E115: Under the Hood with Megan Loftin Part 1 – Cash Flow and FinancingJanuary 25, 2018 in Ecom-Crew-Podcast
We have another Under the Hood episode for you! Under the Hood is a new segment we are doing on the EcomCrew Podcast where we give our listeners the opportunity to be on the podcast and ask us any advice about their business. They get free coaching from us and our listeners get amazing content, too–it’s a win-win!
For today’s episode we have Megan Loftin of The Bootstrap Boutique on the spotlight. Megan is currently doing her business as a side hustle, and like many entrepreneurs still at the early stages of the ecommerce journey, she has been having problems about cash flow and keeping inventory. As is very common with an inventory-based business (especially if the inventory is coming from China), money can get tied up for months on end. In this episode Megan and I talk about the best ways to finance her business and solve this problem.
More specifically we talk about the following:
- Who Megan is and how she got started in ecommerce
- How hard it was to start, and how she failed with her first product
- How she got back up again
- Money getting tied up and running out of stock
- How I got over my hate of debt and how loans helped supercharge the growth of my business
- The specifics of getting an Amazon loan
- Other ways to get financing
This episode is just Part 1 of our entire coaching session and on Part 2, we continue to talk a little bit about financing, and then move on to Facebook ads. It is a very interesting conversation and if you are just starting on your ecommerce journey, then these two episodes will definitely be helpful to you.
As always, thank you for listening. If you want to become an Under the Hood guest, just sign up here. Until next week, happy selling!
Full Audio Transcript
Mike: This is Mike, and welcome to episode number 115 of the EcomCrew Podcast. You can go to EcomCrew.com/115 to get to the show notes for this week’s episode. And this week we’re bringing back the Under the Hood segment, something new we launched this year in 2018. I’m so excited to be doing these. These are actually a lot more rewarding than I ever thought.
For those of you who have been listening to the podcast for any length of time, you know that I’m in to couple of different things. Number one paying it forward, and that’s one of the reasons why we came up with this segment. And the other thing you probably have heard me talk about is a book called Who Moved My Cheese. I think the only thing constant in life and in business is change. And I don’t like to get complacent. I say that moss grows in the forest; it does not grow in our office.
And the EcomCrew Podcast has done well. It’s become pretty successful. It’s actually the fastest growing e-commerce podcast on iTunes. I’m really proud of what we’ve done, but that doesn’t mean that we should be doing the same thing over and over again. We’re looking at all kinds of new things we can be doing with the podcast this year. And one of those things is these Under the Hood segments.
So if you go to EcomCrew.com/UndertheHood, you can sign up yourself to get an hour to an hour and a half of free coaching from either Dave or I, or both of us if you’re lucky enough to be on a week that both of us are able to do it. And the whole idea again is to pay it forward, to help you in any way that we can to improve your e-commerce business. Dave and I live and breathe, and eat and sleep e-commerce.
We absolutely love this stuff. And there’s nothing more gratifying than helping out somebody else with their business that doesn’t adversely affect your business in any way. That’s the great thing about e-commerce. It’s like this multi-trillion dollar industry. And doing these things doesn’t hurt us. The only thing it can do is help by either for me either getting new relationships, new contacts in the industry, or just again what goes around comes around. I really believe that.
And I hope that Megan got as much out of this as I did helping her. I’d love to follow up with her in six to twelve months and see if this has really been able to help her business as well. Again if you go to EcomCrew.com/UndertheHood, you can sign up to be on your very own episode of the EcomCrew Podcast. But even if you don’t, hopefully all of you out there listening will get stuff out of these Under the Hood segments.
And even though it might not directly help you with your business, I’m not answering a question for your business directly; indirectly I think it will help because what I’ve noticed after recording a lot of these segments now is the same theme seems to come up a lot. And I have a feeling that a lot of people out there, it’s probably the 80/20 rule, 80% of the people that are listening to the podcast are probably dealing with the same struggles.
And if you’re hearing results or advice about those same struggles, hopefully you’ll be able to apply that to your business as well, and hopefully it will help in your business. That is what we’re hoping to get out of these segments. So enjoy this recording with Megan. It’s going to be two parts. So it’s going to be episode 115 and 116. We’ll get right into the interview on the other side of this break.
Mike: Hey Megan, thanks for coming on the EcomCrew Podcast, the Under the Hood segment, and welcome to the show.
Megan: Hey Mike, thanks so much for having me, I appreciate it.
Mike: No problem, I’m enjoying doing these. And I’m excited to talk to you today about your business and what we can help with. So before we get to the help part, let’s talk about you just a little bit so I can better understand what you’re selling and how much you’re selling, and where you’re coming from, and the types of things that you’re looking to do. So let’s talk first about how you got into e-commerce. I always find that fascinating how people got into this gig. So how did you get into e-commerce?
Megan: Yeah absolutely. So the way it started for me was for a long time for probably since I graduated college and started working a corporate job, I always wanted just a little side business of my own. But I was never actually successful in doing anything by wanting it, never come up with all these great ideas of things I was going to do, and I never actually did it. And then about two years ago, I was through a couple of different circumstances. First one I found Steve Chou of My Wife Quit Her Job who I know you know.
Mike: I do.
Megan: And I like read his entire blog over the course of like three or four days, which was quite a bit of reading to do. And then found Scout Voelker, The Amazing Seller, and found out about this whole selling products on Amazon space. And I was just like I think I can do that. And so I just made a commitment to sit down and work on it a little bit every night, because that was always my problem before was come up with all these plans and get overwhelmed and never actually do anything.
And so it took me a long time to launch that first product. But I did eventually launch a product, and I’m working on number two now. So finally the main way to actually starting a business is selling a product.
Mike: Awesome, congratulations. The hardest part is always getting started. I go to Steve Chou’s events a lot and speak there. And the number one thing I always hear is like, oh I can’t quite figure out what I want to sell. It seems like it’s the hardest thing is to get started. So Congratulations on getting over that hump. And you mentioned both Steve Chou and Scott Voelker. We’ll put links to both of their sites in the show notes. They both have awesome stuff for beginners especially to read through and start on their journey.
So it sounds like two years ago, you got that first product up. And so for the better part of the last two years it’s been just one SKU, or is it a product that has multiple SKUs?
Megan: No, it actually took me more like a year to actually launch the first product. So I just started my selling in May of this year, March of this year, one of those end months, I can’t remember which one.
Mike: Got you.
Megan: But I had no idea of selling I’ve been selling for a full year.
Mike: Okay, so as of recording this podcast, it’s been somewhere between like seven to nine months you’ve been up and running with this one SKU?
Mike: Okay, awesome. And it took you a year in development. So let’s just kind of talk a little bit about that. What was — because that’s a long time, but it’s not completely out of the question, because I mean there’s been a lot of products for us that have taken a year. And we have a hard time getting the lifecycle of developing a product much under six months. So I’m just kind of curious what was the pain points for you as you were developing that?
Megan: Yeah, a lot of what you said about people at Steve’s summit that is what do I want to sell, it’s trying to figure out how to do product research, and even find out what is a good area to focus on. And then I went through — the product that I’m selling now is the third product that I went to be sample phase with. So I got on a few samples on a few different products. They didn’t work out for various reasons.
The very first product that I actually tried to sell, I was [inaudible 00:08:01] I didn’t know what I was doing. And my supplier, he would have been my supplier, just completely lost confidence, said you know what we can’t do business together. So I was probably out for a month maybe after that. I was just so upset. I was like I don’t know what I’m doing, this is a disaster. And so eventually I got back in and just restarted looking for products again. And then the second product I wanted to sell didn’t work out for other reasons. And so finally I got the third product, but it took me a long time because I was so new to doing product research and working with suppliers and trying to figure out that whole process that it just took forever.
Mike: Got you.
Megan: But once I found the product that I’m selling now, it was a much smoother process because of what I had been through with those first two.
Mike: Got you, that makes a lot of sense. Yeah it’s a lot of back and forth, and you question everything, everything is new. And what seems like second nature to me now and probably to you, when you’re first going through it, it’s a huge mountain to kind of climb.
Megan: Yeah absolutely.
Mike: Cool, so you’ve been up and running for seven to nine months with — what niche are you in? Is it — I had some notes here, but I didn’t quite talk to you about it, what’s the niche that you are doing/
Megan: Yeah, I’d say the niche falls under craft supplies.
Mike: Okay perfect arts and crafts. It’s obviously something that we sell as well which is cool. I think it’s a good little niche to be in. And in the like seven the nine months that you’ve been up and running, what’s like the revenue that you’ve been able to get to?
Megan: Yeah well since I’ve been running, I have done about nine to 10,000 in sales. My biggest problem has keeping inventory and stock, which I guess is not a bad thing. But then I get out of the game for so long. So if I was able to order enough inventory, that I have been in stock recently, I’d be triple that easily. But I have been probably out of stock more this year than I’ve been in stock, so I’ll make it up.
Mike: Yeah that’s definitely tough. And I think that’s actually one of the things that you wanted to talk about today.
Mike: So we’ll get into the yeah here shortly. But first off congrats on getting on to ten thousand sales. At least you got some numbers up there that you can feel proud of. And again that’s not anything to sneeze at because again just getting started and being able to sell through your inventory a couple times. And of all the problems that you’ve got right now, that’s a much better one than having a bunch of inventory that you can’t sell. I think I’d rather be in that position.
Megan: So actually I underestimated. I just pulled out the year to date numbers and it’s 17,000. So, way better than I thought.
Mike: Yeah that’s awesome, excellent. And as far as net margin on that, on that 17K, what do you think you’ll make on that?
Megan: Right now I’m sitting about 14%. We should talk about why that is so low because I have some ideas.
Mike: It’s actually not that bad. I mean, for our company that’s actually what we’re at, but we have a lot of other overhead that goes into that because we have employees and stuff. And I’m guessing you’re not at that stage yet.
Megan: Yeah definitely.
Mike: But when you’re first getting started, even at being 14%, I think that that’s actually still good. I mean, there’s a lot of economies of scale that you gain when you’re ordering more inventory and consolidating shipping, and all these different types of things. There’s no time that it will cost you more than your first couple of shipments. As you get more shipments under your belt, it’s always going to be cheaper down the road.
Megan: Yeah that’s what I’ve found as we’ve been going through it.
Mike: Cool. All right so 14% doing rough math in my head, it’s like $2,400 or so in profit on under 17K.
Mike: Cool excellent. All right and then is this a full time gig for you yet, or is this I imagine still probably a side hustle?
Megan: Yeah it’s definitely still side hustle for me.
Mike: Okay and what are your goals like going — we’re recording this at the end of 2017. We’ll go live beginning of 2018. What are your goals for 2018? Is it to be able to do this full time, or is that not quite the goal for 2018 is just to kind of keep growing it?
Megan: Yeah just to keep growing it. I’m one of those weird people that actually really like my day job. So I didn’t start this to quit my job eventually. If I get to the point where I had to choose one because I was being so wildly successful selling this product, that would be a great place to be. But that’s not the goal right now. I mean I get a lot of fulfillment out of what I do during the day. So it’s just really to continue to grow it steadily, to add more products, to continue to learn how to do this better, and to be consistently profitable.
I mean I would love a nice side income from this, but I’m not trying to scale it up to where I earn $100,000 or the “six figure business” next year.
Mike: Got you, okay cool. So you’re just trying to build a side hustle, build a nice little nest egg on the side, or be able to do something frivolous, go on a nice vacation or something like that with the money maybe?
Megan: Yeah, that would be great.
Mike: Awesome, okay cool. I think I have enough information to kind of go in here. And we’ve talked for just a minute before hand. And Abby our awesome VA back in the Philippines takes notes before we do any of these. So I know kind of some of the stuff you want to talk about, and one of those things is financing. So I guess in your own words maybe frame the question so I can get the best understanding of what you’re looking to do there.
Megan: Sure, so the way I came about this business is, okay I’m going to put in $5,000, and that’s all the money that I want to put in of my money to see that when I started. And my plan was always just to take the profit, reinvest it, take the profit reinvest it, and grow it like that. What I have found as I’ve done that is that I can’t get the cash out fast enough to reinvest in inventory to maintain stock at Amazon. So that causes problems.
And then also I’m expanding right now into my second product. So I had to pull some of that profit away that I would use for more products of number one and the product two. And I’m just finding that that’s it’s not as easy to take that profit out, reinvest and grow it. I can’t do it as fast as I would like. I’m trying to balance patience with being aggressive in growth. And I was listening to a podcast that you did with Greg Mercer, and then you did another one with – you’re going to have to help me with his last name, this is more recent Bill Alessandro.
Mike: D’Alessandro, yeah.
Megan: D’Alessandro okay, where you guys pretty much spend the whole town talking about, or you spend a lot of the time talking about financing these companies. And so I just thought it would be helpful for me to kind of wrap my head around what does that actually mean when you’re taking on outside financing, whether it’s those loans Amazon offers you, or actually going out and getting a business loan. I think I need more sales before I could support something like that.
But what does that actually look like, what is the process involved, what are the pros and cons of taking on that financing as opposed to just doing it the organic growth.
Mike: Yeah, awesome question and definitely can get into that. It’s definitely been a journey for me. I think if you were listening to the podcast, we did about that. I was very against outside financing to start with. I’m just at a point in my life where I am very debt adverse. I like to pay cash for everything; I don’t like any type of credit card debt or car loans or anything like that. It’s just kind of a place I’m at in my life.
And I look back at all the interest I used to pay before I got disciplined with finances when I was a kid, and it kind of makes me a little bit sick to my stomach. So the thought of paying interest to buy more inventory was something that I just couldn’t get my head around, that I was a little bit stubborn about in the beginning. And Bill D’Alessandro is definitely the one that helped me get over that hump.
And the reality is that just about every inventory business in the world finances their inventory. It’s a situation where you just can’t grow fast enough organically. You’re talking about the stock out problems. And if you want to cap where you’re at, the money you’re going to put in is $5,000; you’re only going to be able to grow so fast.
I mean it’s just basic math of you put $5,000 into it, if you’re getting 14% net on that 5,000, you’re going to have to sell through your inventory. You’re going to have about $5,750 at the end of day, which is not a bad return. I mean that’s way better than you would do in the stock market or any other investment. But if you turn that inventory three times a year, you’re always in this situation where you need to sell through it all before you have enough money to place your next order.
And that means you’re going to run out because there’s this long delay of when you place an order from China to when it actually shows up. So yeah I mean it’s a very tough game to play, because you need to have money in the bank. Let’s just say you had that $5,000, and instead of putting all $5,000 into that one product in ordering, you basically need to order $2,500 dollars of that product, and have $2,500 in cash in the bank to be able to continue to support the lifecycle of that product, because you’ll place your 30% deposit, wait 45 days, give your 70% final payment, then wait another 30 to 45 days before the inventory even shows up. So your money is locked up that entire time.
And then the next thing you know you need to place your 30% deposit again to order more inventory. And you just end up in this cycle where you can’t get out of that, where you’re not growing as fast as you would like. I mean it’s not a bad situation to be in; you’re selling through your product. But it’s disjointed because what ends up happening is you run out of stock, you lose all your momentum, you bring this product back in, then you don’t know in your mind whether it’s going to sell as well the next time. So you end up like second guessing your order. It’s a very difficult place to be in.
So yeah I mean my recommendation definitely would be to seek some additional financing, whether that’s yourself if you can get the comfort to put more than $5,000 into it, or use something like an Amazon loan or a Kabbage loan, or one of these other resources. And we can talk about the pitfalls and benefits and all those things here. But that’s just kind of my overall thoughts is you definitely need financing.
Megan: Yeah and I’m in the same place, persona debt, we just don’t play that game at all. And so it’s very hard to not look at this and say, well I’m just going to run it like a cash business and only spend the cash that’s in the checking account. And so it has been for me a really hard mental hurdle to get over. But as I listen to you walk through that and in the other podcast I mentioned, this is something that I’m like, okay if I’m going to be serious about this and step up and actually put some more muscle behind it, then that’s the way it’s going to have to go.
Because you’re absolutely right. I’m in that cycle right now of like right now for the inventory I have ordered; I’ve sold through about a third of it. So okay I need to place another order, but I’m afraid that after Christmas there’s going to be a big drop off in sales, and it’s going to take a long time to finish up that inventory. And then the factory is going to be like, okay we need our 70% now and I’m going to be like, I don’t have it now. And so that is exactly the cycle that you get stuck in.
Mike: Yeah. I think this is actually the hardest part of running an Amazon business or an inventory based business. It’s not just Amazon because we obviously have other channels. And I think that’s crazy. I mean we’ve been doing this for over four years now. And we just had a weekly meeting this morning, and this is always the biggest frustration, the biggest topic that comes up week to week in our business, because the you don’t always have all the facts.
You’re having a like use a variable like an X or a Y in your assumptions, because you don’t know — you said you don’t know what are the sales going to be like after Christmas. And this is — it’s like when I used to play the stock market or I was a professional day trader for a while. And it’s just like you always have if in every statement, like if I bought it then and if I sold then, I could have made this, I could have done that. So it was like if you could have.
And it’s the same thing with inventory, because you’re just like, well what are my sales going to be? If my sales are going to be this after the holidays, then I need to order this much, if they’re going to be this, I need to order this much. And without any historical data, it’s definitely, it’s really tough. It’s definitely like a mental — I always use a curse word here, but it’s a [inaudible 00:20:34], it is. I mean it’s definitely really tough.
So we’ve been able to get the confidence of err on the side of caution of ordering too much, because I’d rather — I know in our business that I’d rather have more inventory and take a little bit longer to sell through it than to run out, because there’s a few reasons why. The first reason would be if I have enough inventory. Now I’m actually gathering data that I would never have otherwise. If I run out and I get it back in, I run out, I get back in, I’m never going to know like for the next year or the year after that exactly how much I really need to forecast for the following year. So for me the data is worth something alone.
Number two, if I’m running out, I’m losing sales. So I can’t I can’t turn a profit on something that I don’t have in stock. But yes there’s obviously an opportunity cost if I order too much and it’s just sitting around, but I have confidence in my product that it’s never going to sit around forever, like I’m going to sell through it. Worst possible case scenario, like in absolute miserable failure like I order way too much, I’ll sell it within a year.
And even at 14% return like what you’re talking about here like on a 14% net profit, that’s still way better than pretty much any other investment. I mean you can’t really make 14% anywhere else, and that’s like if things go really, really wrong. I mean the reality is that you should be able to turn it at least twice a year. It might take six months to sell instead of three or four months. And if you can even in that bad case scenario where you’re turning it twice, you’re now you’re at 28% return on your investment, which is better than almost any year on the stock market even if you played it exactly perfectly.
And that’s how I justify things in my mind. It’s like what else could I be doing with my money right now. I know that even if it goes badly, it’s still going to cope better than my best case scenario of investments in a traditional investment like the stock market or real estate. So that’s just how I internalize it. But everyone’s a little bit different. And then you add the interest component on top of it where now you’re paying for money on top of it which we do. We have almost seven figures in loans at this point; we’re getting to close to that.
But I realize that because of the financing, I’ve been able to exponentially grow my business. And eventually what’s been able to happen as I’ve gone from two and a half million to five million and we’ll hopefully go from five to ten and ten to 20, that will happen organically. I’d still be sub one million dollars right now, like way under one million dollars. So the reality is that when we go to sell the business, it’s going to be worth over the same amount of time, the same amount of work and everything. We have a business that’s worth exponentially more because of the financing. And the interest on that debt is a small price to pay when you look at how parabolic our business has been able to grow over that time period.
So that’s just one man’s way of looking at those numbers and being able to justify it. And obviously you have to have a comfort level yourself that that’s a better thing for you to do for you and your family. It’s certainly not my advice for what you need do, but that’s how I’ve dealt with it personally I guess.
Megan: Yeah absolutely. So you said like seven million — not seven million, sorry, seven figures close to an outstanding debt right now which is a huge number. But that’s not where you started, so can we go back to like that first loan you took out, and how did you decide when to take it. Two, did you spend it on inventory, was there anything else that you spent financing on, how did you get started in the process?
Mike: Yeah, so the first loan that we took was from Amazon, actually the only loans we still take are from Amazon. And I also – let’s rephrase, I actually had a loan that I got from a personal friend, I’ll talk about that as well. But the first one I took was from Amazon. And I believe the first loan I took from them was like it was at really high interest rate. I think it was 16.9%, which I had a really hard time getting my head around.
But the reality again is you look at that, let’s just say it’s $100,000 loan. I’m paying $16,900 for the year if I was to keep that, the whole 100,000 which you’re paying it down, so it’s less than that. But the reality is again like if you look at your net profit margin, as long as your net profit margin is equal to or greater than the interest rate, you should always be taking the loan because as long as you’re staying ahead of the interest curve, it absolutely makes sense at least again in my mind, because again you’re growing your business.
And when you go to sell your business, when you put a multiple on your business, the interest is always going to be an add back. So you’re not going to — whatever interest rate you’re paying, whatever interest expenses you pay, when you go to sell your business, that’s not going to be factored into the multiple. They’ll take that out. So when you go to pay off that loan, the interest rate, you’ll get all that back and then a multiple of three or four, or whatever you can get on your business.
And it’s also deductible, the interest is deductible, so it actually — the end result is that whatever rate you’re paying is going to be less than the rate that’s advertised on the paper. So the first loan I took was for about 50,000, and it was whatever Amazon had offered at that time. And I don’t know if you’re at a point in your account because it’s still pretty young, usually they only start offering loans if you’ve been in business for at least a year.
But they might have already offered you something. So you would have like right on your dashboard. If it was available, it would be right in your dashboard and they would just show you the terms and what they’re willing to offer you, and it would be right there. So for us to answer the other part of your question, I never take financing on anything but inventory.
So to me I look at it as kind of like when the US used to be on the gold standard, for every dollar that was out there in circulation of the US dollar, there was a dollar with a gold at Fort Knox or somewhere else. So to me I look at inventory as that same balance. And I only will go up to 80% of the value that I’ve purchased just to make sure that we’re leaving ourselves some leeway there. So that’s the way that I treat — I don’t ever use financing to pay for employee salaries or some type of advertising campaign, or any other expense like that, because the risk is way too high.
If you hire an employee and it doesn’t work out well, and you have this debt now to pay, it’s very hard to service it, versus the inventory whenever you buy inventory, for us we’ve had a much greater than 80% chance of success rate. And now we have kind of a machine kind of going as well, because like as you keep on building upon this, your risk gets lower and lower, because we’re more diversified and we have more data and we’re making more intelligent decisions than we did when we were first getting started.
So that’s the way that I’ve treated the financing part. And then as far as each loan from Amazon that they’ve offered and we’ve taken, the rate gets better over time. And then we also had a friend of ours that I knew from another business that gave us a line of credit up to a half a million dollars. And that was an interest only agreement that we had which was awesome, because when you’re first ordering the inventory, you’re paying a 30% deposit, having to make a payment on more than the interest, having to pay principal down during that period when you’re first getting started is tough, because you don’t have any sales on it.
And then obviously when you make the final payment, that first month after you make your final payment, it’s hard to service that debt because you’ve paid for it but you don’t have any ability to sell it for the first 30 days where it’s sitting on a boat coming across the ocean. It’s pretty difficult. So luckily we were able to come up with a method of doing interest only with that friend. So it was very easy to service that debt.
And then as we sold through all of our inventory and gotten to a place where we’re at right now, we’ve since paid off that loan completely with him. But it’s still there. So like in 2018 we’re going to be ordering a bunch of more product, that’s a line of credit that we’re going to tap again in the same way.
Megan: Okay right, and lines of credit work like that. They just can sit there until you need them, and still something good to have as an option. So that’s a good use of taking advantage of your network and your contacts and things. And maybe other people — like I wouldn’t have access to that right now which is fine, but it’s a smart use of resources that are around you. So that’s an interesting other option I hadn’t really thought about.
Mike: I was definitely fortunate to have that contact in someone that was relatively easy to set up. I mean we just kind of had a quick conversation about someone that I had done business with him in the past, and he had a high level of trust with me. So we just set it up and did it. And we did take almost 100% advantage of the full $500,000 at one point. Like I said, we’ve paid all that off now.
I mean if you’ve listened to some of our recent podcasts, one of the biggest struggles we had in 2017 was just as we’ve been growing at this rate, staying on top of on top of things from a manpower standpoint, because it’s just you go from one product two, no big deal, you go from two to four no big deal. We’re trying to go from 100 products to 200, and 200 to 400, it’s a lot to add in a year. That caught up with us this year. We just didn’t have the manpower to release enough new items.
So that’s the good news of leveling off for six months as we’ve paid off like almost all of our debt, because the cash flow has just kind of caught up with us. Now we’ve gone in the benefits and the reward from all the things that we launched previously, and now we’re very flush with cash, and on lines of credit are ready to take advantage of. So we’re going to really go kind of crazy here in the first two quarters of 2018.
Megan: I’m like just started that pike out this morning, I haven’t finished it yet. So, spoiler alert.
Mike: It’s all right.
Megan: That’s okay. So the guy that you had a line of credit with though, that’s just a credit relationship, you didn’t take ownership equity in the company or anything like that?
Mike: Correct. I mean that’s something that I’m personally not at a point where I’m ready to do that. I think that in 2018 or 2019 if it gets to a point where that makes sense, I will definitely explore that. But to this point I haven’t wanted to give up equity just in exchange for money. And we haven’t really hit a point where that’s even been necessary.
But at some point, I could definitely see a situation where we are an eight figure company, and we’re having to like keep on this doubling train every year, it’ll be a lot better to have someone with 20% equity or whatever I’d have to give up that would also come with a line of credit that would be basically bottomless. That could be a huge advantage, and it would let us grow at maybe 3 or 4X per year for a couple of years.
And I’d rather own 80% of a hundred million dollar company than 100% of a ten million dollar company kind of thing. And that’s a decision I’ll have to make this next couple of years.
And that’s a wrap for now. As you guys know, this is a two parter. So we’re back next Monday with part two. Part two will be episode number 116 of the EcomCrew Podcast. We try to keep these episodes to about 30 minutes. It seems to be about the bite size chunk of attention that people have these days. It’s also the average commute and a lot of other things. So studies have shown that 30 minute podcasts seemed to do the best.
So we’ll be back with part two next week on Monday, and you can hear the rest of this interview with Meghan. I hope you guys enjoyed part one. And again if you go to EcomCrew.com/115, you can get to the show notes for this episode and ask us any questions you might have about the first part. So we’ll be back Monday with part two. Until then, happy selling, and we’ll talk to you then.
Michael started his first business when he was 18 and is a serial entrepreneur. He got his start in the online world way back in 2004 as an affiliate marketer. From there he grew as an SEO expert and has transitioned into ecommerce, running several sites that bring in a total of 7-figures of revenue each year.