In Part 1, Cory and I talked about his business, Woodies, and the SAAS subscriptions he has racked up in running his business. We went through his SAAS subscriptions and evaluated whether or not he should hold on to some of them and let go of the others. Since he has quite a long list, we continue to talk about the rest of the services he uses in the first part of this episode.
Cory then talks about an impending threat to this business: Chinese sellers. This is a problem we've seen more and more of and talked about extensively last year. The good thing is that there are many things Chinese sellers still can't do to get ahead, but we believe that it's only a matter of time before they swamp Amazon and the platform will be too small for everyone to thrive in. With that in mind, Cory and I discuss a topic that might actually be difficult to talk about–selling his business.
Here's an overview of everything that we discuss:
- Sending traffic to Amazon from his website
- How real the threat of Chinese sellers coming to dominate Amazon is
- Strategies to win against Chinese sellers
- Exit strategy advice
- Ways to maximize the value of his business in case he decides to sell it
This has been a very interesting conversation with Cory. He definitely has his head on the right track, being quite young, and running a million-dollar business while traveling the world. He might have to consider an exit strategy for his business, but with his proven track record, finding success on a new business is something he can absolutely do.
Thanks for listening to this episode and I hope you enjoyed it as much as I did recording it. Until next week, happy selling!
Full Audio Transcript
Mike: This is Mike, and welcome to episode number 119 of the EcomCrew Podcast. You can go to EcomCrew.com/119 to get to the show notes for this episode. And for this episode, we're back with part two of the Under the Hood segment with Cory Stout from Woodies. Again I want to thank Cory for coming on and doing this. I hope you guys enjoyed part one, and got as much out of it as I did recording it.
I keep saying that, but these have been so rewarding. It's really become a really cool segment, something that I really doubted and wondered about to begin with, and it's turned out to be something that's been super enjoyable for me. So if you want to get on the EcomCrew Podcast, and do the Under the Hood with us, you can go to EcomCrew.com/UndertheHood.
We’d love to have you on. I definitely want to be doing more of these in the future especially after seeing some of the early comments for this. It's been awesome. So without further ado, let's do part two with Cory Stout. We will see you on the other side of this break.
Mike: So another e-mail. They get an e-mail with the code just to have it. Yeah, so that's basically how it works.
Cory: I was going to ask you about this because I know that you recognize how well Amazon helps — how much it helps your business, but you're also like kind of scared of it just in case they did pull the rug. And I'm kind of in the other camp that I'm like make hay while the hay making is good. And I intentionally direct a lot of traffic that I could direct toward my own store, and I just send it right to Amazon just to boost on my metrics, boost my click through rate, conversions, reviews, all that stuff.
And so on each of my product pages on Woodies.com, I've got a link that says buy from Woodies, there’s the add to cart button, and then I've got a button right below that that says buy on Amazon. Then I have a little button with the Amazon cart symbol. And it's free shipping on Amazon obviously and it's $5 shipping on my own site. I do get affiliate money because I’ve made each one of those links unique to the product that it goes to. But I'm just wondering your thoughts on that.
Mike: Yeah I mean we're not quite to that level. We do send a lot of traffic to Amazon from our Facebook interactions. I mean like when we get a community drawing for instance it's out of our Mandala book we’ll say you can buy this book on ColorIt.com here, you can buy it on Amazon.com here. I’m definitely willing to send to scrape off some traffic and send it to Amazon because I do get the long term benefits without question.
I just don't know that I’m so willing to do with it with someone on my Shopify store and ready to buy that I'm now putting them over on Amazon. That's a tough bridge for me to kind of get over. Because at the end of the day like the benefits of having the customer buy through our Shopify store is just so great because we're getting their email address and can control that process a lot more.
When they buy off Amazon, yes it does help with some of these ancillary effects you're talking about. It helps your velocity and your sell through and your sales and everything else, and probably a fly wheel type platform. So like because you get more sales, you get more sales, and you get more sales, you more sales. But I stop one stop short of having a shop on Amazon button on my store, but I definitely can understand why you might do it. Like so I don't want criticize you for doing it in any way, shape, or form. I get the benefits.
Cory: Even new links to Amazon from your site, like even like a FAQ or?
Mike: On social media and email marketing and other things, I got no problem with even Facebook, even on Facebook ads directly to Amazon stuff. I got no problem with any of that. But I do feel like if someone has made it to ColorIt.com, they've come that far, we still want to have our own customers. I'm curious, so by doing this like what's your traffic, what's your conversion rate, like do you know how much traffic you lose off to Amazon by having this button here?
Cory: I guess I don’t. I guess if I really dug into the data and figured out how to slice off that portion and measure it, I could figure it out. But no, I really don’t know.
Mike: I mean I would definitely look into that. I'd be curious if I were you. It actually may have a detrimental effect potentially even because it's atypical to have a shop on Amazon button there like that. So you might even be losing sales. People end up on Amazon then they like think, oh let me just go search over here for sunglasses now that I've thought about going to Amazon and maybe end up buying off a competitor or something, who the heck knows.
But you can put in the affiliate link to Amazon; you can track like number of clicks on an individual unique link and just see how much traffic you're sending off sites. Or you can even use something like Optimizely to split test having that button there and then not, and seeing how it affects your conversion rate on your own site.
But again I totally understand why you're doing that, and I don't necessarily have anything negative to say about it. I would just be sure I fully understood all the dynamics of that before keeping it there.
Cory: Yeah I’ve checked my Amazon Associates account, and you can actually see which products people bought. And 90% of the products are my sunglasses listings, and then the other 10% are like TVs and toasters and random. So I don’t feel like I'm losing them to other people. I just might be losing them to whatever, but not to other competitor.
Mike: That's good to know at least, definitely I think is good. So yeah I mean I must split test, I'm a data guy. I take the emotion out of it. It's like maybe it's one of these things that now that we've talked about it, I think it's actually an interesting idea. It might be something that we even test in 2018 just to kind of see what happens, because at the end the day I just want people to buy my item. I don't really care where they buy it from.
The reality also is that, yes I'm giving up 15% on Amazon when I sell an item, but they're also shipping it a heck of a lot cheaper than I could. So it isn't anywhere near 15% in reality of what it cost to actually fill up the order from Amazon. Now the downside is that I don't have any idea of who my customer is and I can't email market to them, which is a huge part of our business. So that would be a trade off and this is part of the tradeoff I can't deal with well.
Mike: Yeah so the next one you had on your list here was Compass. Compass is something that I've used myself. I think they changed their pricing structure significantly since you signed up, because it's a lot more than $20 a month now at least from my recollection, I think so. But they do have some really interesting data that you can't really get elsewhere.
So if you find – it’s just kind of a question in your mind, is that worth 20 bucks a month for the data that I'm getting out of that. It's hard for me to answer that for you. You're the only one who really knows if it's worth the 20 bucks. I tend to think that it is. Some of the statistics that we get even on — I think we're on a free account now, because we did get rid of it because it was – I’m actually trying to get in to finding out how much this thing is now. I think the price went up significantly, but I could be wrong. Actually it looks like it starts at $49 a month.
I feel like to do everything that we wanted to do, it was going to be a lot more than that, but I could be wrong. I have to go back and look at that myself, but yeah I mean data is everything, it has to be looking good.
Cory: Yeah speaking of products that I have locked in, but I'm pretty sure are a lot more expensive now. I'm paying 30 a month for Yotpo.
Mike: Oh well that's sick. We were paying about 250 a month, and switched off from them because I just couldn't justify that silly price tag anymore. But I think that's about what Yotpo really is worth is like 20 or 30 bucks a month, because it's good software, but it's not worth 300. I don’t know what the hell they’re thinking.
Cory: I don’t know what they’re thinking either but I like it.
Mike: We need to add Yotpo to your list here. I don't have that one on the list.
Cory: Yeah I forgot. The Shopify apps, I didn't consider them SaaS, but of course they are. I’ve got a whole list.
Mike: Yeah I'd be curious to see which ones do you have on Shopify? Yeah the last one here was ShipStation, which I think is another one of these like absolutely cannot do without programs. It's by far the gold leader in shipping. We use Skubana to do almost all of our shipping, and we still have ShipStation for certain parts of it because it's so much better than Skubana.
And we have to have a backup. Skubana is a little bit more rigid, so it's like a lot better for us to have a way out to deal with those things. So we still have ShipStation as well. So yeah that’s your list.
Mike: Have you ever contacted ShipStation’s support? Aren’t they awesome?
Mike: I have, yeah they respond like instantly. It was a long time ago, but I do remember talking about a particular issue with DHL [inaudible 00:09:29] properly, and they like fixed it like immediately for us. The bad news here is that I don’t feel like I helped too much for you. It was a fun conversation, but I don't know that I have a whole ton of recommendation other than you're not alone. I mean this is pretty typical.
We had one or two things here that we were kind of scrutinizing a little bit, but the reality is that almost all the stuff is really necessary. The only one that we really were questioning was Schedugram, or whatever that thing is called, and that's 20 bucks a month into this bucket of a couple of thousand dollars a month. I'm not sure that that is going to move the needle like you might have hoped before coming on the podcast.
Cory: Let me switch it around and ask you a question.
Cory: What products have you cut because you thought they would be useful, you thought you could justify the price, but then it turns out you did, because you got a lot of revenue coming in too. So for you to cut, that means you really did the math and thought it was worth it.
Mike: Yeah so the ones that come to mind, the first one is Yotpo ironically since we were just talking about Yotpo. My general feeling with this business and everything we're doing right now — first of all we're trying to grow at two X per year or three X if we can. This year was two X. I hope to be able to do that again next year. With the number of people that we have, I got to come into work day every day and be like I'm going to focus on cutting expenses or making more money as far as profit goes, and making that the focus throughout the day, or I'm going to go figure out something that's going to go increase our sales today.
And for the most part we're in the, I want to increase my sales bucket every day. That's just kind of the frame of mind that we come in every day, and it isn't necessarily a cost savings measure because it's a lot harder to drive the growth train and a lot easier to fix the profit train. So for me it's like, okay well when I get to let's say 10 million or 20 million or whatever number we're targeting, it's a lot easier then to just make a couple of snaps of a finger almost and save money, versus I cannot do that when it comes to increasing our sales.
It's a much longer, much more difficult process over the course of the year doubling those sales. So it has to be like a really damn good reason for me to stop what I'm doing to go look at cutting costs to let's say save $10 a month or $20 a month. I'm not going to do that. If it's a couple of hundred dollars a month, I mean it gets to the point we're just like, okay I'm not stupid with money, I mean you got to do what you got to do.
And Yotpo was that that thing for me. I mean I was just like there is no way I'm going to pay these jokers, because they make you sign a contract every year, and it's like this negotiation. It's a tough fight and I just didn’t enjoy that every year. I looked forward to that about as much as I would look forward to go and get a root canal. And I just dropped them. I was like nope, I'm done with it, and we moved to Stamped.io. I couldn't be happier, and we've never looked back since. So that's one.
Another one, honestly we're talking about Klaviyo. Klaviyo is one that I've been trying to get off of just because of the high cost, and we were having a bunch of process deliverability with our email. But we've since fixed the deliverability stuff as of the last couple of days actually of recording this podcast. I talked to Klaviyo and told them — again this is not the first time this has come up, but I basically told them we're leaving for real this time if you can't get this stuff fixed.
And they have some new “IP” tool that they've implemented that goes on in the background that rotates you to less spammy servers supposedly. So I ran a clock apps test before and after they implemented the tool, and it made a massive difference. So our email was getting double the deliverability than it was before, and we were already doing pretty well. So I'm excited to see what happens. We're waiting now to send some campaigns like the first couple weeks of January when it's more “normal” time to see what happens.
So I'll feel better about paying that $700 a month plus %500 a month for our other site with Klaviyo because of the number of email addresses we have. But I was looking to switch because like MailChimp is significantly cheaper, like a third the price. I also looked at ActiveCampaign, and we looked at Drip. I've installed all these pieces of software over the last ten days and playing with them in hopes of finding the unicorn that can save us money with email, because it is a big enough number that if I can go from 700 down to 200 a month, that’s a massive savings.
But the reality is what I end up really finding out is that Klaviyo still is the best of breed, and switching probably isn’t going to be worth it for us. Last year we switched from Stitch Labs to Skubana. But that was to get features and that wasn't a cost cutting measure at all. In fact that actually increased our cost moving over.
Cory: Of all the apps that I’ve ever done, I had the worst time with Stitch Labs getting it to do something that it was supposed to do.
Mike: Yeah, I mean we had a love hate relationship with them when we were with them, and Skubana honestly is a similar situation just because it's so expensive. Skubana is very expensive; we’re spending almost $2,000 a month with that now. So I mean I want like a lot more out of it. Yeah it's tough. Skubana is priced by transactions.
So a month like this where we’ve done tens of thousands of orders, it goes up in cost because it's literally order by order that they are charging. Which is good and bad, I mean it's good from the perspective of like if we have a bad month, we don't get charged as much. And it's predictable, and it scales linearly in like these big chunks, and there's no argument over pricing month to month. But yeah it's expensive I think. So let me just check real quick. I think our last month with them was just over 2,000.
Cory: And that's my hesitancy to get into any other channels, because I would need something like Skubana to manage eBay and Jet, Wal-Mart and everything else. I'm just not — with the way I try to set my lifestyle and business stuff, I just don't have the firepower to do that.
Mike: Yeah, I know, it makes perfect sense. So I was just like looking, our last bill was $1923. Yeah I mean it makes sense, but like yeah for us, like I have to have it because it aggregates Amazon.com, Amazon CA, all the Amazon Europe platforms, eBay, Etsy, and Shopify when we're on BigCommerce. It integrates with BigCommerce; it does Wal-Mart though we're not doing Wal-Mart yet. Having like all of this same one spot with a centralized inventory repository for us is a necessity. So yeah, it's on our SaaS list and while it's not cheap, it seems to be the only thing that can do everything that we need it to do.
Cory: Okay, got you.
Mike: Cool. So any other questions that are outside the SaaS world, or just something that I can provide more value to you for because I feel like again more of this was — I mean I loved the conversation, I think it'll be super valuable for everyone in the audience. But is there anything that — any problems or other things that you're struggling with that I can help, or maybe shed some insight on?
Cory: Yeah I’m trying to think of something, and I just want to say first of all that I love listening to the podcast, and I'm getting a ton of value out of this. I hope everyone else is too. That episode that you and Grant did a long time ago that I found super interesting was the Game of Thrones like China is coming, China is coming. I always think that there's this force off in the distance, an ocean away that's just like slowly building. It’s slowly getting better and all there at like marketing and taking pictures, then finally learning how to write English sentences on their listings. And I just feel it coming. How soon do you think they’ll get here?
Mike: I think for someone like you probably sooner than later. I think for something like ColorIt, I think that we have a little bit more time, because there's some things that they don't do well. This just came up either on our webinar yesterday or on a recent podcast because I remember just talking about this very recently. Yeah, I mean for items that have little to no differentiation which I think that the sunglasses that you bring in because you don't have your own molds I don't think, or any designs that anybody else can’t do. It scares me for you.
Yeah you're in a great spot on Amazon. But eventually like they could catch you, like there's nothing to really stop them from catching you know versus something like ColorIt. I think the things that we do with our community like running a Facebook Live every Wednesday night, having things like the fan of the month contest, doing other contests and giveaways like the content that we do, and we're working on now with the launching a very prolific YouTube channel with lots of tutorials and stuff.
That's stuff that they just can't compete with. It's too difficult for them being native Chinese speakers to like to compete at that level of content that we can put out and things that we're doing. We also do other things to differentiate our products by spending a little bit more money on them to make them significantly better.
So like we spend a little bit, but the perceived value goes way up, things like the packaging or including a case or refills. And the Chinese custom like just doesn't allow them to do that. Even when we’ve asked them to quote us out and do this stuff, of course they argue with us, why would you want to do that?
They don't want to even take our money; they’re like you're so stupid for spending two cents more to put your name on the pen. Why would anybody in their right mind do that? And they literally argue with you. I'm like no, I’m the customer. I want to spend 15 cents more and use a higher quality zipper, like just do it, leave me alone.
And that’s why I think that they're going to struggle with that for a little while longer. And I think the end result for you; I honestly would start seriously thinking about selling your business because of that. I'm not sure that's a mindset that you have been in. But whenever someone is like number one, I always worry about like there's no place else to go but down. It's like what can you expect to gain by keeping the business long term? What is your real growth and exit strategy?
And for me like if you're at one point five million in revenue, you're looking to go to three next year, this is a good time to be looking at putting the thing up and seeing what kind of interested buyers are out there, because you're growing, so you're going to get a larger multiple. You have awesome margins. That's going to help with your sales price. You're in a situation where you rank number one or close the top I would imagine for things like wood and sunglasses on Amazon.
It’s time to start thinking about like what is the growth cap on this? If you go from one point five to three next year which I think is totally obtainable, the following year you're going to — can you go from three to six? And if the answer is no, if you don't think that that next level is going to be possible sometime in the next 24 months, it's probably your 18 months probably is a good time to start thinking about selling and trying to time the peak in your business and just getting out. And it's one of those like burn the hand kind of things is worth more necessarily than continuing on.
And I mean if you're doing let's say three million next year, and let's just say you're at somewhere in the average margin range of e-commerce which is like 10 to 15%, we'll just use 15%, you're at 450K in profit for the year. You could be looking at selling the business for something like two million dollars. At some point that probably becomes worth taking the chips off the table especially if you’re – it sounds like you’re still younger, and setting yourself up to be able to do your next business with the comfort and financial stability to have the ability to do that. That's just something I would start thinking about just because of the China problem.
Cory: Yeah I think that's excellent advice. I'm starting to open myself up to thinking about that which seemed impossible a year ago. I never would have done it, because it's like so tied to my personal identity which is that kind of to give it up. But I’ve been having a lot of fun running it, so it’s like why sell. But yeah, I do start to see on the horizon some stuff changing. And yeah I need to think about it like that, like how much higher can you go than the top seller of a certain category?
Mike: Yeah, I would always just think about like what happens when you — you're rank number one right now, what happens when you fall to number two or number three and your sales get cut in half, like how does that feel? Try to imagine what you would feel like in that situation. And it’s a very real possibility; anything could happen at any time. You could start getting some nasty Chinese competitor that starts doing some of the things that we've been talking about in another episode that we're putting out about like negative Amazon SEO and reviews, and things like that.
What happens when someone just starts attacking you and it's no fault of your own even? At some point it's always good to get some of the risk off the table in my opinion. I'm not saying like go out and do it tomorrow, that doesn't make any sense. But just at least being cognizant of that and thinking about it. And if that's your plan, you can start planning for it in advance.
And then that's when some of these things we’re talking about SaaS actually makes a big, big difference, because then you can cut a couple of these things that aren't super necessary even though you use them today, because everything that you cut, if you do sell a business like yours which could fetch a four times multiple, something like Forecastly at 180 bucks a month, all of a sudden that is like a $10,000 difference in your sales price.
How badly do you need that, or can you go to something like RestockPro for 100 bucks a month, and like get you like an extra five or 10,000. So it comes down to just thinking about stuff in terms if someone paid me $5,000 right now to switch from SaaS A to B and I can effectively get the same results, would I do that? And the answer is probably yes, right? If it only takes you a day, it's a nice $5,000 you just kind of earn. So yeah, there's definitely things like that you could be thinking about as well.
Cory: Okay cool. I listened to your episode a couple of months back about preparing a business to be sold. I don’t remember who the guest was that day, but he said that kind of thing like every expense now counts times four besides this.
Cory: But then there's also the flip side of that that he mentioned was you want to make the business like able to just kind of be handed off. So if I have like an inventory forecasting formula that I use personally which is just kind of I go by the feel of it or I don’t have any rules for it. That's kind of why I got Forecastly so that I could just tell someone, okay log in to Forecastly, look at how much to order, order it.
Mike: Yeah and I think that Forecastly – and I’m not — I was just picking on them, like nothing against Forecastly. I know the guy that created it; it's a great piece of software. We use a pixel software ourselves, it does the same exact thing with RestockPro. And I completely agree with your thought process there, that that is one that makes it easier to sell the business.
The guy you're talking about is Joe Valley. It was funny on the webinar I just kind of couldn’t think of the guy's name, and he’s a good friend of ours. I felt so bad, but Dave reminded me his name. And we'll link to that episode in the show notes just so people can go back and listen to that if they're interested. But yeah it was definitely really good advice, and that was definitely one of the things that he was talking about is just making sure that the business can transfer.
That might be one thing that you need to worry about with your mom being an integral part with it. Maybe it's time to spend that 600 bucks a month to hire a Filipino VA/ support person that could help transition with the business when you sell because your mom may or may not want to — or maybe the buyer would be turned off by the fact that it’s your mother just because they might be worried that she would quit. So I mean those are all things to start thinking about. And if you're thinking about it now, that makes it a lot easier to position yourself over the next six to twelve months to deal with all that.
And the other thing I'll just mention as well and the thing that worries me through all this right now is statistically like we are in one of the longest bull markets in the history of the country, I think the second longest now. We just passed the third longest one a couple of months ago. So it's just I start to worry about any type of economic downturn affecting my business as well. It's actually kind of scary, because we're not in a position to sell right now and aren’t going to for a while.
But if I could, I would certainly be thinking about it because of that as well. So there's a lot of factors that kind of go into it. And you've done this once; you could always sell and start selling something else. It's not quite that easy as you know because I mean you've already done a couple of other things and had some issues. So it's awesome finding something that's working, and it's not necessarily always so easy to replicate it, but just a lot of things at play.
My advice for this is just to think about what would it feel like if you could sell your business right now for two million dollars cash and walk away, you get the two million dollars in your hand. Or like how grossed out would you feel if you “only got one million,” or only got a half a million or whatever the worst case scenario is on the flip side. Or you weren't able to sell it for two million, you had to keep it and pluck away and making 50K or 100K a year, or something went wrong and that's kind of like where you are at.
Things happen all the time, the unexpected. I mean when we were in online poker, they added the UIG, the Unlawful Gaming Enforcement Act to a port security bill in the middle of the night that no one was even expecting. There was never any discussion about something like that happening, and all of a sudden just one night it was a mid seven or even eight figure difference in our personal wealth just like in a blink of an eye. I was like holy crap, right? So you just got to always be planning for stuff like.
Cory: Okay good thanks.
Mike: Yeah, no problem. Any other questions or thoughts you want to go over?
Cory: No. I just want to say thanks for taking the time to go through this episode with me, and giving some great advice, and for doing the podcast. I listen to it every time, it's awesome. Keep doing what you do.
Mike: Cool. Well thank you man, I really appreciate the kind words, and thank you for being one of our three listeners. That's my mom, my mother-in-law and you, so that's always good. But no, in all seriousness thanks so much, and glad you got a lot out of this. And I don't say this enough to people I meet in this business. I mean congratulations on what you've been able to build, because you sound like you're a younger guy who's kind of got his head screwed on right, and been able to build a seven figure business which is not easy.
There's a lot of people out there that are still figuring out like how do I get started, or they've been struggling for years to be able to even turn a profit. I talk to a lot of people, and they probably work just as hard as you do. But like sometimes it's a little bit of luck and sometimes it's intuition or just being at the right place at the right time, but at the same time you still got to do it. So congrats on being able to build what you've done. It's a great looking website, good looking product. I was looking at it while we were talking here, and definitely kudos.
Cory: All right, I really appreciate that.
Mike: No worries. Best of luck in 2018, definitely follow up with us in the next six to twelve months, and let us know how it's going. We’ll get you back on as a follow up or something. And I hope the next time that we talk, you’re well on your way to that three million dollar number man.
Cory: All right excellent.
Cory: I appreciate that.
Mike: No problem, take it easy.
Cory: All right Mike, take care.
Mike: And that's a wrap. I hope you guys enjoyed part two of this Under the Hood segment with Cory Stout from Woodies. Again one last time I want to thank Cory for coming on, taking the leap of faith, and doing this with me. It was awesome, definitely a really interesting guy. He's got a great business just like so many others of you out there in the EcomCrew community. It's been awesome meeting more and more of you through Under the Hood, through different live events.
The fun thing about e-commerce, I've said this before many times is just the diversity and how all of us can work together to help each other and not have to worry about cannibalizing our own businesses and hurting ourselves. One of the things that was really frustrating for me in the online poker days, everybody was kind of vying for the same people, the same customers, and it became very difficult to share knowledge and be a part of the community.
And that is definitely the exact opposite in e-commerce, and it's something that I've come to really enjoy in every way, shape, and form. And it's not just these Under the Hood segments, but meeting people in person, speaking at events, whatever it might be, it's been a great joy in my life in business here. And I want to thank everyone for being a part of the EcomCrew community. We will be back with another episode in a couple of days. Until then guys happy selling and we’ll talk to you then.