It's been a while since we've had an Under the Hood episode! For those of you who are new to this segment, we sometimes bring on podcast listeners to the show where they can talk to us about their businesses and ask us for advice. It's essentially a free 1-hour business coaching session turned into a podcast episode. It's a win-win!
If you'd like to be featured on the podcast and get advice from us, just send us an email at email@example.com with the subject line: Under the Hood application.
For this episode, we bring in Sebastien Taché, an ecommerce entrepreneur from Canada. Sebastien holds a full-time job while running an ecommerce business that nets him $170k in revenue. His ultimate goal is to be able to grow that revenue to $700k-$1.2M by 2020.
Get high-quality articles without breaking the bank
One of Sebastien's first steps towards this goal is to improve his content. However, he is facing a problem a lot of ecommerce entrepreneurs with blogs do: experts who produce high-quality work are too expensive but generic freelancers on sites like UpWork who charge on a per article basis will most likely produce mediocre work at best.
We faced this problem too early on in our business and we found that the best way to get around it is to hire a full-time content writer.
Granted that it takes longer to find a good content writer than finding a freelancer, and that you'd have to pay them a monthly salary, the advantages are tremendous. As a result, a number of articles written by our content writer has consistently been on page 1 of Google search.
We discuss this strategy in detail on the podcast, but aside from that, here are a couple things Sebastien and I discussed as well:
- Whether outsourcing PPC is a good or bad idea
- How to develop your own brand in a competitive niche
- Is it a good idea to go to China when you're bootstrapping your business?
- How to use an available line of credit
- How to approach a product that's potentially patented
Tips from the conversation
Here are some of the tips I gave Sebastien during our conversation:
- Aim for low-traffic, more-specific long-tail keywords that will yield better coversion rates
- Put your writers through a digital marketer training course
- Never, ever outsource SEO
- DO NOT rely on the manufacturer telling you that a product is not patented
I enjoyed this conversation with Sebastien and I look forward to talking to him again in 12-18 months and see where he is in his ecommerce journey.
If you'd like to be a part of the show and be featured in your own episode, send us an email at firstname.lastname@example.org with the subject line: Under the Hood application. Looking forward to hear from you!
Thanks for listening to this episode! If you found this helpful, please leave us a review on iTunes.
Until next week, happy selling!
Full Audio Transcript
Intro: This is Mike and welcome to episode number 187 of the EcomCrew Podcast. You can go to EcomCrew.com/187 to get to the show notes for this episode. As always, we'd love to hear your comments and questions you might have about the episode. Again, that's EcomCrew.com/187. Today, we're back with a segment we call Under the Hood. This is something we started about a year ago, maybe longer now where we interview guests that listen to the EcomCrew Podcast that have an e-commerce business or thinking about starting an e-commerce business and want to talk to us to get advice for their business.
And what we do is record that conversation which we do for free and turn it into a podcast episode so everyone else can hear their struggles, their recommendations that we give and some of the things that they're doing in their business. So hopefully they can apply that to their business and at the very least hopefully find it interesting to see other things that are out there happening in entrepreneurial land. So, today we have dining Sebastian on the show with us. It’s a cool conversation.
We talked about all kinds of things from Shopify store to dealing with private labeling to having people that are doing things that are in a niche that are very competitive and things like that. So, I think you guys are going to enjoy this call. On the other side of the intro we're going to dig right into it with Sebastian. Before we do, I do want to mention not to forget to go to EcomCrew.com/free, E-C-O-M-C-R-E-W.com/F-R-E-E to get all the free resources we put together for EcomCrew listeners. There's no credit card to give us, or any type of bait and switch thing like that, just really good content, video content and courses, mini courses we put together for our audience over at EcomCrew.com/free. Thanks again for supporting the EcomCrew Podcast, and now on with the show.
Mike: Sebastian, welcome to the EcomCrew Podcast my friend.
Sebastian: Thank you. Thank you very much.
Mike: No problem. So just so everybody knows that this is one of our Under the Hood segments. We've been doing more and more of these. I absolutely love doing Under the Hood. It’s a way to meet all these podcast listeners that are out there in this nebulous thing called iTunes that I never get to talk to people. And there's real people on the other side of this microphone, which is really cool to get to meet you today.
Sebastian: Awesome. It’s really exciting to be here. Thanks for having me.
Mike: No worries, man, no worries. So just so people know exactly what this is, is that the whole idea behind Under the Hood is for me to be able to interview podcast listeners and help them in their business. My goal is in this our conversation to be able to like double your business. So we're going to go over actionable things and hopefully we'll be able to help you over the next year to be able to grow your business substantially. And I'm really excited to dig into it. But before we like get into the nitty-gritty details, the thing I love to ask everyone first thing because it's always just so interesting to me is how did you get into e-commerce?
Sebastian: So I started a couple of years ago, maybe I started really getting interested in researching it probably four years ago. The reason I started was I had just come out of university and while I was in university, I was going to school and also playing football for the university. So, both of those together took up a lot of my time while in school. But then I found myself once I graduated and working in normal nine to five job I had a lot of extra time after work. And at the time my girlfriend, she was also starting up her own company. So I told myself, why don't I do something with the flow with this extra time?
So I was doing some research. For me I wasn't really chasing like a passion kind of a business, I was just chasing a business that would work that I would be able to grow and play with the different elements of the business and have that have that growth. So I was doing my research, and I needed also to start a business that would also be a good fit with my nine to five job. So yeah, I saw that family ecommerce was the best fit for my lifestyle at the time and for my interest.
Mike: Excellent. So like you said, you kind of got to know about four years ago. Is that like four years ago when you first launched your brand and your website?
Sebastian: Well, the idea came to mind about four years ago. It took about like maybe six months to find out where to be sourcing the products, find out how to be financing this, the initial startup costs. So I'd say I really launched three and a half years ago or I was like okay, this live, we're ready to sell, it was about three and a half years ago.
Mike: Okay, excellent. So we're in as recording this, we're in like mid 2018. So you're talking the beginning of 2015 is when you started?
Sebastian: Yeah, exactly. I'd say that at the end of 2014.
Mike: Okay, excellent. So let's just kind of throw up some revenue numbers so people can kind of see what your sales have been 2015, 16, and 17.
Sebastian: Okay. So 2015, well, I'll start backwards. This year we're looking at roughly 170,000. Last year was at 85, and the year before that, I forget the final number but there was — I would say it was maybe like 20,000, so from 20 to 82 this year. I think we're going to finish 175, 180.
Sebastian: Fiscal year ending in the next couple of weeks.
Mike: That's awesome growth, congratulations. That's definitely not easy to do basically doubling every year which is something I can commiserate with if you want to use that word, because it's interesting, like how you continue to double every year, you have a new set of problems every time you do that. So we'll talk about some of those as we go through this. But so your goal for this year is 170,000. And what do you expect your net profit to be off of that?
Sebastian: We're looking about like after everything has been paid, I haven't paid myself a salary but everything is paid, I’m looking at around 11%.
Mike: 11%. Okay, that's good margins. And let's kind of dig into one thing is we talked about before hopping on here is you didn't want to talk about your specific product, which is fine, but let's just talk about in generalities. Is it your product? Does it have your brand name? Is it your brand and trademark or are you buying and reselling other people's products?
Sebastian: I'm buying and reselling other people's products.
Mike: Okay, and is it drop ship or are you shipping yourself.
Sebastian: No, we ship it ourselves. So we bring it up because we're in Canada. So and the product that we have, we want our customers to be able to get it as soon as possible. And so we ship and bring across the border and then sell it in Canada.
Mike: Okay, excellent. And so, would you say that one of your competitive advantages is that you're like a .ca and people obviously resonate with that within Canada?
Sebastian: Yeah, exactly. I guess I'm trying to kind of go for the Tim Horton’s effect where we're proudly Canadian. And exactly, it's a bit of a competitive advantage in that way where I know people want their products as soon as possible. So they could order from the States and I mean, I wish they would go for us, but there was like the whole duties and taxes, especially these change right now. So there's a lot of unpredictable costs that the consumer could be hit with. So with our price, it's one price and that's it.
Mike: Okay, excellent. And what's your channel makeup? Are you 100% on Shopify or do you sell on Amazon and other places as well?
Sebastian: I'm 100% on Shopify for now.
Mike: Okay, and what's your revenue sources? Are you getting revenue from just organic search, are you doing PPC?
Sebastian: Since now it's all been organic search.
Mike: Excellent. And what's been your approach to get the organic traffic? I mean as you've gotten higher rankings, I assume that's what's helping this revenue growth, but what has been your strategy for getting organic traffic?
Sebastian: Well, when I started like what really I was really passionate about was SEO. So I bought a bunch of books and started reading up on SEO. And so I tried to the best of my capabilities then is to build a really SEO friendly site and generate some content. I mean I haven't been — we haven't been like the best at generating consistent content would be our difficulty right now but with content and just the products that we have. I mean we are [inaudible 00:08:57] is good SEO and patience.
Mike: Excellent. Okay very good. All right, so I have a pretty decent overview. I’ll probably have some more questions for you later, but since you only have one channel it makes it easy. And again just congratulations on being able to get to this point because it's the hardest part is getting started and seeing the growth that you're on. Hopefully this year it will be 175 and next year will be 400K. And one of the things we talked about just briefly, this is still a side hustle for you. I assume the goal is to be able to do this full time at some point.
Sebastian: Ideally that would be nice, but I have other goals for this for now. I would like for this to be for my girlfriend to take this over eventually and make it easier for we want to start a family. The job that I have right now, I have a pretty good job right now so it's try to leave but I really enjoy the strategy behind the business. So yeah, we'll see where it takes us.
Mike: What do you think your revenue levels would have to be at in 2019 or 2020 to be able to first have your girlfriend be able to leave her job and do this full time and then for you to be able to do with full time?
Sebastian: I would probably say at least in the seven hundreds. I have this on a spreadsheet somewhere. But there was at least in the 700 to 1.2 a year or point two million a year.
Mike: Got you. And that's for both of you to be able to leave.
Sebastian: Yeah, exactly.
Mike: Okay. So we're going to talk about that in mind. As always, like to have a goal, and I think that that number based on what we've talked about, and I've looked at the website as well in the niche, I think it's definitely doable. So I’d love to chat about what your challenges have been and what you want to do to get to that level. So let's crack right on into it. So, start asking me questions. I've asked a lot, why don’t you throw some questions at me of things you're looking to get some help with?
Sebastian: Yeah. Okay. So my first question I have is at this stage of my business, knowing that I don't really do any marketing, it's pretty SEO, organic search, what would be the first task that you would outsource knowing that I also have time constraints with my day job? Right now I have someone taking care of customer service, I have someone taking care of the accounting, and the shipping is all taken care of. So right now, my only focus is growth, and either focus on marketing or increase my sales channels. But I'm finding that I also want to dive into also private labeling and building a brand. So all that to say is that would be for you at this stage would be the first task that you would outsource or pay someone to do?
Mike: So it's always hard to be definitive with this type of stuff with the limited background, but in this case, I feel pretty strongly about it for a couple reasons. Just the story is similar and some of your hesitation when you're talking about content, it sound like you're kind of not getting as much up there as you would like. And if you're being able to do what you've done so far organically and I have the benefit of knowing the exact niche because you were nice enough to share the website with me and I again, completely understand why you wouldn't want to share that with 10,000 people, hook 10,000 of your closest friends, right.
But I think that I would hire a content writer. We have a couple of full time content writers that are in the Philippines. The price is relatively reasonable. Since you're talking about one niche, it's easy for them to learn about that niche and start writing really high level content around this. It's a kind of niche that it's visceral, right? Like people like don't want this problem in their life and they want to fix it or they might not even be thinking about it and you see you solve that problem. And the content can like even be shocking and like very shareable and organically viral.
And I think that there's a lot of long tail terms around this and there could be even education of people that weren't thinking about it, because this is like one of those things where you don't think about it necessarily day to day but it's a problem that every household potentially could have. I think that I would hire a content writer. That would be my answer. I mean I think that it's the thing that takes the longest to really get traction.
So I would start trying to find that person today and then it probably will take the better part of a couple of months to find the right person that can write good content around this space, and then you help them with research of here are the types of articles we want to write and here's the search terms we're going after, here's how to organically continue to grow our traffic. I think that it's definitely prime for that, so that would be my first thing.
Sebastian: Okay. And I also have another question around content. How do you budget for content? Like do you budget like per article? Okay, it should cost me X amount of dollars per article and I'm not going to be more than that. How would you budget for that?
Mike: Yeah. So, this is actually pretty difficult to do because it's so nebulous, like what you get out of an article is very difficult to see the exact results very quickly in terms of ROI. So what we had — I've been all over the map on this. So I've literally been doing this for 15 years. So it's been a combination of me being the one actually doing the writing, but that's not scalable. It's been hiring people from India or someplace and just putting up words on the page, but that doesn't actually build a brand and right or authoritative content. Then it's been hiring English as a first language speaking people from like North America so the US, US or Canada and paying them 200, 300, 400 dollars an article.
But what ends up happening like over time like you realize that that just isn't sustainable. You're never going to get that type of ROI out of content. So what we've done now is being able to hire some writers in the Philippines that we’re paying in the $600 per month range and it's a monthly salary. So I don't have to stress about per article as much and they're phenomenal writers. And at that rate, like I don't have to — like I know that we can get up at least a decent ROI and pay back at that rate and they're writing let's say 10, 20 articles per month. So, the per article rate ends up being in the 30 to $60 range. At that rate, I know that even if it doesn't pay off like it's still worth it to me. I don't have to stress as much.
But I know that it does work, because organic converts to very low percentage and especially if you're writing for more head term type traffic. And the example I always use for this is shoes. So if you rank for shoes, that's great. You're going to get lots of traffic to your site, but your conversion rate is going to be very low. If you rank for running shoes, you probably will do a lot better. But if you rank for something like men's running shoe, men's Nike running shoe with blue shoe laces, you might get very low amounts of traffic, but your conversion rate will be higher.
So we typically go for these longer tail type things. We want things that do get us good conversion rate that can get a long term that they're linky type articles, articles that will be authoritative. We have a couple of articles on EcomCrew, a couple of articles on ColorIt that have become these types of articles where they do very well. And in your industry you can do things like buy 10 different products and send them to your VA, and have them like test them. This one is kind of hard to test in some ways because it requires the particular problem of it like exist before you test it. But you can still test it and take it out of the package, and write some really in depth comparative articles of the products and become like an authority in this space.
And a Filipino writer is like definitely capable of doing that. The hard part is finding the ones that excel to that level to be able to do it. And the way that we've been able to get our writers to operate even at a higher level as we put them through Digital Marketer’s content marketing plan, especially the execution plan, it talks about all these different types of articles you can write without being an expert in the space. So obviously you're not going to hire someone that's an expert in this niche just as we haven't been able to hire someone who's an expert in the tactical niche or in the baby space.
But with following Digital Marketer’s blog post ideas and format which I think is just brilliant. You can teach them how to use a tool like BuzzSumo to find content that already exists which I can promise you shocking content in this niche already exists. People are having problems in their home, in other places and there's definitely articles that have been written about this that you can use from and put together listickles or content roundups and things like that where you don't have to necessarily be an expert in the niche.
And what ends up happening is as they write these articles like over six to 12 months, like our tactical writer now like she's already was awesome to begin with but now she's really good and a real good understanding of that tactical niche and can actually write as authority or your staff are getting to that point in the space. So yeah I mean I think that it's definitely doable. And that would be knowing that you've already got organic rankings and things are going the right way, I would continue on that path.
Sebastian: Okay, so if I understand, like I'm spending like $60 an article, I'm paying too much, or I might not see the ROI on the article.
Mike: I think that that would be like the most you want to really pay is 60 bucks an article. Yeah. So I mean, that's basically — again, we're paying somewhere between 30 to $60 is what it works out to per article when you factor all in. At the end of the day, like after you take their salary and divide it out [inaudible 00:19:35], a lot of it, they spend a lot of time on research and doing other things. And, we just had our content writer help us create an infographic which would actually be really awesome for this and they're the one driving all that. But yeah, I mean, I think that in that range is where it becomes economical like where you know there's going to be long term benefit.
And I'm looking at SEMrush right now, I'm looking at your organic traffic and yeah your ranking for a bunch of really great terms but you're not quite number one for everything yet. You're like, I’m looking actually like literally you’re six, seven, and eight for the top terms, it like popped up here. So writing more content around these particular specific keywords can really help kind of bolster your rankings. And ranking number one for something versus number eight is a massive difference.
Sebastian: Yeah. Okay. And would you — so also on the outsourcing tasks, I just started outsourcing PPC like a month ago because I made some little tweaks on my site. I know if it's ever happened to you, but I made some — I was realizing that I wasn't maybe optimizing [inaudible 00:20:50] of SEO, I was not placing for the right keywords let's say, or the sequence of words wasn't optimal let’s say. And so I made a few tweaks on my site and then I saw my traffic drop a bit. So then I got a little scared and then I was like, okay well, I need something to increase my — to keep my sales going up because I don't want to fall back on my goals. I'll spend money to make sure I hit my goal.
So about a month ago, I decided to hire a PPC firm and I want to know just for Google AdWords, and I want to know your take on that. Is this a good idea? Is this a sustainable? I want to hire — I was considering outsourcing the SEO to make sure that all the little bugs and errors were fixed up, or go to PPC where I could see the results right away, and I know what your opinions on that.
Mike: Yeah, I definitely have some thoughts on there. So I mean, I think what you're going to end up finding is that let's start with Google AdWords specifically. At least in the United States, I can't speak for Canada, so the dynamics there might be a little bit different. But PPC, Google AdWords in the United States on companies that are like buying and reselling which basically means you probably have Keystone margins so you're buying it for $1 and selling it for two, and by the time you like factor in shipping and all your other costs and you're at 11% net profit margin. So that seems to be pretty consistent to what I've seen, it's tough to make money at the end of the day doing PPC.
What does usually make sense is Google Shopping ads. Those typically over perform and do well enough to make it financially worthwhile. So I would definitely run those and remarketing ads, so anybody that's come to your site that didn't make a purchase, typically those ads do well. But at least in the US market, Google AdWords seems to be a losing proposition for the most part. There are some terms and some things you can find, but it's hard to scale it to any significant amount of traffic and volume.
And I think that outsourcing that is perfectly fine. We are outsourcing it right now still, but we are about to bring it in house because we just hired a new marketing person and we want to do some of that stuff in house now, but I think that that's perfectly fine. They can't really damage your company by doing PPC outsource. One thing that I always — like I said, I have the, I'll never outsource list, and on my I'll never outsource list is two things and only two things. One of them is SEO and the other is Facebook ads. I'm really adamant about not outsourcing those two things.
The SEO reasoning is that they can do permanent — can and probably will do permanent long term harm to your company. SEO companies know that the attrition rate is so high and they have to produce results quickly enough to continue to keep the attrition rate as low as possible or as high as it possibly can be at least or low I guess in that case, low as possibly can be. So they're always pushing the envelope and the penalty box for them is that they lose you as a client and they can go find another unsuspecting sucker later if your company goes to zero because they got some bad links and you’re completely screwed. I would not do it.
And it only takes a couple of links, a couple of bad links to really throw things out of perspective and put you in a position where you could get permabanned by Google. It's just absolutely not worth taking that chance in my opinion. So, I would not do that.
Sebastian: I’m happy to hear that, very happy to hear that.
Mike: The Facebook ads is more of just it isn't going to do any long term damage to you. The worst they can do is just spend your money inefficiently, but I've literally yet to find someone that's happy with a Facebook ads agency like long term. We here people every now and then that all they're doing a great job, but usually six to 12 months down the road they're like, man, I just wasted a shit ton of money.
Sebastian: Okay, it's good to know. So in terms like my PPC, the company that’s taking care of my Google AdWords, from my understanding it's like there — I just started out like last month right? So we're going to like we're kind of pivoting our second month, we're trying to figure out, okay, which keywords should we attack this month. And what they're saying and I don't really think it's a sales pitch because I paid him a flat rate no matter what, all that really goes up is my Google ad spend. But what they're saying is like, we need to research more, would you need to do more research? Should I tell them no, let's forget this research and let's just focus on Google Shopping and remarketing?
Mike: Yeah, I mean, I would start with like the lowest hanging fruit, right? I mean like, I don't think there's anybody in e-commerce that would say that Google Shopping ads don't outperform AdWords ads, like that's pretty definitive at this point. So yeah, I mean, I would have them work on Google Shopping ads first and then remarketing does very well as well. You can have them do Google remarketing, YouTube remarketing, Facebook remarketing. That would be the next thing I would attack on. If you can get good ROI on those things, then I think that you can work on AdWords and see where they're at.
But you got to let them know that like you need a 5x ROI on your AdWords ads. And they're going to be pushing you down to like three or whatever number that they're like oh, that's unrealistic and blah, blah, blah. You got to let them know that it's unrealistic for you to lose money and be in business, right? I mean, so 5x ROI basically means that 20% of your sale is going to PPC spend. And if you're — we didn't go over whether or not you're actually on Keystone margin, but just guessing based on what your net profit margin is, you're either there or slightly lower and you can't give up more than 20% of the sale to advertising and that's just the end of the story, right? I mean, this is the age old thing that it's not your money. So they'll spend as if it's their money.
So yeah, I mean, I think that if you can get there, if you can get to the point where you're getting sales consistently at a five to one ROI, it's worth it and I will continue to do it. And getting — there's a lot of ancillary benefit because Google is looking at conversion rate metrics and other things that help your SEO rankings and select and you get more reviews and all these different things like a rising tide raises all ships, but not sacrificing losing money to do it.
So I mean, if you can actually turn a profit on these things and it increases your relationship with your suppliers, there’s a lot of other things that help with your volume goes up, it gets you more research. We're going to talk about private label stuff here in a little bit. It helps with research for all that and other things but you don't want to lose money at the same time because that doesn't make sense.
Sebastian: Yeah absolutely, that's good advice. My next question I want to dive right in is developing my own brand in a pretty competitive category. So I'm looking like on amazon.com and there's a few competitors online right now or a few different brands I should say that they already have like 2,000 reviews on Amazon and they're like three and a half stars, some of them four stars. And I would like to go into – I would like try and it's always been my long term goal and I feel like I'm here because I'm getting a lot of also big buyers right now. They want to order many units and I have a hard time competing on price.
Whether it's the government or whoever it is, I have a hard time competing on price because I'm a reseller. So the only way I can do this is by developing my own brand. But from what I see and unless you can tell me otherwise, I feel like I'm in a pretty competitive market for a product that's not really attractive. Unless you really need it, it's not really attractive. And I'm having also a hard time assessing how can I target these customers on the platform, a place like Facebook and say, well, no one has an interest in this particular product or in this niche?
Sebastian: So I don't know what you have to say about that, about going because I see with ColorIt and when I did my research on that too, I have noticed like there is pretty big players in the coloring book realm on Amazon, and you seem to have done it very successfully. So what's your take on that?
Mike: Yeah, I got a lot to say about this. So hold on to your hat. I’m pretty passionate about this. But I mean, first of all, you've got traffic, you've got an audience, that's worth a lot. I mean like you've got people that are organically coming to your site to find this. I think that the age of reselling products is dead or dying. It's not dead yet, we still do it ourselves, you're still doing it, you're making money. But you're at the mercy of one of these guys just basically like I'm not selling to you anymore for whatever reason or them raising their prices or changing any rules, adding that pricing or taking it away, or whatever it might be.
They're the ones in control and you're basically building their brand for them even though they're larger companies but you're helping to build this brand for them over time rather than building your own brand. And it just happens to be that the name that you have for your company can also be like a great brand, right? I mean, you didn't pick a name that wouldn't work well as your own private label brand. And for me, that would be like more my long term focus would be like over the next six, 12 to 24 months, whatever it might be. I personally think that you can compete with the big boys head on with no problem for a few different reasons.
As I said, number one, you have the traffic. So people are coming here. This is not — yes there are big brands in here but this is not like a brand that anybody would necessarily know. So versus competing with like shampoo where people are going after a specific brand name, like Head and Shoulders or Dove or I don’t know, I'm just thinking of the commercials on TV all the time. That's a very brand affinity product. This is not. This is I have a problem, there isn't anybody else advertising about this problem on TV.
I don't know any of the brands that are here and yes, there's already established ones with lots of reviews, but you can fix that. You'll get reviews in time. As long as you have a good product that it's going to — so I think that that's not going to be a problem for you. I think you can do this. I definitely think this is a niche you can do that with. And then on the Facebook side, I actually think you'd be surprised there's a few different types of products that you don't need targeting for.
I talk about this in my Facebook group with friends from time to time and they have products that are interest agnostic. This is a problem that everyone could potentially have in their room whether they own, rent, whatever. I mean, it doesn't matter they could have this problem and not even know it, and you just need to make them aware of that in shock and awe fashion, and those types of ads can do very well. And so I think you'd be surprised there too. I think that it could potentially – and I definitely use the word potentially, because I've never tested this.
I think that there could be a couple of other issues you might have to deal with, like Facebook may or may not approve these types of ads. I don't know if there's any restrictions in this. I don't know if there's any licensing or FDA requirements for this product. So I would look into those types of things first, to make sure that you don't have issues there. But barring that type of problem, I think that this is an incredible like incredible, incredible niche. I think that you have a lot of more opportunity than challenges, really. I think, like put the things — because there's always challenges but if I was to put things on a scale, like opportunity on one side and challenges in the other, I think the opportunity way outweighs the challenges, and you could build your own brand pretty quickly in the space.
And if you have people looking to place large orders from your site, that's another great sign because now you can start discounting your product like you're going to buy this stuff way cheaper by cutting out the middleman. I mean you're going to go from buying from for one and selling for two to buying for one and selling four margins by developing this yourself. And now you can offer discounts to industrial buyers and hopefully over time, those industrial buyers — your name becomes like a household brand within their sphere and they're recommending this product. And in this stuff takes time but yeah, I mean we've proven with ColorIt that we can compete against the big boys selling things as old as books or as competitive as gel pens because of these factors.
So I think that private labeling for you is a definite avenue. And if you can improve the product in some way like you probably you probably have learned over the course of the last four years of selling these products like we did with Icewraps.com what are the best selling products? What are the functionalities of things on the best selling products that people like? Okay well, what are the things that they don't like? What do they complain about? Do you have an opportunity to fix that stuff when you when you are developing your own brand?
And the answer for us with IceWraps was that we did have that opportunity. We've made — while there are subtle changes, there are enough to get the product to go from being a four star product for our competitors for us to have a four and a half or five star product. And that's what eventually gets you to the top of the ranks for something like on Amazon, and that opens up another whole door for you and also opens you up to the US market. So I mean, this is how I see you getting to like 1.2 million or beyond over the next couple of years and I definitely think it can be done.
Sebastian: Okay, well it's good to hear. All right, so I have that one, I have a — so yeah so developing that brand and like I purchased your two course pack and I'm going through it right now. And I see that — and I'm listening to your podcast that you're a big advocate of like going to China and going to meet the manufacturers. For someone like myself trying to develop this brand and I do have ideas for little tweaks here and there on the products, and at the same time I also find them on Alibaba these products, right?
Sebastian: So and I know you also say like Alibaba, yeah, I mean, there are some people on there, but it's always best to go in China. If I'm starting off and I'm trying to start it off, like my guess we'll try to like bootstrap it as minimal cost possible, would you say, take the hit, go to China or try Alibaba first and if it fails then go to China, or go for like a company, for example, let's say Sourcify and hire them. And they can help you guide without you having to be there. What would be your take on that?
Mike: Yeah. So I mean obviously if you bought the course you know that like we advocate if you can go to China to obviously do that. I'm about to hop on a plane in two and a half weeks and go over there for another month, but we can do that, we can justify that. And I get that like you might be in a bootstrapped situation, so I guess my advice would be if you can do it, I would absolutely do it. You'll get so much more done over there in such a short time span. There's no doubt about that. Going to China removes months from the process like literally removes months in the process.
So for us, I mean that that's one of our biggest factors. It also is the relationship thing, being able to go over there and having opportunity from the beginning to pick your manufacturer because you’re going over there and had a meal with them and they probably going to try to get you drunk, and having that opportunity to do that is going to be more for you long term. Having that relationship does make a difference. If you have like these little idiosyncrasies and things you want to improve on the product, that's hard to explain over email. That's another advantage of going to China, because you can point to the product and say, I want to change this.
And they actually will get it because you're like showing them versus what ends up happening over email a lot of time. You communicate a change, and the sample shows up and it's not anywhere near what you asked for, a really frustrating situation. So yeah, I mean, if you can, obviously like only you know finances or whether or not you can invest $5,000 or whatever it takes to go over there and a week or two off of work, that's a decision to make yourself. Now, on the other end of it, Alibaba, that's one of the things we always talk about in the course. You can use something like Alibaba, you can use something like Import Records, we talk about that in the course as well.
Go to one of these big brands, if their import records are public, you can find out exactly who their manufacturer is. And we're using a manufacturer for one of our IceWraps products that CVS uses. So you can find manufacturers for like these big multinational brands that can help you make a product. You know they're probably going to be reliable. I mean, the downside is you might not be their number one priority, because they have a big client like CVS, but we've been lucky in that regard with that manufacturer.
But yeah, it just depends. Like this particular product, I'm not sure like, how much you can really do with it with some of the things we talk about in the course. Like what is packaging going to really do for this? It's going to be hard, I don't know, you might be able to bundle a couple of things here. Like I'm looking at your site, maybe you bundle a couple of things. That's one of the things we talk about in the course. Improvement wise, I don't know enough about this. Like, I don't know, I just don't know enough about this particular industry without doing some more research like what you can do to make the product substantially better.
You're not going to put a patent on anything here; you're not going to redesign the world. But you can probably make some improvements of like the size of the product or the way that it's stitched, or the thickness of it, or how it's disposed of. I don't know exactly again, without giving away the product, obviously like to our audience what can actually be done. But I am again; I'm a big believer in relationships. I funny, I was talking to somebody else about this just the other day. We were talking about, like sourcing fails and like all the crap that can go wrong importing from China.
And we basically have been pretty lucky. We've had almost 0% problems with anything because I think it's the relationship stuff. Like I just have to point to that and go because we're there multiple times a year and we are capable of knocking on their door, or not like, we're not going to punch them or shoot them or anything, but it's uncomfortable to have to explain to somebody over dinner why they screwed up and how they're going to make it right next time. It's better to just do it right the first time. And I do think that that goes a long way.
So yeah, I mean if you can swing it, I would definitely think it would be worthwhile. If you can't, I definitely understand and I think that between Alibaba, Import Records and looking at other — another thing we talk about in the course is looking at other trade fairs. And this is probably a type of product that would be really prevalent in certain types of household good trade fairs, and then just finding those manufacturers. And what I do, we've actually done this a couple of times, and what we say like we wait for the fair to happen, and then we email them and say, oh we just met you at the fair, but I can't find your catalog or we wanted to just talk to you.
And so they think that you were there which I think helps, and then you can just kind of troll the trade fair listings and try to find someone from that you can then start striking up a conversation of and get some samples sent to you. And the only thing I would recommend doing is not doing it in a linear fashion. So in other words, don't email one manufacturer, wait for a sample to show up, realize that their sample sucks, it's not going to work out, and you're going to have to go to another one. Email five or 10 of them at the same time, get five or 10 samples in route at the same exact time.
And that way that compresses your timeline and then pick your favorite one that you like to work with, and just tell the other four to nine of them, sorry, I picked somebody else. That's a much better way to go about it than trying to — like we did that in the beginning. We would just put all of our bets on one manufacturer that we liked working with through email to begin with, and then realize that something wasn't going to work out and we had to start from ground zero again. And that's like another six to 12 weeks that you have to wait to kind of get through that process. So if you're not going to go to China, I would approach it that way.
Sebastian: And when you ask for those samples, do you ask those samples with the modifications that you require or that you foresee putting in the product, or do you just have the sample as like the product as is and then you assess the quality, assess the stitching like you're saying things like that, how would you go about that?
Mike: So we approach it differently depending on the type of product that we're looking to launch. Like, I'm looking at your homepage here; it looks like you said there's other things besides what's on the homepage. I'm looking at this particular product that's on the homepage on the top right here. That type of product, the way that I would approach that specific product is to just get samples off the shelf. And the reason being is that you're not going to open up a new mold for this type of product. You're not reinventing the wheel; you want to find the guy that has by default the highest quality product.
So it's easiest to take their product and then modify it, than go to a manufacturer that is only a five out of 10 of what you're looking for. You want to try to find the guy that's like an eight or an 8.5 out of 10 of what you're looking for that you can make the fewest changes to because explaining the changes and getting them implemented is the hardest part of this whole process. So for these products, I would just get off the shelf samples, tell them to send you their highest quality version of that product, and then wait for those samples to come in and you compare, find the best two or three of those and then have from those work on your modifications and then get a production sample made of those.
And don't worry about the numbers they are going to throw out at you to get that stuff done. And those numbers by the way for the sample off the shelf should be free, and you would just pay the shipping to get that to you. And if they argue with that I would just tell them like no, like I'm not going to even bother with you because if they want money for that up front, then they're just probably not going to be someone you're going to want to work with. And then for the production sample you're going to need to pay and it depends on what you're asking them to modify.
But in this particular product, I would say that you're probably looking at between one and $200 fee to produce a production sample that's got your footprint and your stitching pattern and whatever other little improvements you make to it and your logo sewn into it, and whatever other things you end up doing, you're probably looking at one to $200 to produce a production sample. And typically you can negotiate to have that removed from your first order and I'm usually fine with that. So you're looking at probably total like all in like $1,000 investment, which is still cheaper than going to China by a lot by the time you pay for all the shipping charges and sample production fees, but your time frame is going to be longer.
So for us like what we do, we're getting ready to go over to China. We have some meeting setup the day that we land in China. We're going right to the factory. We're showing them products we're looking to develop. We're going back to that same factory on the same trip and looking at production samples all within like a 10 day to 14 day period and they don't charge us anything to do all that because we're already ordered from them and they know that we're serious, and we usually can develop an entire product while we're there in just a couple of weeks, that's the difference. So it just depends in your mind and in your business what's that worth.
And there is also a frustration level because the frustration level on that process is way the heck lower than going back and forth through email and DHL. But you can only do so much depending on you only maybe get two weeks of vacation, or do you want to spend one of those weeks of vacation in China doing this project. And I don't know if your – you said you had a girlfriend, does she want to go over there with you and do you turn it into a vacation at the same time and an experience and all these other things, or is it just like, does it sound like an awful experience that neither one of you want to go through? Those are all things to kind of answer on your own.
Sebastian: Absolutely, and I've been looking at those workshops that they give, some workshops where you go there, they coach up on how to from the design all the way to the production, they bring you around to the Canton Fair. Also, I'm not opposed to the idea if it really accelerates my learning curve and if I see, okay well, like five years on the line I want to develop like ten new products, or a year down the line we’ll develop ten new products, then just say very spatially that maybe we should consider one of those workshops that really accelerate. Just going there is a learning curve and you will make mistakes, but going to those workshops will also mitigate any of those mistakes or future mistakes.
Mike: Yeah, I mean, I think once you finish going through all the modules on our course, you probably don't need to join a workshop to go over there and be aware of all the pitfalls.
Sebastian: Awesome, okay.
Mike: Yeah, I mean, it is a little overwhelming, it depends on how much of a world traveler you are. For me, it was like literally like no big deal going over there. There were some unanswered questions, but I've been to 49 countries now at this point. And so, China was like the 45th nation, so a country I had ever been to.
Sebastian: I see.
Mike: It was the first one I was required to get a visa for. So that was a second I guess, I had to get a visa to go to Russia. But yeah, there was some definite like intimidation factors, the language is obviously intimidating. The signage there, like not being in English at all was a little bit intimidating. But I'm incredibly lucky that I have a Chinese wife who speaks Chinese as well. That was nice. So that lowered my frustration level. But the Canton Fair itself, there's nothing to really worry about. It’s just a big building full of lots of booths and nothing can go wrong there.
And you're going through the course and as you know we talk about a lot of things to be thinking about when importing from China. You're going to know all the mistakes to watch out for and paying someone else $5,000 to setup a hotel room and plane flight for you probably is not a good use of money.
Sebastian: Okay, perfect. I don't know how we're doing on time here but I have this one is last one. I have one more question.
Mike: I think we're perfect to do one more question. I think we're exactly perfect timing for that yeah.
Sebastian: Okay, so I called my bank the other day because we needed a limit increase on one of our credit cards. So I call the bank and they threw at us a bunch of lines of credits, and I have credit available right now that I'm not using. We're at this phase that [inaudible 00:49:33] too large of a topic but where would you put these lines of credit? Where would you use this credit to really leverage my growth? Because I need you to talk about to get growth you need credit eventually when you're looking to double every year. Is it only on inventory that you say the only time you’re going to use your line credit is for let's say you want to do this big order from China, then that's when you'll tap into that.
Sebastian: Otherwise do everything else. What's your take on that?
Mike: Yeah. So I mean, this is just — I'm going to get into some life philosophies and lessons, I guess, as well as business. But when I was younger, I never had anyone that really taught me how to be financially smart and progress. So I got a credit card when I was young and just started charging stuff left and right, and it seemed like a game that was like, just too easy to win. And you realize long term that that was really dumb. So, the very first thing I did as we've had our first successful business was to pay all of our debt off. I'm talking like credit cards first, then it was a car, then it was the house and you just live like on all cash basically.
I would charge everything to get the points but it's on auto pay to pay the full balance every month. So I treat credit cards that way in my personal life and same thing in my business. And overtime time, I realized that no one is wealthy enough to run an inventory based business that's doubling every year without eventually needing some money for that, including like big multinational companies like Apple or Wal-Mart or whoever that has inventory. So the way that we look at it, I look at it as the old US gold standard, when there was a time when for every dollar circulating out there, there was $1 with a gold someplace. And so for me, my gold is my inventory.
We have this number up on a screen that's in our lobby, inventory that's on hand, so to me, that's my gold. We have this inventory on hand, and I don't want my credit balance to ever exceed that balance. It doesn't really matter at what day what charge goes to what or whatever that might be like. I have a revolving line of credit and I don't want that number to ever exceed it. In fact I don't want to ever go above 80% of that. So if I have a million dollars worth of the inventory, I will allow myself to have $800,000 in credit basically is what it comes down to. That's just the way that I've approached it.
So, the answer for me would be you don't want to use it to buy PPC ads; you don't want to use it to hire that content writer. You don't want to use it to pay for your sample fees or any of these other things that don't have any intrinsic value if you were to go to resell it, because once you spend that money, you have nothing to show for it if you don't get something to return on it at that moment.
But inventory, your cost of inventory should always be resalable at or more than you paid for it. Otherwise you made a really big mistake, because you're buying it especially if you're buying private label or your own brand type products, you're buying it even at a deeper discount. Even if you had to unload it on eBay or something, or Amazon or whatever it might be, you're still going to get your money back. So that's kind of the whole philosophy behind it is that your inventory is kind of like is your gold, and I'd lend against that just as any company would. Every inventory company does this.
So yeah, I would, if you're ready to take that leap of faith, I would make sure you have the cash flow, the free cash flow and profitability to be able to pay for the trip to China out of your pocket or the sample cost out of your pocket, or the tooling or molding cost out of your pocket, the sample fees etc out of your pocket. But when it comes time to purchase the inventory, to purchase that first $20,000 PO that you're going to send over there or whatever the number is, that's I think perfectly good use for your credit line.
Sebastian: Okay perfect. That's great advice.
Mike: And also realize that that number is going to just continue to grow. If you sell through it, you start selling through it; you're going to need more money to buy your next order before you've even done selling through your first order. And hopefully it's selling well and your second order is bigger than your first order. So it takes 12 to 18 months to become cash flow positive on any new skew that you launch because of this. So also make sure you keep that in mind as you're developing these products.
Sebastian: Okay, perfect. Well, thanks a lot for that Mike. Yeah, I don't take up too much of your time. If I could just squeeze one more in…
Mike: Let's do it. Let's get one more.
Sebastian: Okay. So if I'm looking at a product where I feel that there might be a patent or a design patent on it, should I hire a lawyer for this or should I just dive into the patent database and go from there?
Mike: Yeah, Google patent database is actually amazing. I mean, it's really, really good. So definitely check that out. I mean, if you have – I mean you're in the end industry so you know the products that are patented. Usually it's first of all, it's like right on the package. I mean, now some of the patents are defensible, and some aren't. They might patent it, they might have a design patent, and you could do something as small as just making the thing like one inch longer and you're completely going to be fine against that patent. Now, it doesn't mean that the company is not litigious and won't bore you in debt, trying to prove you wrong.
So, my personal opinion is I try not to ever mess with anything that has a patent on it. I don't want to go up against somebody that's patented something that like I'm clearly just copying their product. I mean, it isn't worth that fight. In this niche you might run into that a lot. Like just I don't know, I have a feeling that might be something you're going to want to be very careful of. And also just again, know all the certifications that you need because if it requires FDA certification, which this thing easily could that license is $5600 a year just to be able to bring the thing into the country.
Do not rely, I think we talk about this in the course specifically do not rely on the manufacturer to tell you whether there's a patent or it's sellable or there's a problem.
Sebastian: Yes I remember that.
Mike: They will not tell you the truth. First okay, let's give a benefit of doubt; maybe they don't know the truth. Okay, but they also don't seem to care. So do not rely on them. If there's a question where you're like, I don't know about this and you want some reassurance, then absolutely grab a lawyer. I actually have someone I can recommend to you if you need them. They're expensive as hell, but for two hours of their time, 1500 bucks, they'll give you a definitive answer. You can actually show them the exact product and the patent that you're concerned about and how much you need to worry about it, and then they can also look in their database and see how litigious the company has been historically.
There's certain companies you just don't want to mess with. They're wrong, but to prove that you're right is going to cost you a million dollars. So, do you have the money to fight that? Probably not, and it's not worth going down that road.
Sebastian: Okay well, thanks a lot for that.
Mike: Of course man, absolutely.
Sebastian: I really appreciate it. It's been really good advice. It's kind of weird being on this end because I listen to your blog plus I hear your voice and now it's I’m here actually here talking to you.
Mike: Awesome, so it's like I say, it's a lot of fun doing these and my goal is to catch up with you in like 12 to 18 months and hear that you're doing 1.2 million man.
Sebastian: Yeah, well I’d love that, that's the goal.
Mike: All right. Well it's been a pleasure having you on the podcast. Again let's catch up at some point in the future and look forward to chatting again soon.
Sebastian: Perfect. Thanks a lot Mike.
Mike: Excellent Sebastian.
And that's a wrap. I want to thank Sebastian again for coming on the EcomCrew Podcast. Just as one final reminder, you can go to EcomCrew.com/187 to get to the show notes, the comments, all that good stuff about this episode EcomCrew.com/187. And another reminder as I mentioned at the top of the show, EcomCrew.com/free is where you can go get all of our free mini courses and content that we have there.
All you got to do is give us your email address and you're in. There is no credit card to give us, any type of subscription or sign up for anything like that, just some free content. So, EcomCrew.com/free for that. And besides that, I want to thank you guys for sticking with us for 187 of these, and until the next episode, talk to you soon, and happy selling.