E145: Under the Hood with David Wilson Part 1 – Taking a Plateauing Business to the Next Level
Massive growth is not uncommon for ecommerce businesses. We, for instance, doubled our revenue every year since we started in 2015. With this kind of trend it becomes very unsettling for most ecommerce business owners if sales suddenly remain the same month after month, even if that sales number is high.
This is what today's Under the Hood guest is going through. David Wilson had been enjoying massive growth when his sales suddenly plateaued–not increasing and not decreasing, just remaining more or less the same every month. His ads no longer worked, paid search was no longer effective, and his cost per acquisition skyrocketed. His business was in danger of losing profits if he kept doing the same things over and over.
David needs cost-effective ways to expand sales and that is the topic for this Under the Hood session. For this episode, David and I talk about the first action he urgently needs to do: delegation. Much of his time is tied up on small day to day tasks and he needs to free up time to spend on higher-level tasks that will help recover the growth of his business.
In particular, we talk about hiring VAs and using Amazon FBA for fulfillment, two of the lowest-hanging fruit in terms of delegation. In addition, we also talk about the following:
- David's consulting session with me and Grant in the past
- His professional background and how he got into ecommerce
- How his business started plateauing after experiencing massive growth
- What he does on a day-to-day basis
This is just the first part of our coaching session. In Part 2 we get into the meat and potatoes–the specific actions David needs to do to scale his business and gain back his previous growth. These are things that can easily be done, from improving product photography to using a new Shopify theme. Part 2 will come out on Thursday.
If you liked this episode and would like to have your own personalized business advice for free and be featured in the podcast, sign up for Under the Hood here.
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Thanks for listening! Just comment below if you have questions or advice for David, and get a chance to win an EcomCrew branded mug. Until the next episode, happy selling!
Full Audio Transcript
Mike: This is Mike, and welcome to episode number 145 of the EcomCrew Podcast. You can go to EcomCrew.com/145 to get to the show notes for this episode. And for today we're back with another Under the Hood segment with David Wilson. He's asking us how to take his plateauing business to the next level. If you haven't done one of these Under the Hoods with us yet, go to EcomCrew.com/UndertheHood to get on your very own episode of Under the Hood. We'd love to hear from you.
As I was traveling over the last month and a week actually and meeting lots of new podcast listeners, it was really, really cool. I met up with a lot of people at Global Sources, at our mastermind, and at Sellers Summit that are podcast listeners. And one of the things that we heard more than anything else was that Under the Hood segments you guys do is really awesome. It was really great feedback. So we're going to do more of these in the future, but we need you to go to EcomCrew.com/UndertheHood to have you sign up.
And again anyone that's come up to me, I want to thank you guys for taking the time to saying hi. It is really humbling having people that you've never met telling you that they feel like they know you because they listen to you week in and week out and how much you've helped their business, definitely has fueled my fire to want to do more podcasts in the future. Not that we had any lack of content before, but that definitely has a little bit of a pep in my step doing more of these now that we're back from this long trip. And definitely want to thank everybody for your comment.
So, on the other side of this break, we're going to get right in with David, and hopefully you guys will enjoy this.
Mike: Hey David, welcome to the EcomCrew Podcast man.
David: Thanks Mike, how's the going today?
Mike: It's going great. I want to thank you for coming on and doing this. Before getting started, I do want to disclose just a couple of things. First of all, we have talked before. I think it's important for people to know that. That wasn't the reason we picked you for this, but we did do some consulting in the past and I just think it's important for people to know that. I don't know why but I'm always a full disclosure guy. But I think we talked either one or two hours in the past, is that right?
David: Yeah, it was actually with Bryant as well and that was about a year and a half year, a year and a half ago.
Mike: Okay awesome. Yeah just again I — just so everybody knows, Abby our awesome assistant back in the Philippines, she's the one that's done all the interviewing for this. And she has total autonomy for who she picks, who she thinks is the most interesting people for the segment. And so I was completely out of it, but she recommended you. She thinks that you have an interesting story. After reading over the notes and remembering our conversations from before I agree. And I'm excited to have you on today and kind of hush through some things.
David: It sounds great.
Mike: Cool, so for those people that aren’t familiar with this segment yet, this is Under the Hood. And the idea is to interview people who listen to the EcomCrew Podcast and give them basically an hour of free coaching or consulting. In an exchange we’re recording that and making that into a podcast episode and just trying to do some new and interesting content that other people aren't doing. I've done another one of these so far, this is the second we’re recording. I'm having a blast so far doing it. I think that it's just going to take the podcast to the next level. And as I said Dave, I'm excited to chat with you today.
David: Great likewise. I do listen to the podcast regularly, and so I think it's going to be exciting to be a part of it.
Mike: Cool, so let's dig right into it. As I kind of mentioned before we hit the record button, I think the important thing to do is interview you first just to give everyone out there some background on you and the types of people that listen to the podcast and a little bit about your business without giving away any secret sauce, which I think is also important because all of us need to make a living at this. So let's just kind of start with how you got involved in e-commerce. I'm really curious to hear how you got started and why.
David: Sure so originally my background was in digital marketing. I’ve had a number of different corporate jobs being a digital marketing manager and up to the level of director at one point. And when I left my last job a couple of years ago, I had an idea to do — I read Tim Ferriss’ 4 Hour Work Week and all that sort of stuff and had already been thinking about doing an e-commerce business.
And originally I got into jewelry sales. I had a contact who was already purchasing jewelry overseas, mostly in Bali and China and was already doing these sales, but they were in person sales. And I had always thought, hey, why doesn't somebody turn this into an online business? And when you think of all the different things with online businesses, jewelry fits the bill. It’s small; it has relatively high sale price, good profit margins, and all that sort of thing.
So that was really how I originally got into it. Now I don't still do jewelry sales. I actually shut down that website. And I could get into any more of that in greater detail if you'd like, I don’t know.
Mike: No, I think it's just a good intro just kind of how you got into it which sounds like you were already kind of doing it for someone else. You were a digital marketer and saw an opportunity to get into something and the first thing was jewelry. That isn't what you do today, but that's kind of was something that kind of whet your appetite for e-commerce it sounds like.
David: Yeah absolutely. So that was actually modestly successful in the sense that I wasn't losing money, but jewelry is actually a pretty saturated niche. Also it's not necessarily something I had a personal passion for, because typically it's for women. I mean not all jewelry but mostly. So I had seen some other companies out there that were doing really well. And I thought that maybe I could do that as well.
But it was just such a saturated market and actually on Amazon that category was closed to new sellers. And at the time I didn't really realize how critical Amazon was going to be to my business. So I was basically selling on my website and it was basically breaking even with driving all the traffic to my site through paid search and that sort of thing. So anyway I switched. I basically just had a kind of a random product idea. And I decided to create my own product and it was a type of belt.
And so I just put up a website and decided to see if it would sell. And surprisingly it sold quite well and people loved it. So yeah that was sort of the origin of my next company. And yeah, so I basically just kind of taken it from there to where I am today and I shut down the jewelry business in the meantime.
Mike: Got you, excellent. And when did you start the thing with the belt? When was that, was that this year or last year?
David: So it was about two years ago. I think my website launched in November two years ago. And so yeah I'm just a little over two years in.
Mike: Okay perfect. And what have your sales been for those first two years, what was it in year one and year two?
David: So in year one, actually I have this spreadsheet but I guess I got my first couple of orders in October of 2015. So through 2015 I had only sold about a little over a thousand, besides I was only doing it for a couple of months.
David: But my month over month growth was always astronomical. And then for all of 2016, I think I really didn't sell that much. I only sold I think about $25,000 worth. But I had some problems in there where I was using a generic part initially with my belt, and it was breaking. And so I basically kind of intentionally plateaued my sales because I didn't want to get a bad reputation from my customers.
So once I kind of realized this was going to be a viable business and went through and had a part built on my own with my own molds and everything and it was much more reliable, then I really ramped it up. And so it was in the last — I've been averaging about 10,000 per month in sales. Sorry, I was looking at — actually about 46,000 in sales total in 2016. And then this year I've been averaging about 10,000 a month. So I'm on pace for about 120,000.
Mike: Awesome that's great growth last year then, that's almost 3x.
David: Yeah, yeah definitely. So the problem has been that I've been kind of plateauing. I got up to about 8,000 in January to almost 10,000 in February and then I was really excited in March when I went over 10,000. And then since then it's been relatively flat. So that's kind of whatever I was hoping to get out of this call was how to take it to the next level.
Mike: So you're kind of stuck at that 10,000 a month level?
Mike: Awesome, okay we will definitely get into that and talk about things to help with that. One of the things I definitely need to understand there is margin. So like on the 120K, what do you net in, like how much room do you have for advertising and other means of getting sales?
David: Yeah so I mean the gross profit margin is quite good. I get my product produced for a few dollars per unit in overseas in China. And I sell it for around $20. I have a few different versions with different price ranges. So I mean the gross profit margin is upwards of 80% or so after the Amazon referral fees and all the paid search and Facebook advertising and on and on. I don't have it down to a perfect amount, but right now it's around 50%.
Mike: Okay, so you're netting about 60k off the 120?
Mike: Okay perfect.
David: I do my book keeping but that’s the plan.
Mike: Okay and I guess the next question a follow up to this is, is this like a full time gig for you at this point, are you still have another job that you're doing to kind of support this, you're not quite ready to [inaudible 00:12:23]?
David: That's another good point. I do digital marketing consulting two days a week. So, on Tuesdays and Thursdays I devote those days to working for another company. And I've been doing that for the whole two years. And then Monday, Wednesday, Friday, I focus on my business.
Mike: Okay and is the goal, if you could get to 250k or 500k, I mean is there a goal in your mind to do your business full time, or do you like the consulting enough that that's something you want to do long term?
David: So I mean I'd love to do my business full time. I think that my wife appreciates the consulting paychecks. So that's one consideration. My quandary is do I need to do this full time in order to get to the next level as opposed to getting to the next level? I mean I think if I can get to like you said 240,000 which would basically be doubling what I'm currently doing a year, then for sure I could do this full time, and it would make sense especially if I keep my profit margins anywhere near where they are now, because then that be making six figures a year just through the business.
But I'm kind of wondering if I really need to just jump with both feet in order to get to that point rather than trying to get there while still doing the consulting two days a week.
Mike: Got you. All right, all that makes perfect sense. So I think that as we kind of go through this, our goal will be like what can we do to get you to that to 250k number so we can consistently be doing about 20k a month instead of 10k a month and make you feel comfortable to leave the consulting thing and do it full time.
David: Yeah absolutely.
Mike: Okay, so I guess the next thing I'm thinking about here, my next questions are, so you have three days a week devoted to this. You get 24 hours a week that you're spending on this belt business, what are you spending your time on right now? Like what is your 24 hours comprised of that you're able to work on it? I mean are you actually — you're not doing the manufacturing as you said already that that gets done in China, so what do you actually spend the time on them?
David: Yeah so well I spend a decent amount — I mean I feel like with digital marketing there's a lot of kind of overseeing things. You're not always building new campaigns but a lot of times you're kind of keeping an eye on things. Soon a daily basis I definitely go through and review my paid search campaigns. I do pull – let me up little sheet here. I do PPC I do Google AdWords, I do Bing ads. Occasionally I go through and check to see which keywords are converting better, redo my ads so that I constantly have a new champion trying to work on my click through rate and my quality score. I don't spend a ton of time on my social ads currently, that's one area I think I could definitely improve on. I'm basically advertising on Facebook right now.
Originally I was getting really good results there, but lately it's — my cost for sale has gone way up. I go into Amazon and basically click through all the — I have a certain kind of pattern where I go through and look at the different reports to make sure my account is healthy and I look at kind of my sales over the last month and how they're trending. I tend to — I go and I look at my sponsored ads and see what's my average cost per sale, how is it doing this month, how much did I spend yesterday, how much did I spend today, am I spending too much money on certain keywords, do I want to like maybe pare back on some of those CPC or do I want to increase certain ones?
I actually go through and I look at my products on a daily basis to check and see if I've got any new reviews. I make sure that I didn't get any bad reviews that I need to kind of take some sort of mitigate some risk there. I actually just expanded my products out to Amazon Europe. They're not really selling a whole lot yet, but I'm also I just got into Amazon Canada, and that was a little bit of a nightmare trying to ship your products to a warehouse there. And somehow I had to build out the sponsored ads on Canada and in all the different European markets.
I used Fiverr to get some translations for all my products and then even some of the accents came in wrong, and French and Italian and then you have to kind of work with the Amazon support to fix your product listings. So a lot of different things you do in Amazon to try to make sure that your products are set up correctly and working correctly and all of that. It took a long time to get all my products into Europe and to get them under the correct — my products have a lot of variations, and to get them all set up under the right parents and everything can be quite a hustle.
I also sell on eBay. So I can't say that I spend a lot of time on eBay, but I do go there and make sure that I have enough inventory listed. I still do ship some of my products. So on Monday, Wednesday, and Friday at the end of the day, I'll spend an hour or two depending on how many orders I have picking and packing, and shipping the orders for my website. Amazon, I am doing Amazon FBA, so they ship obviously all the Amazon orders.
I’m trying to think what else I do. I do some correspondence with the suppliers. I've got one supplier that creates one part of my belt, then I've got another that basically assembles and fabricates them. I've got a couple other businesses that I — other product ideas that I'm working on. So I work with this 3D AutoCAD drafter to sort of create some of my other products that I'm thinking about producing.
So I don't have a standard routine, but I try to keep a list of action items that I'm working on a day to day basis with kind of my most critical things that I need to do, and I just go through like for example a lot of times I’ll need to ship new product into Amazon. So that will be one of my things because I don't want my inventory to ever run out. So, just a lot of different things like that.
Mike: Got it okay. Awesome that's a great overview and I got a ton of recommendations based on what you said there. But I still got more questions I want to ask. We’ll come back to the recommendations if you don't mind after I ask just a couple more questions.
Mike: Awesome. So the questions I have next are completely shifting gears into just channel allocation. So you mention you have your own website and that you sell an Amazon and eBay. So of the 120k that you'll do in 2017, what do you expect the channel breakdown to be in percentage terms?
David: Yeah. Well my website used to be a larger percentage. I'm looking at a seller fixed spreadsheet here where I basically put in my Shopify revenue, my Amazon revenue which is about to get more complicated with the European markets, the eBay revenue. I mean eBay is a fraction; eBay is probably a few hundred a month. But right now I’ll have luck if I get 500 from eBay’s that's what 5%. And Amazon is kind of the lion's share I would say. So Amazon is about 70%, and so that leaves another 25% for my website.
Mike: Got it, okay awesome. Well I think I'm ready to throw a bunch of things out here. So time to get the pen and paper out. And you’ve worked with me before, so no this is I just like I’m fast paced and I throw a lot of ideas quickly. So I do have the benefit, I know your brand, I have your stuff up here in front of me just to kind of give the audience a perspective. Again it's a belt. I don't want to again talk about any secret sauce. So it's in fashion, it's a belt, it's apparel item. I think that's more than enough for people to kind of get their head around what the product is, and also kind of what I'm looking at.
So my first thoughts are how can you free up more of your time to do things that only you can do so you're able to focus on – I was kind of putting down a list of the things that you were telling me that you do in your 24 hours. And I would say, at least 80% of that can be done by a VA in the Philippines for 500 to $750 a month. Things like looking at Amazon PPC and your Google Analytic ads, I’m sorry your Google AdWord ads and Bing ads and some of these reports and stuff you're talking about.
All that can be done with a VA where you're just getting a report once a day or once a week and then taking actionable or doing action based on that and not having to spend the time to do it yourself. And I think you're definitely at a point where you could afford to do that for that $650 a month. It'll take you probably two to three maybe even four months to find the right person, to train them, but once you train them then you aren't the one doing that every single day.
And you can step away from those things that are very transactional that aren't necessarily time sensitive. Like if they do it in the middle of the night Philippines time which will be in the middle of the night for you but like during the day Philippines time, it doesn't matter. I mean if you are looking at your Amazon AdWords sponsored product performance at two o'clock in the morning your time, and when you wake up at 9:00 AM it's there for you.
There's just a ton of stuff you mentioned that could be done by a VA because like you're in a new position where you're still working part time and every minute that you can spend doing things only you can do — like I wrote down one thing as a for instance like working with a CAD designer. That's not something you want to be a VA to do, that's something that you need to be doing.
So I think that's probably one of things that could like make a huge difference for you like really quickly. It doesn't necessarily directly increase your sales, but it definitely indirectly has a butterfly effect of increasing your sales because now the things that you're really good at which is the product development and some of these other things which only you can do, you have more time to do that. So hopefully that all kind of makes sense.
David: Yeah absolutely. I mean I think the reason why I have stuck with a lot of the digital marketing stuff is that's kind of my background so sort of my comfort zone is paid search. I mean I've worked for large companies, and managed pretty significant budgets. So, I kind of feel like that's one of the areas that I tend to know well. I'm not as professional with the Facebook ads and I think recently I've actually thought about maybe trying to hire an agency or somebody just to really kind of tune those up.
I think that I’m going to have something that stands out as more viral on Facebook. But yeah I mean I will definitely say I probably spend more time just kind of keeping an eye on my business and checking through things and making sure that there's not anything wrong as opposed to doing things that are immediately going to increase my sales.
Mike: Yeah. I mean if you've been doing digital marketing for a long time you know that you can easily train that secret sauce that you know, at least 80, 90% of what you do there to have them go through and look for the high level things that are glaringly wrong. It's easy to teach. We have someone in our Philippines office that's helping us with PPC and we're doing more and more with all the time.
And it's something that I used to do, it's something I think I'm good at, but the reality is as we got bigger I got worse at it because my time got spread thinner and it is time consuming. And that's something that they can certainly do. We also have someone that's taking care of the reviews. Like the thing you mentioned just obviously you're right, you want to hop around on top of someone who leaves a negative review and try to solve it as quickly as possible, but that's not something that you're adding any value to your business for. You could easily train someone to do that, and they probably would be more efficient at it than you anyway, because they're going to be working at it five days a week and you're only doing it three.
David: Yeah absolutely, it makes sense.
Mike: The other thing I wrote down, you mentioned that you’re shipping the orders that come through your own website in your own Shopify. There is an integration with Shopify in Amazon FBA to where you can have those orders automatically get shipped from your Amazon FBA inventory. And the advantage to that is like two or three fold. First of all it removes you from the process so you're not having to ship that stuff. That gets done automatically in the background in real time. And it will push back the tracking number and everything automatically back on the Shopify.
And it's a native Shopify integration. So you don't have to like it's no extra. The other advantage is then you only have one pool of inventory. Instead of having to have a couple of things like construct back at your house, you can just have all the inventory at Amazon. It will just pull it right from there. The other advantage is you can take a vacation. You don’t have to be there to ship the items or have someone covering for you to do that.
So there's just a ton of advantages of — and that's what we do for ColorIt and everything else that we do. We ship 98 or 99% of our orders that come through our Shopify stores directly from Amazon FBA.
David: Yeah that makes sense, and in fact at one point I did briefly do that actually when I was going on a vacation. One of the issues is that in an effort to expand my product line up I created some additional accessories and things like that that we’re not really branded but they were kind of additional items that I thought I could sell as extra things people purchased when they're on the site. And I never really advertised for them.
So they still do sell like once in a blue moon. Somebody will say, hey, I'll throw one of these little pouches or bags on my order. That really hasn't happened much. But when you get those or anything that's not at Amazon in your order then you kind of have to like manually go in and say, okay, well Amazon you fulfill this part I'm going to fulfill that part. And it gets a little bit confusing.
So I'll admit sometimes it's kind of nice to do something brainless and actually when I listen to the EcomCrew Podcast typically is at the end of the day and I'm about to like do my shipping and I'll check to see if there's any podcasts out there that I haven't listened to. And I’ll print out all my labels and my packing slips. And then I'll just sit there while I'm doing that and I’ll kind of listen and hope I’m absorbing some new information while I'm doing that part.
But yeah I do agree, and I think the other nice thing about doing it through Amazon is that then you can kind of burn through your inventory quicker on Amazon. So if you have some slower selling things on Amazon, instead of them sending you notices to like take back your inventory, hopefully you can get some of that inventory off of Amazon quicker.
Mike: Yeah it makes sense. I mean sometimes it sounds like you just have a personal enjoyment from doing it, and you get to listen to the podcast as well. So that's good. It keeps our listenership up.
David: Yeah I think what I need to do is some of those extra items really are not selling enough to justify even probably having the space on my website. I don't know if it's better to make it look like I have more products or better to just focus on a few things. But yeah I kind of need to make a decision on if I'm going to keep selling those things. And definitely I do think that in the long run I should be moving my fulfillment over to Amazon like you suggested.
Mike: Yeah, I definitely think so. I mean I think at the end of the day you need to kind of think about your business so like how can you remove yourself as the bottleneck. And if you're the one shipping that's again that's another thing that a lower level employee could be doing. And it's taking away from the precious time that you do have because you have less time than any of us because you're doing this part time.
Even if it's only two or three hours a week, that's still 10 to15% your time is being spent on shipping when it could be spent on some of the other things we're going to talk about here that can improve your business and get you to that 250. And I actually think that – I’m just looking through here and remembering kind of some of our old conversations. I think that you can go way past that. I'm excited for you.
David: Cool, thanks.
Mike: Okay so that was all the things I had on the on the personnel part. There was one other question I forgot to ask, I need to ask just real quick. On the 25% revenue that you get from your website, what is your conversion rate on your website and where does the traffic come from that’s generating that $2,500 a month or so in revenue from your website?
David: Yeah so when you look at the conversion rate, I usually kind of look at what I have in my paid search campaigns. So it's now getting a little bit complicated because I've got this new product that hasn't been selling too hot from the paid search. It’s on a different website but my shopping campaigns like so far for this month, they're doing a little better. They're actually upwards almost a 10% conversion. But overall it's usually between about like 5% to maybe higher. If I'm having a good month, that might be like 6, 7, 8%. Facebook, less than that.
I would have to pull up my analytics account to get kind of my overall conversion rate. I'm sure my organic conversion rate is better because people that have found me and are familiar with my brand are likely purchasing more readily. So in my conversion rate on Amazon, you’re just specifically talking about Shopify, right?
Mike: Just on Shopify yeah.
David: So I typically drive most of my traffic there from paid search. Most of that is Google. I'm not spending a ton right now. For some reason it was getting less cost effective there for a while. So when I first started, I was getting at — my cost for sale was like maybe $8. And with a product that only costs 20 or so dollars, that's pretty significant. And I would think of that, okay, well that's also customer acquisition costs. I might be getting more sales from this customer down the line.
Also I don't even track how many people fill out or give me their email address from my SumoMe form. I offer a little discount on the website if they sign up for my newsletter. So I don't even track that. But like my cost per sale has gone from what used to once be like $8 to more like probably on average 12 from paid search. And my cost on Facebook, at one point I was at around like 8 to $10 as well and now it's over $20.
So I just have a hard time putting more money into those vehicles when I feel like they're not as profitable as they should be or could be. And I don't spend a ton on Bing. I'm just kind of there because I know it's there. But that's more cost effective. I typically get a few conversions here and there at 10 or so dollars per sale. And yeah, I mean really the main ways I get traffic to my site is paid search, AdWords, and Bing, and Facebook ads.
And I do get some organic traffic. I mean I think I rank just off the first page for one of my main keywords. But I mean it doesn't seem like I get a ton of traffic from that.
Mike: Got you okay. And as far as repeat business, so are you’re getting people that are buying a black belt and then getting a tan one or a brown one or anything like that, or is it just typically your customer buys one and they're done?
David: I don't have the greatest metrics on that to be honest you. I mean I do have certain people like when I'm in my Shopify account there's that what they call these little modules that they'll say like these customers are expected to spend the most on your store, and I'll show you some better customers. So I've got a few that have a life time that they've spent $150, $130.
So there are quite a few people that come back, and I don't know the exact percentage of people that are repeat buyers. And I would say the majority of my sales are people coming and buying one belt, leaving but probably every third sale is somebody buying two or three belts. They rarely buy more than say three, but they do buy in other colors, and I've got a couple of different materials and styles.
Mike: Got you okay perfect. So that gives me all the things I need to kind of give you the recommendations on the next step here for the next…
And that's a wrap for now. I want to thank David again for coming on Under the Hood today. You can go to EcomCrew.com/UndertheHood to sign up to be on your very own Under the Hood episode with us. We would love to hear from you. Again I love doing these and got so much positive feedback over the last few weeks that it's definitely motivated me to do more of these.
And even though we have a few recorded already, we definitely more people to come out of the woods and come do this with us, EcomCrew.com/UndertheHood. So until the next episode everybody happy sailing, and we'll talk to you then.