How's my Offroading brand doing after two full years in business? How are tariffs affecting my profit margins and what am I doing about it? And how did a permanent suspension of my product affect my sales?
In this post I'll give a full update after two years including a breakdown of my numbers and a list of a my wins and losses for the period.
Related Reading: Rebuilding a Million Dollar Ecommerce Company, 18 Month Update
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Related Reading: Rebuilding a Million Dollar Ecommerce Company, 6 month Update
Related Reading: Rebuilding a Million Dollar Ecommerce Company, 60 Day Update
Million Dollar Update
Overall, after nearly a full two years the business is currently has a monthly run rate of over $100,000 putting the yearly run rate at around $1.2million.
|July 2017||April 2018||January 2019||July 2019|
Overall, profit would be on a nice upswing and very healthy IF there were no new tariffs. Living in a dreamland for a second and ignoring Trump's Tariffs, gross profit margins were 34% in July, up from roughly 29% in my last update.
However, unfortunately these tariffs do exist and my overall profit margin is quite a bit lower than last year because of it. The good news is that WHEN the tariffs do get removed, my profit margin will be very strong and on $1.2million in sales, it would net me an extra $25,000-$50,000 in profit.
Some of my biggest wins over the last six months include:
- Home-run product developed after a year: After over a year of development, one of my new products launched to big success and is doing close to $20,000 per month in sales; Next season it will likely be closer to $30,000/month.
- Content website getting traction: My content only website for 4×4 parts and accessories is starting to get some traction. It's only averaging about 100 organic visitors a week but it signals that the site is basically out of Google's “sandbox”.
- Purchase of another content website: I purchased a small Amazon affiliate website from Flippa a couple of months ago within my automotive niche doing about $200-$300 in affiliate income per month. It provides some some product data for me and also provides some work for my VAs.
- Hiring of a Second VA: I hired a second VA for the brand recently as I look to slowly grow out my team.
Some of the bumps along the road include:
- Trump's Tariffs: Nearly every product is now being hit by a 25% tariff. I've increased prices 10% across the board but this still doesn't account for all of the tariff increases and has hit my profit margins about 3-5%.
- Product Suspended: I had a product suspended for an IP violation relating to a design patent I was unaware of. Whether or not it could be disputed is irrelevant I only have about $2000 in inventory and it's not worth the fight.
- Product Quality Issues: I have at least two products where the overall review rating has slid from 4.0 to closer to 3.0. This isn't necessarily quality fade but rather the product just needing overall improvement.
Goals for 2020
- Get PPC to Below 30% of Sales: PPC currently accounts for 35-45% of my sales. Although it has been progressively decreasing, it is still way too high. Fortunately, my average ACoS is low but this will only increase in the future. Increasing organic sales will help this.
- Improve Product Quality for Two SKUs: Two of my top products are having some quality issues, specifically with one of my bags; Other competitors have similar problems but improving quality will increase review rank and create a competitive advantage.
- Increase Revenue to $1.75m: My original goal during my 18 month update was to get revenue to $140,000/month by December 2019. I'll likely fall short of this by December but should be able to hit this by April 2020
Moving into 2020, I'll start to really focus on refining profits for the business. Doing so will do two things: it will bring more cash into my pockets but it will also give me the opportunity for a potential profitable exit if I decide to go that way. Based on my experience, it takes nearly a year to really batten down the hatches and seal any profitability leaks. My primary focus will be decreasing ACoS across my advertising campaigns (which will mean eliminating a lot of unprofitable campaigns) and increasing organic rankings for products.
As always, if you have any questions or comments, feel free to posts in the comments section below.