It's that time of year when most of us start reflecting on the past year and thinking about the year ahead. The older I get, the more it seems like I blinked and the year just flew by, 2015 was no exception. For some reason, I'm my own worst critic; looking at our business on a day-to-day basis it never feels like I / we got enough done. I use the saying “We are drinking from a firehose” all the time, because that's exactly what it feels like day-to-day within our business. We always have a list of things to do (that is a mile long), with only so many hours in a day. However, as I was sitting here putting a list of goals together for 2016, I would be remiss if I didn't take a step back to look at our accomplishments in 2015. A year that encompassed the sale of Treadmill.com, starting a new company, buying an existing website, launching a couple new brands from the ground up, and growing from $0 in sales to a pace of almost $1,500,000 by year's end.
It was almost exactly one year ago today that I was sitting around thinking about an exit strategy for treadmill.com. It was the end of our second holiday season operating that site and I had really just come to the realization that I was pretty much miserable running it. I've written a lot about treadmill.com on EcomCrew, so I won't write a whole diatribe about what precipitated the sale. However, the main issues were: running on slim margins, depending on drop shipping for our orders (which gave us very little control), having MAP pricing that we had to sell at but our competitors didn't, having 2+ weeks delivery times because we were shipping everything LTL, and the crazy high shipping costs.
As a result, 2015 started off with us looking for a buyer for treadmill.com. Luckily for us, the timeline from sale conception, to a signed deal was just under 5 weeks. We started shopping the site around the last week of December and we closed on a deal January 31st. In actuality, we had a handshake deal done by mid January, so just a couple weeks into the year I was faced with a major decision. We had an 1,800 square foot warehouse / office / showroom with 11 months left on the lease and an superstar full time employee who was expecting his 2nd child in 2 months time. The options were to A) write off the lease as part of the treadmill sale and say some nice parting words to our employee or B) find another business to plug into the warehouse and employee into. Option A was the more stress free option for my wife and I, but we went with Option B because good help is hard to find. I know that sounds cliche, but it's really true. It's even more important in a small business, because a bad employee can crush a smaller business.
So, over the next couple of weeks I scoured the internet for ecommerce businesses to purchase. I wasn't concerned about what the business sold nearly as much as other factors such as the underlying business model and the potential room for improvement. I looked at businesses that sold all kinds of stuff from bikes, to charm bracelets. From green products, to alarm systems. I ended up settling on IceWraps.com. This is another topic that I've talked about extensively on EcomCrew, so I'll spare the details on this post.
The outcome was me flying to Hudson, MI to get one week of training on IceWraps.com, packing everything up to send to San Diego, and spending one month doing transition work with the new owner of Treadmill.com. Just your ordinary average February. As a result, our sales on IceWraps.com during our first month of operation was a paltry $4,950.
As February turned to March, it became clear that we were going to have to totally scrap the platform IceWraps.com was on (Yahoo Stores) and replace it with a more modern platform. We ended up going with BigCommerce since that is what Treadmill.com was running and I was most comfortable with. Since I have a good IT background and can manage a tech project fairly effectively, we were able to get the new version of IceWraps.com up and running by the end of March. It wasn't the perfect final version, but it was functional enough that it allowed us to close March with $26,376 in sales.
Our main focus in April was to refine the website and get our SEO house in order. We spent a lot of time doing conversion optimization and adding new content to the site. We went back though the site and took all new product photography and wrote new product descriptions. We also started doing some PPC. The final result was nice growth in April and we ended the month with $40,284 on the board.
May and June were all about channel expansion. We started getting product into Amazon.com and got our eBay listings rocking and rolling. There was a pretty big learning curve, because we didn't have a lot of experience with Amazon.com at this point, but just like anything else I didn't let that stop me. We saw really quick success selling product on Amazon and as a result we saw our sales explode to $58,593 and $63,963 in May and June respectively.
By the end of June the lightbulb really went off and it became clear that creating our own branded products and leveraging the Amazon marketplace was going to be the future of our business. To this point we had dabbled into doing this sort of thing, but by early summer it was really clear that this is what Terran (our parent company) was going to become. I went on an epic vacation with my wife and several friends in July that spanned almost 3 weeks, but before leaving I was able to place a large order for our first branded products. Since I was on a cruise ship in the middle of the Baltic sea for the better part of July, we didn't see a lot of sales growth. However, things held pretty steady at $63,830.
As the summer started to heat up, so did our sales. As our first batch of branded products went live in late July, it set us up for a great August. In just our first full month of selling branded products on Amazon we were able to tack on an additional $20,000 in sales. That allowed us to end August with $87,699 in sales and officially put us on pace to be a 7-figure company. Not bad for our first six months in business.
Following the success of creating branded products, we cranked up the volume in September. We set a goal to add at least one new branded product SKU per week through the rest of the year. As a result, we ended September with our first six-figure month at $110,652 in sales!
At this point a few things started to become really clear to me:
Selling other manufacturer's products on Amazon is really tough.
If you find products that have low competition on Amazon, it's great for the first little bit. However, there are so many people grinding out Amazon.com, that as soon as you experience success there is someone else right behind you ready to take less margin. It becomes a race to the bottom a lot quicker than you might think.
For products with higher competition, it's even more of a grind.
We also had two manufacturer's change their Amazon policy this year. They previously allowed us to sell on Amazon, but then stopped all their retailers from selling on Amazon so they could have those sales for themselves. I don't even want to discuss all the ways that screws up inventory planning. From having to pay to recall inventory, to ending up with an excessive amount of inventory in your warehouse because your forecasting models change overnight. Yeah, #goodtimes.
So, by the end of September we made the bold decision to stop selling all 3rd party products on Amazon.com. This was a tough decision for us, because we were selling $30,000 – $40,000 in other manufacturer's products each month via Amazon. However, the margin was becoming lower and lower. What was once 25%-30% profit was being squeezed to 10% or lower. Remember one of the reasons I wanted to sell Treadmill.com was because it ran on slim margins? Exactly, enough was enough.
For the products that we sold exclusively on Amazon.com, we knew it would take a couple of months to sell though that stuff. For products we also sell on IceWraps.com, we just kept the inventory in our warehouse knowing it would just take a bit longer to sell though on that channel. However, we drew a line in the sand and stopped ordering any products from manufacturer's that would be destined for Amazon.com.
We need to go to China
We already had great success with our own branded products. So, I didn't need much convincing of this. If we were going to replace our 3rd party Amazon sales, that had horrible 10% margins, with our branded products it was going to take a trip to China. Incidentally, our branded products have 50%-300% margins. So, by the end of the summer we started planning for the Canton Fair and Hong Kong Mega Show. We spent the better part of October in China at these shows planning out our next batches of branded products. It takes about 3 months from the day you order to the day you have stuff on Amazon.com or your website, so we haven't seen all the fruits of our trip materialize yet.
So, getting back on track with sales performance for the year. Even though we were in China for almost 3 weeks, we were able to keep up or sales volume because of that great employee I mentioned above. While we were in China, he was able to keep the ship afloat and we closed October out with $112,472 in sales.
Remember above when I said we drew a line in the sand and cut off all our Amazon 3rd party products, well we really felt the impact of that in November. We also signed a lease to move into a new warehouse that is 3,000 square feet vs the 1,800 square feet we were in. This meant that every product we ordered in November was going to have to be moved in December during the move to our new warehouse. So, by early November, we decided not to reorder any inventory and let stuff just run out. We also couldn't run any Black Friday promos this year because of the move. So, November was our first downward month of the year with “just” $97,865 in sales. The bright spot in all this was that our profit margin was higher in November than any other month of the year because we eliminated all the low margin 3rd party Amazon junk.
The best news of all is that we are on pace to close our December with our best month ever. At the time of writing this, on December 26, 2015, we are on pace to do $117,800 this month. That brings our pace up to almost $1,500,000 in annual sales. We are in a great position for staring off 2016 with a bang because we have about 15 new SKUs that are about to go live on Amazon.com over the next couple of weeks.
Accomplishments In 2015
- Sold Treadmill.com for more than our original asking price and successfully transferred away from that business model (drop shipping).
- Started a new company and grew sales from $0 in January to $118,000 in December.
- Successfully purchased an existing struggling ecommrece site and turned it around (IceWraps.com).
- Major gains in SEO traffic with IceWraps.com. The screenshot below is 12 month organic traffic growth.
- Made our first trip to China to the Hong Kong Mega Show and Canton Fairs.
- Successfully launched over 30 branded products.
- Joined 3 mastermind groups and got amazing value out of them.
- Attended several live workshops / meetups / conferences for ecommerce.
- Bootstrapped 2 brands from scratch.
- Hired our second full time employee.
- Improved profit margins every quarter though 2015.
- Moved to new 3,000 square foot office / warehouse space.
- Launched EcomCrew and wrote several high quality content pieces.
- Launched the EcomCrew podcast.
Goals For 2016
So, enough about 2015… lets switch gears and focus on the coming year. I'm not a big New Year's Resolutions guy, because they almost never get adhered to. However, I am big on quarterly goal setting because I think it's important to get goals on paper and systematically cross them off. In one of my mastermind groups we discuss our goals each quarter and hold each other accountable for reaching those goals. I think it's hard to set goals in a fast paced business like ours past 90 days. However, once a year I like to jot down my longer term goals and reference them though the year.
- Increase top line revenue 2x – 3x in 2016. Since we are growing so quickly, I don't want to set an annual target here. Instead, I want to set a target for what we should be doing by the 4th quarter next year. So, my goal is to do between $650,000 and $975,000 in top line revenue during the 4th quarter of 2016.
- Add at least 50 new branded products. I want to keep up our pace of adding at least one new branded product each week in 2016. To me this is the future of our business.
- Increase organic traffic on IceWraps.com by 25%. We already rank number 1 for most of the juiciest terms, so increasing organic traffic is getting harder and harder. However, there is still room for growth here.
- Become a expert at email marketing for all our businesses. In 2015 I started cracking the surface here and I want to take things to the next level by becoming an expert in this area. I want to build out extensive email funnels for our businesses and A / B test them until they are performing at their peak.
- Launch one new in house brand. We have a couple brands we are in the process of testing right now. I want to launch at least one more brand so we have places to launch new products in 2016 and beyond.
- Become an expert in sales funnels. This is something else I have been just scratching the surface on in 2015. By the end of 2016 I want several bulletproof funnels developed for our businesses.
- Create several profitable PPC campaigns. On the heels of number 6 above, I want to use these funnels to create profitable PPC campaigns that can bring lots of new traffic and sales to our businesses.
- Work smarter, not harder in our warehouse. Now that we have a brand new warehouse, with double the space as before, it can become easy to get sloppy with space efficiency. We signed a two year lease in our new space and my goal is to not have to move at the end of that time. If we grow our business 2x – 3x this year and next year that is going to require working very smartly in our new environment. We are going to need 3PL providers to supplement our business. Ultimately this will be cheaper than expanding our warehouse in a high rent area like Southern California.
- Create courses for EcomCrew. I want to develop at least one high quality course for EcomCrew members. The first course I do will be free and / or very cheap to use as a lead magnet and attract more attention to this site.
- Attend at least 4 industry events. It's important to grow and learn; it's a journey not a destination. So, I want to attend at least 4 industry events / meetups / whatever you want to call them in 2016.
- Take at least 4 weeks of vacation. It's easy to get wrapped up in work since it's a job / hobby / passion for us. However, it's important to get away and enjoy life a little too. So, I want to take at least 4 weeks vacation in 2016 to keep my mind clear and not burn out. We are starting January off on the right foot with a week in Mexico :)
Great ecommerce info as always. I appreciate how this podcast has useful tips and experiences instead of wishy washy marketing BS like other podcasts. Keep up the good work.
Thanks so much Adam. Happy New Year!
Btw, how would I apply to the open position Michael?
Hey Adam… we actually filled that position back in November and the new employee started December 1st.
just wonder if you could give some deeper insight on startup costs? kudos for the quick growth but product costs and recurring costs play major roles in growth (unless you have deeep pockets of course)
Both Mike and I usually have about $50,000 for an initial project. A website will be around $10,000 in random costs (design, development, content, photos, etc). Initial products around $20-30k. That leaves another $10k for marketing and advertising.
You can always do less on a shoestring provided you’re willing to do all of it yourself. A template website with no mods is whatever time you put in. If you write all the content, it’s time. If you take your own photos it’s time. You might save $8k or so that way. Product cost is what it is. If you have a super cool concept and can do a run of 100 units at $10 each, then of course it will only be $1,000 inventory, but we prefer having selection and variety or going deep. Lastly, the $10k for marketing is a “never dare touch that” figure in my book. If you do, then it’s greed or short sightedness. Albeit, I come from a marketing background, so there’s that, but if you’re not willing to pay to play, then it’s no play in my book.
Wow congrats on the success! Great read. I’m working towards it currently sitting at around $50k/month in revenue.
Working towards getting to where you are! Will indulge on all your articles :)
What percentage of your sales are Organic SEO vs Amazon? Are you running any paid ads as well?
How are you managing both ecommerce websites with just one full time employee as far as order fufillment? CuttingBoard.com, IceWraps.com.
If you don’t mind me asking about what do you pay for a 1,800 sq ft and 3,000 sq ft warehouse?
The organic vs Amazon, it used to be mostly Amazon, but it’s switched to majority FB traffic and organic for ColorIt. We employ Amazon and 3PL, so we can scale our fulfillment easier. That said, at this point (Q3/16), we both have multiple employees to help with in warehouse fulfillment.
I’ll answer your warehouse space question on the assumption you’re trying to figure out how much is 3,000 sf next to where you live. The answer is that each locale is different and it really depends on a huge amount of factors including vacancy rates, traffic, location, etc. As very, very general rule, you should be paying under $10sf for warehouse space. You can get as low as $1 per sf if you get a huge building or are in a depressed area.