be a warehousing and distribution company. I mean I almost … I talked to a warehouse and distribution company one time and said look if you could bring your distribution to us we'll help invest in some of the product and we'll mark that back up to be able to help get the distribution business. So there's a lot of ways that people can scale businesses if you put the right people around you. And I think you just have to be willing to have those conversations and think creatively on how to grow your business.

Joe: I think you're absolutely right. The more I've talked to different entrepreneurs in this situation it's being likable and it's working hard and it's getting lucky back to the reason you are in the business here and now. And again I don't mean to make light of being lucky because it only came from your hard work and dedication and being willing to take some risks by hopping in a car and drive four hours to Chicago just to meet with the agent of Snooki when you didn't really know. You didn't know what she was all about. So you got to do those things. Well, we had people on the podcast that sort of break the mold in terms of being able to buy internet based businesses because they use local banks because they've built relationships with them. They go and they talk to them, they shake their hands, they see them face to face, and they instill confidence in the bankers, other types of lenders, investors, family funds, family members, warehouse owners, shippers, whatever it might be their goal is to stay in business and to grow. And if you can do what you're talking about and make it mutually beneficial then they're going to help your business grow as well. We do that every day. It's not just brokering and trying to sell a business for the absolute maximum price, it's trying to achieve the goal of the seller. Sometimes they're trying to get it sold very quickly with a better set up and transaction. Maybe all cash close in 30 days other times they want to max it out. They're willing to take a small note on something and hold the business and deal with that emotional stuff you go through for a little longer in order to reach the goal. So I like the fact that you're talking about bringing in other people and talking to as many people as possible to make something mutually beneficial. Well, what would you say has been the biggest challenge and maybe the biggest mistake you've had to have made in terms of finances in cash flow and things of that nature? Just pull on out of your hat to—

Pat: Well it's interesting because I can tell you I've made hundreds of mistakes but as I've talked about before there's … let's just say there's a hundred there's less than three that I would regret because the other 97 led me to something that is always better for business. So I'll give you a great example when I was growing the kiosk business my father and his wife Sharon who started it basically had … I don't think they had more than 25 kiosks at one point in any seasons which is still a lot if you're talking season November, December. When I bought it and started doing distribution I changed it up. I brought them into the warehouse because they use to sell only containers. They bring them in to container loads, they bring them in to Seattle or LA Portland and they'd send it to customers. They never touched a product. They didn't have a warehouse; didn't touch it. It was basically just an order company. It's like an FOB order. What I decided to do was get a warehouse and bring the product in, get the warehouse to scale, put people in there, break the containers and ship whatever they needed. So if they didn't get in the 4,000 or 8,000 pair of containers I could still sell. So we went from 30 to about 300 kiosks in about four or five years. So we were one of the bigger kiosk programs seasonally in the United States. We had them from every state. You know I had one guy that ran 20 of them. So what I couldn't see at that time were two things: one, how good that would be and two, how catastrophic it would be. And it's interesting that they're both. And the reason they were both is I started to get so much product and we were so seasonal that I was taking chances on buying product in case we added a few kiosks late or someone needed more or whatever and that was just that all that was doing was rolling the dice and eventually figuring out what year it was going to come up craps. That you ended up a year where you had a million dollars in products sitting on the floor for nine months to a year that you didn't have money to pay for. So I was sort of in a position to where I was betting on to come a little bit more than I needed to be with the kiosk business so it became catastrophic with relation to cash flow. And I ended up having to partner with someone to be able to make sure that I could hedge it and grow. But at the same time, it was the biggest blessing I did because as we put the slippers out there and our name and buy HappyFeet.com was on the back people learned about our brand and we started to build that same funnel I talked about. It's funny how my hands are always down here than they appear but—

Joe: And if you had the video I can see that funnel, that visual that you're doing.

Pat: I just let everybody know I move my hands we're not even on video. Anyway, my point in this is that it helped grow what we … the scope of the business. It looked bigger. It looked like a company. It looked like something you'd want to be involved with. So all these people started taking notice and we did NBA license, we did NCAA, we did NFL, we did all these different things and we really expanded the base of the product. And it's something that … you know the first container they bought was four styles in three sizes or four sizes, there were 16 SKUs and now we have over 5,000.

Joe: Wow, incredible.

Pat: So it was catastrophic to our cash flow because it nearly broke me and it should have and still trail the business for years after that because I made the decision. But it's hard to be upset about it because we were in a position to where we decided that we couldn't continue on that trajectory. So we cut the kiosk business back, we concentrated on the .com and what we found out was people were conditioned to buying a product and if the kiosk wasn't there that year they bought it from us for Christmas. So those leap years and those difficult things it's almost hard to be upset about it because it was almost like the lost that you would have taken or the aggravation tax. It was something that you really needed to be able to grow the company overall. So it's really hard to regret that. Every decision that I made that's been bad I always look at something and that thing could be better. The DreamWorks thing, I was terrible at it. I didn't understand any licenses but now I have learned some things about it that going into the Disney/Marvel deal that helps me really understand it better. So I don't regret a lot of those things. I just try to learn from them to get better and back to the point you talked about with relationship on scaling the cash, be passionate like I was. When I talked to people they get excited about building products, they're excited about doing businesses and doing all these things. If you go in and find people that have capital that don't operate businesses and you're passionate they'll put you in place to make you successful because at the end of the day that's what you're going to do for them. It's all going to come around and that's why I have to maneuver so I have to jump up every day and say I want to be passionate. Sometimes it's been hard for me to do that because it's tough but that's what I'm always trying to do.

Joe: Yeah it can be exhausting for sure. Let me just pivot here, you've talked about kiosks a lot, it's what you know. You know very well. You're in the ecommerce world now and licensing and so on and so forth. I've been in a few events, Mastermind events where people have stood up and said hey what are your thoughts about me taking my brand and starting in the kiosk business and expanding in retail that way instead of a retail store? What are your quick thoughts on that for folks that are out there thinking of that now? Is it a pain in the ass? Is it worth it? Is it challenging? Is it too much, too late? What are your thoughts?

Pat: Let's say … let me answer two ways: number one, for our product as big as it is and needing storage for a couple of months a year it's a very difficult sale. Because I think it's challenging, it's tough, it's a big investment, they want too much per square foot. I personally think that the kiosk and especially retail business is terrible. That's just my opinion. I just think retail, in general, is bad so when it falls down to that and what you see malls do is go away from branded products and good looking kiosks in the past to getting anything they can get in there. It's now like a flea market. So I really don't think it's a very good business unless malls turn around and change it. As far as retail goes you're making a huge commitment to what you're getting in front of customers. Right now I think it's very difficult to get in to retail and be able to scale. But if your product is small enough and you have the ability that you can get people to run them independently then yes I would not sign a lease all over the country as an independent company and then try to make it work for one hug and then have 25 or 30 locations. It's not a good business plan. I think some people have to go to retail. Luckily I'm right now knock on wood I'm not in that position to have to do that. It's not a tremendous business but it's not a bad place to start if you have to.

Joe: Okay I got you. Alright Pat you've been an entrepreneur for 30 years, there a lot of folks out there that are just starting off on their entrepreneurial journey some of them are 20 years old, some of them are 50 years old and are quitting the corporate world any last minute advice for those that are just beginning that you can share?

Pat: Yeah don't quit your job until you have a built business. I mean I talk to my sons, my sons don't work in my business because we know that I can … first of all, I need them to go and find their own way. And I want them to be able to go out and understand what it takes day to day to be able to work at this job and bride. If they were working for me then I know that they would get a little bit of a sense of complacency. But I tell them if you want to start a business start it while you have a job. Something that is not taking you away from a job, not like you're living and working for someone all day and then taking some of those money. See if you can make a run in whatever product or business you want to do, keep your income so you don't add that stress. There's a stress to starting a business you need to make sure you have an income. If you can figure out how to make that and navigate that as a new entrepreneur, then I think that you have an ability to have a good balance. Either way, you have to be ultra-excited about it and willing to do anything. I'll give you a great story and I know that some people may have heard some of the podcasts, I had a guy that was an entrepreneur here in Louisville that I work for at that golf shop and I told him I said I'm going to go start a business I think I'm going to leave this job is there any advice you can give me? And he said well you're moving from a meal ticket to a suit lot and understand that's not going to be easy. There're going to be days when you're going to worry if you can even have food on the table or whatever it's going to be and you're not going to have a fall back. You're not going to have that check coming on Friday and you better hope it shows up in the mail paying some of your receivables so you're not going to have anything. And it's stressful and some people look at the excitement of taking a product and taking it to market and say hey I can do this so I could really make this work but they don't understand the other intricacies to running a business and stress that comes with that. It's not easy so the biggest thing is just to make sure you're prepared for that. Number two, I'd like you to keep the job and then I would find some mentors to put around you. A board that is a pseudo-board; it may not have to be a board of directors, it's not that sophisticated but people that can help you understand and navigate the problems that you're going to go through. You're going to find them.

Joe: Awesome, that's great advice. Pat Yates, HappyFeet.com thanks for coming on the show we'll talk to you soon.

Pat: BuyHappyFeet, B-U-Y HappyFeet.

Joe: There you go BuyHappyFeet.com I'm going to go buy some. Thanks, man.

Pat: Thank you Joe.

Links and Resources:

Happy Feet

Pat's LinkedIn Profile

One of the misconceptions people have about Quiet Light is that we do more e-commerce than content transactions. Fun fact, our top two transactions ever have been content and SaaS deals.

Our guest today, Bruno Bornsztein, is a web entrepreneur who has conquered the content domain via his two websites, Curbly, and Mandmade DIY. Bruno is what we like to call an "old school" entrepreneur, someone who successfully combines his own web development expertise with entrepreneurship. Equal parts content creator, developer, businessman, and design aficionado, Bruno got his start during the wild west days of the influencer platform. Nowadays, he's in the process of launching a new SaaS product to make success more fluid for influencers.

Episode Highlights:

• The starting up of Curbly, the monetization, and the changes the site took on over the years.
• At what point the site started publishing sponsored posts for large companies and how these companies found him.
• We delve into the world of influencer marketing and how Bruno built a brand, rather than an individual, that then became the influencer.
• We discuss how influencers should pull back from the spotlight rather than build that personal brand that cannot operate without their personal daily input.
• The metrics that exist to measure the influencer impact.
• Bruno talks about his transition from a content site to building his Influencer Kit Saas tool and the phase the product is in now.
• The potential challenges in scaling The Influencer Kit quickly to meet market need.
• The target clients for The Influencer Kit tool.

Transcription:

Joe: Mark, one of the things that I think is a bit of a misnomer here about Quiet Light is people think that we do much more e-commerce physical product business brokering than we do content. And in fact the largest transaction I've ever done, the top two have been content and SaaS. And I understand you had a friend of yours, Bruno from one of your Mastermind groups on to talk about both that … just both content and a new SaaS business that he's got from his own content site. Can you chat about that?

Mark: Yeah of course. Yeah, Bruno … the guy is an old school entrepreneur and I'm doing air quotes right now for old school because in the world of the Internet is there an old school yeah? But in my opinion, he's old school because the guy started out developing his own stuff. When he started his first business Curbly.com which is a home improvement blog. He developed the code himself, designed everything, and then he was writing the blog post as well. And now that he's transitioning into a new SaaS product called InfluenceKit he's once again developing the code on the backend and doing pretty much everything on his own and lives in that world of web development plus entrepreneurialism. A super, super smart guy when it comes to that side of it. So he and I actually … this podcast is really just he and I catching up online and walking down memory lane. But there were a couple of things that came out of this that I thought were fascinating. And one thing that I love about his business Curbly, and there's a couple of other guys that I talked to here local to me in the content world, is they're treating their businesses like influencers and they actually talk about it as influencer marketing. And I don't know about you Joe but I … when I think of an influencer I think of that 21 year old model wearing sneakers and putting them on Instagram and getting paid just to post wearing those sneakers or is just like that right? The personality based influencers. But what these guys are doing is they have their blogs which are completely irrelevant to their personality and I'm not … calling it a blog might be a little bit meaning because it has so much more content than that but these sites are influential. They have lots of followers for what they're doing and large companies are coming to them and paying them to use their products and write about those products through to their sites. So when you look at a content site we often think well how do you monetize that? Well there is AdThrive, there's Google AdSense, and maybe you charge for advertising but these guys are generating quite a bit more money by getting these sponsored posts. So Bruno and I talked a lot about that. We talked about how did he get into this in the first place with these sponsored posts, how did he attract some of these larger advertisers which are obviously paying quite a bit to have these sponsored posts. But then we talked about his next venture which is getting into that SaaS base. He realized that these companies that were paying him to do these sponsored posts, they wanted good metrics. They wanted to know how many people were clicking on the post and viewing them, how many people were sharing these posts. And so he develops offer internally for that reporting, now he's developing a full on SaaS product and we talked about how do you grow a new SaaS business the right way because everyone thinks … and I'm sure you've seen this Joe in the SaaS community, you kind of have this idea of all right you create your product, get the right fit, and then just scale, scale, scale, scale, scale, right? Well, not always right? And he wants to make sure that he scales the right way and has a really good product market fit.

Joe: Yeah I think doing it slow and doing it right is much more important than trying to get big … too big too fast because you make mistakes and lose good customers along the way because they'll go somewhere else. I love the sounds of this because as you said most of the content sites that we've brokered are using AdSense and AdThrive and things of that nature. Even the largest one that I did was and there's not a whole lot of sponsored posts that are driving revenue. So I think that's fantastic and I love the off shoot of an entrepreneur telling his story or her story about how they had another business, in this case, the SaaS product to serve those customers that were doing sponsored posts. So I think it's great. Let's go to it.

Mark: Hey Bruno thanks for joining me. I really appreciate you taking the time here for a quick conversation. You and I are local to each other. We meet up once every few months with a couple of other guys and just talk shop so it's kind of weird to be talking to you.

Bruno: I know we should almost just get together in the same spot, right?

Mark: That would have been good planning on my part and you know I don't do necessarily great planning all the time. So we have a little tradition here at the Quiet Light podcast where we have our guest introduce themselves. We like to say it's because you know yourself better than I do but really it's just because I don't do show prep so—

Bruno: Sure. Guess what I didn't do any show prep either so I think I could probably introduce you better than me. So my name is … as you know my entrepreneurial, Bornsztein. I'm a local St. Paul guy like you are. And my background is in publishing online and web development. So I'm really a web developer who got into running digital content sites for a long time. So what that looks like is I launched a blog called Curbly.com in 2006 and another blog called ManMade DIY in 2010. I ran those for 10 years or more and in the last couple years I've been focusing on a new project called InfluenceKit which is a Software as a Service product that's targeted at digital influencers, content creators, basically people like who I used to be.

Mark: Right now you come from this kind of old school or what I consider to be old school Internet entrepreneur. And I used to fall in this category. The first business that I built online, I built the code and I built it in Pearl if you can believe that and I didn't know a lick of code but I figured it out. You're still doing that to this day though, right? I mean like InfluenceKit it's a SaaS product you're building; we'll talk about that in a minute. You're doing most of the development on that.

Bruno: Yeah I'm the lead developer for InfluenceKit. I was also lead technical person for my content sites which was good and bad. There's upsides and downsides to being technical like that. I like you, learned to do a lot of this stuff a long time ago when the way that you were to do web development was usually do source. So a lot of things I learned was just by looking at another site, looking at the source, trying to pick apart how it worked. Fortunately, that process has gotten a lot more easier now so there's a lot more resources out there for people to learn how to become web developers. But yeah I definitely like being involved in the technical side. I think the challenge for me is figuring out when to disengage from that and how much I should be involved and how much I need to try to delegate. So that's definitely something that I'm working on.

Mark: Yeah. Alright so I want to start out and I want to break this conversation into two parts, I want to talk about InfluenceKit and what you're building there in the SaaS realm but I want to talk also about Curbly and ManMade DIY is that right? Okay. You and also I know some of the other guys that we know have a model with their content sites. I think a lot of people when they hear content sites are just thinking okay I'm going to put something up. I'm going to put on pass a bad network and just kind of run from there but you guys do quite a bit more. Tell me a little bit about starting up Curbly and maybe the beginning story of that and then what its primary means of monetization has been over the years.

Bruno: Yeah it's actually kind of an interesting story because it wasn't really intended to be a blog. The way Curbly came about was this: I was doing freelance web development; I took a contract building a social network, this was in 2005. This was before Facebook was publicly available to everybody. You still had to have an EDU address to get in. And this network that we built was intended to kind of like compete with that in some sense. After that project was done I had some time on my hands, a little bit of money saved up, so a friend of mine and I decided to build something and being the sort of non-strategic person that I am we just kind of … it was a little bit random; I had bought a house, I was working in my house that was kind of an area that interested me so somehow without a whole lot of forethought we came on this idea of a social network for home improvement. The idea that Curbly was meant to be was a social network UGC site … User Generated Content site that all was focused around the home, design … I'm remodeling my kitchen here's pictures of what I want to do, I'm looking for ideas for my bathroom does anybody have some? It sounds a lot like a site you've probably heard of which is House. House is that. I think we wanted Curbly to be House, we just didn't really know it at that time. So what ended up happening was Curbly sort of organically transitioned into something else. When we started the site we built it really quickly in about six weeks, the MBP of it. And the first thing was well we don't have any content on here how are people going to want to like join this social network when there's nothing there. So we just posted for it; freelance writers on Craigslist and had people start kind of seeing content. And that was not because we wanted to be a publisher or a media company but because we just wanted something on the site. But over the first three or four years it just kind of … I realized that there was a business model there and that was easier actually than trying to become House. And for a variety of reasons turning into House just like didn't happen. But I learned that actually there was a way of generating high quality content for a reasonable price using freelancers and in monetizing that. So yeah over the course we were really lucky with Curbly. I think in our first month we went from zero to 250,000 patrons a month.

Mark: Wait, wait halt. What? How did you do that? Was it all organic SEO or were you keying in on other—?

Bruno: No it was luck. We got to be lucky, we got on Dig, we got on … remember Dig?

Mark: I remember Dig. I got Dig to the front page maybe twice in my life.

Bruno: We got on Dig, we got on a few other things; Life Hacker it was a big blog back then and they posted a link to one of our project that somebody posted. Yeah, it was just lucky. I talk about this a lot … like sometimes if you would ask me at the time in November or December 2006 after Curbly had been live for two months like how things were going I would've been … I would think I would have said uhh I don't know, it's okay not great. And I just think I talk to a lot of like younger entrepreneurs about this a lot which is that at the beginning it's really hard to know whether you're succeeding or failing especially if you don't have any experience. So the way I'd phrase that is success or failure look the same a lot of times when you're just starting out. And it's really about experience and context. So at the time, our goal was to build House, right? And so we wanted 250,000 users to sign up to Curbly because that's … active users was the metric we were looking at. And because we didn't have that, because we weren't seeing that it was kind of like what are we doing wrong? It's not working. Not really appreciating that we had actually been really successful in another way that we didn't understand. So I think for anybody who's … is entrepreneurial but maybe hasn't done a lot of things before just remember that you maybe … it may be very difficult to disentangle whether you're succeeding or failing you just don't … you might not have enough experience to really know the difference.

Mark: Yeah I know with Quiet Light it was the same thing. For the first five, six, seven years of Quiet Light I did the same thing and people would ask me like well what are your plans and I'm like I don't know I might just make a boutique and not really do much more with it or I might just kind of wind it down over the next few years. But I just kept kind of going and going and going and it wasn't until I really went to hire Jason on initially, Jason Yellowitz, that I was kind of like there might actually be something here that I wasn't expecting. But you're right, success and failure do look the same. At the beginning at least they can look the same. When did you start taking on these sponsored posts and just to be clear for everyone listening you do have like AdThrive and stuff like that that you monetize through but a big bulk of your revenue is coming from getting sponsored posts from major companies like Home Depot and other large companies that are looking at your traffic, at your audience and saying we want that audience so we're going to pay you to test this product or to be able to feature this product in one of your DIY stuff. When did you start making that transition?

Bruno: Yeah 2009 was the very first sponsored thing that we ever did. So that was very early on. It was with a fabric company who I won't name but it was kind of a failure for a variety of different reasons. But it was the first time we got paid just to create content on behalf of a brand. And then it ramped up. So I would say in 2009, 0% of our revenue was sponsored content or influencer marketing [is what it's called now and 100% was … you know the rest about probably 95% was programmatic display ads and the rest was affiliate links. And then back then it was even okay to do text links. That quickly went sour but there was a period where it was okay to have text links on your site. And then probably by 2016, 50% of our revenue became sponsored content. So it did sort of take a little while to ramp up. And it took a while before we started seeing interest from established brands and agencies. But definitely by 2012, 2013 you are starting to get pitches from PR agencies, brands, ad agencies that were interested in partnering with you to talk about their products.

Mark: So what changed for those agencies to start recognizing you? Did you have to do outreach for that or was it really just them picking up on the metrics that you guys were supporting at the time?

Bruno: You know I think a little of both. I definitely started doing … being proactive once I saw that there was an opportunity to make real money there. And so definitely being proactive, reaching out to people even just replying, you know we always got … as any kind of publisher, you're always going to get a lot of press releases and inquiries and people that want you to talk about their thing. So by proactive, I even mean just replying to those and saying like hey you know we're not necessarily going to cover this product this month but if you're interested in sponsored content we have these opportunities. So just being like a lot more responsive and offering that. I think on their side they didn't really start seeing metrics until much later. Even today a lot of influencer marketing happens with very little metric reporting which is something that InfluenceKit is trying to change. But I don't know that it was that they started seeing big metrics I think it was that the people that were working in those organizations were more digitally native. Like they understood that landscape more. In 2009 I mean I … in 2009 I had people who didn't know what a blog was. There were still people who are like what's a blog, why would I … how do you make money on it, how would you … why would a company pay to have their content on it or whatever? By 2016 that wasn't happening anymore. Everybody knew what a blog was. Everybody knew what social media was. And so the idea that a brand would want to communicate with your audience just made more sense. They understood that like okay blogs are a real thing. They have a real audience. They're communicating … they're able to communicate your message and help you get your branding out there. And so I think it just became a little bit easier to convince them of that.

Mark: Yeah it reminds me of … do you remember Darren Rowse from ProBlogger?

Bruno: Yeah.

Mark: He was kind of the big guy who was making all the push of saying you know what these blogs you can actually make a lot of money with them.

Bruno: Yeah.

Mark: A bit at the forefront of this movement. We're getting in this weird, wild world of influencer marketing something which I know very, very little about personally. And I think one of the interesting observations here … and I'm sure a lot of people listening are kind of like well yeah, of course, Mark just kind of get with the program but it's the idea that I think influencers I think that Instagram person, right? Up on Instagram on and it's the person themselves and they're making sure that all the pictures have the same colors in them and fit the 3 by 3 matrix that they want to have so it looks all nice. But Curbly itself was the influencer in this in this situation.

Bruno: Right.

Mark: So you built a brand that was an influencer.

Bruno: Yeah. Yes. So Curbly always was … Curbly never had a … it was never a personality driven site and that helped us in some ways and hurt us in some ways. But yes in our case it was much more about the site than any individual person contributing to the site. Because our site was driven by people like freelancers and a few staff people that were creating the content. But in general yeah there is much … you do seem more of like the individual sort of pseudo celebrity influencer although there is a lot more out there than just that. There are a lot of sites out there that aren't so tied to the individual that's running them that's really more about the content that they create and the audience that they are able to pull together.

Mark: Yeah [inaudible 00:18:39.7] anything about like the other guys who are now over [inaudible 00:18:42.4], right? Totally the same sort of thing where they can do that and be a full blogger pro as well right and all the brands that he and Lindsey have as well which is so influential for what they do.

Bruno: I think a lot of bloggers and digital content creators that I talk to this is a topic that comes up because in terms of selling sponsored content it can be easier if you are sort of a known personality. But in terms of actually having that be your business not … first, not everybody wants to do that because it is difficult to have … to be that kind of an influencer you really have to expose so much of your personal life and really be vulnerable and that's not for everybody. Not everybody wants to do that. And then just from a … strictly from a sort of business strategy point of view, it's not always smart to make the business so reliant on you. You may be a huge Instagram influencer bringing down a lot of money through your influencer contracts but what do you do when you want to sell that business? That's a really hard business to get out of. It's a really hard business to cut back because if you want to say like scale back your work or you have a family or a kid who's going to take over that role? So I have talked to a lot of those types of influencers about like how can you sort of start to pull yourself back. How can you supplement your business and make it a little bit more sustainable and not so reliant on you as a person?

Mark: Yeah absolutely. That's the same advice that we would give anybody out there is that I totally get the appeal of a building a personal brand. And I think a lot of people start with that in mind. Like I'm going to build a brand around myself, I'm going to be the celebrity. But then you get to the point where like this is a lot of work and I've been growing it for five years and I'm tired of posting my life for the public to see every single day and so how do you convert that over to an actual business? It can be done and I've seen a few cases where people have done it but it's a process.

Bruno: It is and I just think it's something that … you know because so many of these businesses do start off as hobbies or side projects it's not something that people think about right away but I think it is important to think about. You need to start thinking about it as a business, building a team that can support you. If you need to be the face of the brand okay that might be fine as long as you are thinking about it and I'm also thinking about how that might affect your ability like you said to sell a business or change your involvement in the business.

Mark: Yeah. Alright, let's talk a little bit about the influencer marketing side of it and the metrics and just kind of moves into what you're doing now with InfluenceKit. You said it yourself there's not a lot of metrics that were necessarily expected from the people or even deliverable for the people that were paying for these sponsored posts. What have you done there and maybe through Curbly or that you just kind of learned over the years that's really helpful for somebody paying for a sponsored post to start to key in on in terms of those metrics.

Bruno: Yeah I mean really where this came out of was like I said around 2016 we started doing a lot of sponsored content. And the first problem we had was just producing it efficiently. Not even reporting on it but just like honestly making sure that we did everything we promised we would do. I mean I know it sounds kind of silly but when you're doing … I think that we were probably doing three blog posts a day on Curbly, we're doing something like four or five sponsored projects or campaigns a month on Curbly. That's just a lot of moving parts. Like did we … are we supposed to do Instagram for Home Depot and how many pins were we supposed to do and what was the blog post supposed to include and is it cap is it the Home Depot or just Home Depot? I mean these are all little details but it makes of a difference when you start working with those brands because they expect a level of professionalism and you want to deliver that. So that was the first problem it was like okay we just don't have a good system for this. And that's kind of where the precursor to InfluenceKit came. It was just an internal tool that I built to help our team. Just to help everybody keep on the same page, what we have to do, when is it due, did we do it; simple right? And we used that. We used that tool for a long time. We used it both for our sponsor content but also for our editorial planning. It was great. It was really helpful. Then at 2017, 2018 I started thinking like man, we're just not doing a very good job of showing these sponsors their ROI of what we did for them. Like they're paying us money, we're getting good deals, we're getting as much money as we think we should be getting, we're creating this really good content but that's kind of where it stops. And I realized that that was a weakness. And so then I started looking at well how can we report, how can we go back and report on this? Doing it manually sucks and I'm somebody like if I do something twice I never want to have to do it again. Like once I've done something twice I'm like okay I should build something. So that's where InfluenceKit came out of. And it really just lets you automate the reporting piece of that process. So that for us, when we're doing, say four sponsored campaigns a month each of those campaigns might have four or five separate deliverables; things that we have to deliver back to the brand and report on. That's 20 different things. We can just dump those on to InfluenceKit and send the brand a report. So yeah I mean that's kind of where we're at now. The industry as a whole is really kind of still up in the air, people are starting to ask for a lot more metrics but not all. And that's kind of part of my mission with InfluenceKit is. I want to see every blogger doing this. I think it's to their benefit and I think that the biggest benefit is going to be when the industry realizes that there is reporting on this stuff they're going to start opening the floodgates. And by that I mean there's going to be a lot more money coming in and available to do this kind of stuff because they can actually measure the results.

Mark: Let's talk about InfluenceKit … and I love the transition here. You've been doing content, sponsored posts, all these and then internally like you said if you do something twice you want to build a tool for it and you started building the tool and it starts evolving and the next thing you know you have on your hands what could easily become a SaaS application which is what you are really focusing on right now. So you just finished an [inaudible 00:25:03.5] you just finished a kind of an introductory like get in the door sort of program with InfluenceKit for a limited number of people and you're in the testing stage with them right now is that right?

Bruno: Yeah so we're essentially in a sort of like a pre-launch phase right now we're letting in a very limited number of people. And that's really … that's not because you know we're snooty or anything it's just there's we're a very small team. It's myself and two other co-founders. And I think that we want to get it right. We're trying to figure out and I think all SaaS apps probably deal with this but what's the growth rate that we actually think we can achieve and we actually can support. I think that there might be a little bit of a misconception that you just like want to grow as fast as you can as soon as you can like just grow, grow, grow, grow. I don't know but I don't want to do that you know. I want to grow this business at a rate that is sustainable that we can actually keep up with. I don't want to be working nights and weekends right now. So yeah we are … where we are is we're letting people in. We're kind of testing out the product with them making improvements and changes based on early customer feedback and then figuring out okay now what? Like we think we have product market fit, we spent about six months kind of convincing ourselves that that's the case and now it's like okay well how do we figure out how to grow and like I said at what rate we want to try to grow at.

Mark: So a couple of questions that can come to mind here, I'll ask the easier one first and that is you talked about not wanting to necessarily just grow as fast you can, scale as fast as you can. What are some of the restraints that you're seeing that if you were to open it back up and … our of millions of listeners are listening to this podcast and they start knocking on your door and they're like hey we want in Bruno, we want in. What are some of the challenges that you guys would have in scaling quickly?

Bruno: Oh man I would say first of all let's just back up and obviously it would be a great problem to have that million and millions of people—

Mark: It's a good problem to have millions of listeners as well.

Bruno: You know I'm not like that and so I don't want to just make that assumption. Obviously, we need to work really hard still to even have that problem. But what are the scaling problems? I think the first scaling problem would be people. SaaS apps at least ours, I suppose I should speak for everyone but ours are still pretty heavily dependent on people. You really need to support people, you need customer support, you need onboarding. There's still a lot of time that goes into it and so that would be the first problem. Then with that comes a bunch of other problems like scaling an organization so that you're building … yes, you're building a product but you're also building a company. And in some sense, the company is like the more important product because if you can build a good solid organization then you'll do other good things and good products will come out of that. So we're really trying to be conscious of that like okay if we suddenly had to hire three customer support people how would we do that? How would we train them? How would we all stay on task? So I think scaling up people would be a big constraint. From a tech point of view for sure, there are some things we'd run into as well. InfluenceKit, in particular, relies on a lot of API's so … and for the non-technical people that just means we have to go out and grab stats from a bunch of different sources; Facebook, Instagram, Google Analytics. All of that takes server time. All of those API's have rate limits. Whenever you're building software you know doing something at a small scale and then just like growing it to a bigger scale is not as easy as just … it's not like we multiply things linearly. Things get way more complicated, way more difficult to debug. And that's not to say that I'm not excited about solving those problems; I am. But yeah I want to do it in a sane way. I think if we were to suddenly add … if we were suddenly to triple our user base like in a month I would be spending a lot of late nights doing things that I don't want to be doing.

Mark: I totally understand that. Building the organization side I think is really important. Whenever you're scaling anything at all having that foundation to be able to scale on is crucial because you will just completely buckle under the weight of growing rapidly. Who's the client for InfluenceKit? Who are you trying to target? Obviously, digital creators would make sense but it's not just mom bloggers.

Bruno: So we think of our customer as professional bloggers. I know that when we started out you kind of mentioned when you think of influencers you think Instagram and for sure you know that's legit but as we talked about and we talked about this a lot who we can picture as our customer it's somebody whose primary platform is content creation on a website that they own and their social platforms are supplementary to that. And when I say professional I mean like if they're making their living off of this, like they're supporting their family. They might even have an employee or two. We look at it anywhere from there up to what you might consider more like a small media organization; a site that has five or 10 or 20 employees. Beyond that, you don't think about that really as our market so much because at that scale there are other tools for those people and you don't really want to swim in those waters. So that's really who we think about and the interesting thing is that we've started hearing from a lot of agencies and brands about this. Really not our plan but what's happening is influencers are sending reports to their sponsors; the people that are paying them and then we're hearing from them saying we could use this. A great problem to have, it's a little bit like of an existential mini crisis for us because we're all in front … we come from this background, we're bloggers, we set out really with a mission to build a tool to help empower people like us and we don't want to just like pivot and start serving a completely different market at the same time. I mean when you have people asking to use your thing and who wanted to pay you, you need to listen. So we're trying to navigate that and see how we can do it.

Mark: Alright that sounds like a really good problem to have and sounds as well like we maybe pivoting down the road into matching influencers as well. Not to plan your path for you but it just seems like a natural extension that might be happening as well. Cool. Well, I really appreciate you coming on the podcast here talking about some of these things and I think we probably could have broken this up into two because just thinking about all the questions to deal with on the sell side. If I ask another question now we'd go on for 15 more minutes.

Bruno: Okay.

Mark: So I'm going to stop it now and I'm going to say I want to have you back to check in as you get past that kind of first initial enrollment and talk about how things have all been in this influencer space. I love the idea and just thinking about influencers outside of the Instagram model, thinking about it more in terms of a brand and just kind of this story is … well, it's fantastic so thanks so much for coming on.

Bruno: Alright. Yeah thanks for having me. I'd be glad to come back and chat with you here on that episode.

Mark: Alright. Looking forward to meet up with you. See you again soon.

Bruno: Alright sounds good. Thanks, Mark.

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