E219: 2018 Recap – Highs and Lows of Running an Ecommerce BusinessJanuary 31, 2019 in Ecom-Crew-Podcast
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We only open registrations a few times a year with the next reopening probably in April, so if you’re ready to take your business to the next level, join us and get the following benefits:
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With that out of the way, let’s get down to what this episode is about.
2018 Recap: The Numbers
Dave and I first discussed the detail that seems to be the most important for most people: end of year revenue.
For us at Terran, we ended the year at $5,944,667. This is 27.22% higher than 2017, which was about $4.6 million.
We initially had a goal to earn $9.7 million dollars in revenue this year, but due to unforeseen circumstances we were forced to cut back product development which ultimately affected our revenue. I talked about this in more detail in this episode.
Dave’s new company, which he started from scratch, ended the year at $556,000. His 2019 goal is to achieve a run rate of just under $2 million.
Money in the bank, Shanghai winters, and Amazon creating their own IceWraps brand
While last year was overshadowed by such things as additional tariffs and Amazon creating their own brand that’s exactly like IceWraps, not everything was bleak in 2018.
We decided to prioritize profits over revenue last year, which led to us having substantial money on the bank for the first time since we started this business.
Our product launches have also been successful, largely due to the launch process we’ve been teaching at EcomCrew. This launch process was so successful that all of our newly launched products got the “New Best Seller” badge on Amazon.
Dave also ended the year with a third of his sales coming from Amazon Canada. Not only that, he’s been successful directing traffic from Shopify to Amazon, effectively solidifying his ranking.
Dave had his fair share of lows though. One of these is a literal low (as in temperature) when he went to Shanghai during its worst winter in 20 years, without a jacket.
That said, one of our highest highs last year was the success of EcomCrew Premium.
Years ago, EcomCrew was nothing more than just a blog and podcast revolving around a hobby. Last year marked EcomCrew becoming a real and profitable business, and we have you to thank.
Thanks for listening to this episode! Until the next one, happy selling.
Full Audio Transcript
Mike: This is Mike.
Dave: This is Dave.
Mike: And welcome to Episode 219 of the EcomCrew Podcast. It’s an exciting time for Dave and I whenever it’s EcomCrew Premium week, so how are you feeling Dave?
Dave: I am now feeling slightly better after UCF week. This is my first night after like a week of kind of being recovered not only from hangovers, but from like four hours of sleep per night. So, I’m feeling pretty good today.
Mike: I don’t think we planned very well. We had ECF week, and then the only time we could figure out a ton to lunch premium to make sure we’re going to be around was right afterwards. And I feel physically brutal but I’m very excited and optimistic about about Premium.
Dave: Oh, me too. Yeah, it’s our first time opening it up I guess in just over two months.
Mike: Yeah, first time in 2019. So we’re going to go through this quickly because the main thing we want to talk about today is actually a 2018 recap. So, if you don’t want to hear our 30 second pitch here, just hit fast forward past these next 30 seconds but EcomCrew Premium is our premium subscription service. We switched to the subscription last year just so we don’t have to keep charging for every single course we release. So the courses we have in there and everything else we release in 2019 are all part of that same package along with twice monthly webinars, unlimited email support, our Facebook group, and I think — did I miss anything Dave, being able to interact with two cool guys. I don’t know what else?
Dave: Well, that primarily, but also some in-person events and we’ll be over in China in April. So, if anybody is thinking about heading over there, that’s your opportunity to get to join the queue and meet Mike in person, get his autograph. But seriously, we will be doing a get together in China just before these three of the Canton Fair and that also means just during phase two. So if you’re thinking about hanging over there, EcomCrew Premium is definitely a good add on for you just not only for the events that we’ll be doing but also far import from China like a pro course that we have included with Premium.
Mike: Yeah, enough of that. We don’t have the exact date yet, but it’ll be let’s say April 27nd plus or minus three days, is that fair to say at this point?
Dave: Your dates are off a little bit. I think it’s April 22nd minus two or three days.
Mike: Oh it’s over there, okay well we’ll figure it out somewhere in that time frame, we should have this nailed down. We’ve been working with a couple of people and a couple other things we might work with. We’re trying to nail that down as soon as possible. So yeah, so I want to get into today’s topic, enough about — I always feel weird with the sales thing. So, let’s get into the main thing we want to talk about today. Well, it’s still January, I think once February rolls around which I think actually when this thing rolls out, it’s kind of like having your Christmas lights up too late in the season or something. So, we want to get a 2018 recap in but it takes a little while to get the final numbers in.
For me, I cheated a little bit. I did a goals review. So I did talk about my revenue 2018 to 2019. So 2017 I mean, sorry. So in in 2018 drum roll, our total revenue was $5,944,667, which was an increase over the previous year. And of course, QuickBooks doesn’t let me slide over, here we go 27.22%. Last year, we did 4.672. I just did an episode of why we decided to cut the growth rate down a little bit, so I’m not going to get terribly into that. I know Dave wants to be able to talk about his numbers and stuff as well. So, I’ll save some time to talk about some other things I really want to get into.
If you want to know more about why we decided to slow the growth rate down a little bit, listen to the last episode, it really goes into a lot of detail of what was going through our heads. But I can say that our net profit grew at a much faster rate than our top line revenue and we have cash in the bank for the first time. I have to go through our ecommerce journey because of doing some of that. So Dave, what’s things look like for you year over year.
Dave: So, we’re in a completely different boat than you. So, we’re trying to grow revenue as quickly as possible, not focusing as much on profit. Now, that being said, our revenue is roughly one tenth of yours. So, for the year it broke out to 556,000 and change. Now, most of that came the last few months of the year just because of the way the product development worked and most of the stuff didn’t arrive until basically early summer. So most of that came in the last bit of the year. Last month was basically our first Kind of “million dollar run rate month” where we broke I guess just over $80,000 for the month. So yeah, that’s where we settled, overall for the year was just under 600,000.
But like I said, it’s coming fast, much faster at the end of the year there. So hopefully going into next year, it’s closer to around 1,000,005 or even just under 2 million. That’s kind of the goal for next year.
Mike: Yeah, perfect. It sounds good. And also, just to mention, you basically were starting from zero or close to it 12 months ago. I mean, you didn’t really have a whole lot of sales before that because you were starting a brand new company, right?
Dave: Yes, absolutely. So to give some background too, April 2018 was about $8,000, December 2018 was $82,000. So I’ll give some idea of kind of the scale and the pace of which I grew. So, that $550,000 number I’m actually quite happy with just because where I started with at the beginning of the year. And getting that initial traction is definitely the hardest part.
Mike: Yeah. And what do you — I mean, what’s your goal for 2019? Where do you think you’re going to be there?
Dave: Just under $2 million for a run rate. So, definitely overall for the year, I wanted to be close to 1,000,005, but by the end of the year as a run rate, so basically the last month of the year, I wanted to be close to a $2 million run rate, which would be around $160,000 per month. So that’s kind of the goal.
Mike: And the thing that’s interesting, I don’t know why this question keeps coming up. I guess I maybe I don’t know why, but we get asked a lot, is it still viable to get into e-commerce in 2019? Can you still run an Amazon business in 2019? I think that you’re like the perfect case study of yes. And not only are you doing it, but you also threw off a decent net profit throughout last year as well. So you’re growing and actually making money with it, which is impressive and important.
Dave: Yeah, it’s funny, as I kind of get into this longer and longer, I’m realizing that e-commerce is kind of like any investment, you get a certain return on the capital that you invest. So, if you put money into bonds, you’re going to make two or 3%, if you put it into stocks, you’re probably going to make somewhere around five to 10%. Last year you invested and I’m sorry if you did. I had a lot of money invested in stocks last year; fortunately, my money started to turn into inventory too late in the season.
But yeah, you put money and if you invest money in e-commerce, you get a much higher return and making 1,000% on your money but most people are making somewhere between 50 and 100% return on their money. So, I don’t know, I’m kind of more objective I think at this point in my e-commerce journey, where I kind of just look at as an ROI number on the amount of capital that you put in.
Mike: Mm-hmm, Yep. I couldn’t agree more. So all right, so what you had asked me to do for this episode, that’s the revenue the high level stuff, you’d asked to talk about highs and lows of 2018. So I made a list, I checked twice, I wanted to try to — I came up with four highs and — I’m sorry, five highs and four lows.
Dave: Five highs and four lows. I have a list of two and two. You should qualify…
Mike: I’m an overachiever man. You know, I’m not going to just do one thing.
Dave: You should qualify the number there. Okay, you do five and four and I’ll do two and two.
Mike: Well, I’ll start then because we’ll go back and forth. And since I have more, I’ll end on one. So, my first high was ColorIt product launches. I feel like we just really kind of figured out our system, the white hat approach, which we teach is a part of EcomCrew Premium, another plug for Premium there. But we have this whole process of launching products in a white hat way and I’m really pretty proud of what we were able to do with that. For me, it was a high knowing that I have the confidence of launching new products pretty much with almost 100% certainty as much as you can in life with something that isn’t exactly 100% certainty. But man, we were able to increase our revenue with ColorIt rate by over 40%.
I didn’t really break down by brand how these numbers shook out. But ColorIt grew by 40% last year, which a lot of it had to do with the couple of products that we strategically launched. There was some other other stuff that went into that as well. But everything we launched for ColorIt over the last year launched to a new number one bestsellers. We have that badge when we launched and I know it just felt good. It was kind of a high looking back at the year, it was something that felt good to me.
Dave: Yeah, it’s interesting. I still wonder how Amazon’s algorithm works. In two or three years from now, we’re going to realize that Amazon places all this weight on the age of a brand and an age of a seller account for ranking items. And I wonder if they are, you’ve been around for what now, five years?
Mike: We started ColorIt in 2015.
Dave: 2015, so I do think the age of a brand really helps those product launches, and of course, the actual product launch strategy too. But I do think I’ve seen this in my Offroading brand, as it ages a little bit more, things just seem to rank easier and easier. And of course, the launch process goes with that too. But I think age of the brand also really helps. And I think that’s a great thing with ColorIt is that you’ve hit kind of that point now where you have years under the belt, and I don’t know something about me just thinks that Amazon’s puts a lot of value in that age of the brand.
Mike: So this is not an Amazon podcast, but I have a theory about this I want to say real quickly, it’s intriguing. We know and we we’ve seen from all the black hat stuff that’s come out over the last year that we kind of learned and part of that was it showed Amazon’s algorithm and kind of how things work and so much of its add to carts and an actual purchases. And what I think that you’re seeing and also what I’m seeing in why ColorIt is doing well, our offering is doing better, I think as your catalog expands, there’s more people that click on your brand name, click on other products by the seller, other sponsored products related to this product.
And as you have more products, your items per order goes up from 1.0 to maybe 1.1, or 1.2, or whatever it might be when people are throwing, they’re finding your brand through one product, but end up buying more than one of your products, even though that happens at a relatively low percentage, I think that that’s something that’s actually moving the needle. That’s my theory at this point.
D; I think regardless of what the actual thing moving the needle is, I definitely think you’re spot on with a bigger catalog moves the needle a lot further and quicker. So I think that kind of comes down to what we’ve talked about for a long time. Don’t launch one product at a time, try to launch a few products at a time.
Mike: Yeah, yeah, definitely. All right, so what’s your first highs of 2018?
Dave: Sure. So big high is almost a third of our sales coming through Canada. And I don’t know if that just means that I can speak Canadian better than you Americans. But a third of our sales are coming through Canada. So, I do think that these new marketplaces whether it’s Canada, Japan, Europe, they have so much more growth potential than the US. So I think if you’re European you could definitely see similar things if you launched in Europe. So, with a third of our sales coming through Canada, not only is a third of our revenue coming through Canada, even a greater percentage of our profits are coming through Canada simply because again less competition, higher margins in Canada.
Mike: Got it, very cool. You actually gave me a fifth thing to add to my lows list, I’’ll talk about that in a second.
Dave: No, no, no you can’t do that.
Mike: Yep, I’m doing it because it was actually a low but I’ll talk about it when we get to the lows. All right, my next high is net profit in cash in the bank. And again this is something I just talked about a little bit about in the risk levers thing episode that I did. But towards the middle of the year last year, we just made a cognizant shift towards taking the gas pedal off of the the top line revenue growth and just moving that over to net profit and trying to work on that and and just lower the stress level.
And again, it’s made a marked difference, and I was talking about this in the previous episode just how that just changed the frame of mind of everyone here like not having to constantly worry about paying for the next order and having money for taxes and things of that nature, because when you’re growing at 100% per year, you’re using up cash faster than your organic growth. So, you’re having to either put more money in the business yourself or borrow more money and we were just always in this constant cycle of on paper we have this great business and we were showing a great net profit and paying taxes on a bunch of money, but at the end the day there was no cash.
So, now the end result especially after now the holiday season has passed and all that, we have more money in the bank than we ever have. And it’s a it’s a high. I mean, it definitely is a high for me at this point just not having that stress level. It’s it’s not as good of a story. I mean, I’m sure that a lot of people out there would love to have heard that we did 8 million or 9 million or even $10 million last year, but as you say, that’s just vanity and the profit part is definitely sanity. And this has helped keep me sane and you still having me to do podcast because of it.
Dave: This is kind of a funny podcast because your wins are exactly contrast to my lows and vice versa because you’re talking about — sorry to get on the low part but it flows nicely. You’re talking about all this extra money that you have in the bank right now, definitely a low for us is less money in the bank because we’re growing so quickly. Every couple of months, I’m basically having to cash in some of my stocks which have performed terribly in the last 12 months and take huge losses on them and basically convert them into inventory.
So, exact opposite of you where you have all this extra cash flow coming into the company and an excess of it and we’re in the exact opposite where I basically taken out the investments which are actually in the company, I’m thankfully haven’t had to turn to personal investments yet but taking business investments and stocks and convert them into inventory. And that’s I’ve been through this before thankfully, so I’m kind of aware of what I’m in for, but it does, it sucks when you’re basically every time a big PO comes up for payment that you have to scramble to get that cash.
Mike: Yeah. And I mean, it goes — I just again talked about this recently as well. But this is where you got to look at yourself and not everybody necessarily around you. Everyone’s at a different stage in her life. Everyone has different financial backgrounds and financial resources. And we’re with all in business acumen and all these different things that kind of come together and you just happen to be because you sold your business a couple of years ago and kind of hit the reset button, you’re just in a different phase. And there’s no right phase and there’s no right answer, just you got to be in your lane. I’m in my lane. And it’s good to just have this contrast so people can understand the different headspaces that you could be in as an entrepreneur.
Dave: Yeah, I totally agree. But I kind of cheated there and gave a loss or I guess a losing point. So let me highlight that with our win and that would be targeting Shopify customers and sending them to Amazon. So, especially after coming back from ECF week, and everybody is talking about trying to get off Amazon, I’m trying to do the exact opposite. And I’m trying to drive traffic to our Shopify store, and then getting them to go directly to Amazon to buy. So, I tried to do everything possible to get them not to buy on our Shopify store. And we’re getting now a significant amount of revenue going through our Shopify store that we can divert to Amazon, and an even bigger portion going to Amazon.
So, by taking all this traffic going to our website and driving them Amazon, you can really see the uptick in rankings on Amazon because Amazon for whatever reason, really seems to value external traffic being driven to your listings. So by being able to do that, I think that we’re able to rank items a lot quicker than we could compared to the listings who aren’t sending any external traffic to their listings.
Mike: Yeah, I mean, without a doubt. I mean, that’s the whole core of our course is to take traffic however you do it capturing leads by having organic traffic on your website, however the heck you do it, we have a bunch of different ways we talk about. But I couldn’t agree more. I think that that external traffic thing is definitely a high. I think that’s a part of like what I was talking about that just the product launches, I think you’re dead on, there’s no doubt that that makes a big difference.
Dave: Yeah, it’s funny how those two different viewpoints on that whole sending traffic to Amazon or not sending it to Amazon, some people are trying to get them doing everything they can to get people off Amazon, the other boat is trying to take all the traffic, do everything they can to get it sent to Amazon. So, it’s funny the contrast there. I guess well, time will tell who has the right approach.
Mike: Yeah, without question. And I can tell you I feel like Jack on a high with this because I’ve done both myself. When I first got started, it was everything I could to get the traffic off Amazon to my store, I didn’t want to have them — I didn’t want to pay them the 15%, etc. etc. Now it’s it is reluctant, right? I mean, like I’d rather have the sale on ColorIt or my own website, whenever it might be. I’d rather have that because I’d rather have the control etc.
But the reality is unquestionably in my mind at this point because we’ve been doing this for a couple years, the math is that you’re better off sending it off to Amazon because by doing so, every sale that you send over there, you’re going to rank slightly higher. And if you have this outside traffic, and you can push that leverage just a little bit, it’s what’s allowed us to rank for these ridiculously competitive terms that we would never I mean, clearly and never in a million years would we rank for some of the stuff if it wasn’t for this halo effect that we have by sending the traffic.
And now the hard part is I can’t quantify like, I can’t put that on a spreadsheet and say it’s made X percent difference. But without question, just being a math guy and being so intertwined in this business, I know the answer to it, and you’ve obviously seen the same thing.
Dave: Yeah, and probably the best part about sending traffic to Amazon is that if you use an Amazon affiliate link, you can select to get an Amazon gift card back in revenue instead of deposit into your bank account. So now I have these massive amazon gift cards coming to me every month for the affiliate links that we’re using. So, I’m buying lots of useless crap.
Mike: We should start using those gift cards to give away for EcomCrew people.
Dave: That’s great. Okay, you match me and…
Mike: That’s what I was thinking. Sorry. Okay, I bought myself a whole there. All right, so the next high for me was speaking at seven events, being honored enough to have people ask me to come more and more every year but not just the fact that I did it, but the fact that I feel like I got better at it. It’s something that it’s been well documented on this podcast. It was something that I was completely fearful of. I never thought I would do and now it just if there’s one thing I’m really proud of in my life, because the business stuff has always come easy. I feel like I’ve been training for that for 20 years.
But the speaking thing was something that is relatively new and something that I was more afraid of than getting a root canal or whatever other things you hear people talk about they’d rather do than do public speaking. And we just got back from UCF Live where I spoke, and I feel like of course I still have the butterflies and some jitters before going on stage because I think that that’s impossible to ever get rid of. But it was just a couple of seconds beforehand and it was more just like excitement, I was excited to get up there and do it and do a good job. And so for me, that was a big high for for 2018.
Dave: Yeah, you mentioned that and I’m still trying to wipe away that taste of puke in my mouth as we heard our friend as we were leaving UCF and this other guy basically said the highlight of his ECF event was getting to meet celebrities like Mick Jackness. And I guess it’s kind of — and full credit to you. I say that kind of tongue in cheek, but the truth of it is you have done a great job of speaking people. I think maybe celebrity is not the right word, but you have established a little bit of trust and authority in our little niche of e-commerce. So, good on you Mike and it is amazing over the years how much you have progressed as a speaker and watching your ECF video of you speaking this year, pretty good actually.
Mike: I appreciate that, thank you. And we’ll obviously make that available to EcomCrew Premium members because we make all of our talks available for that, so one more thing that’s going to be added into that pot. So, speaking of EcomCrew Premium, it was the other thing I threw on my highs. I promise this is not another plug for EcomCrew Premium, this was just literally on my high list because it was a high for me. I mean like the fact that we established this new pay part of our site, that we got so many people to do it, that our refund rate has been under 2%.
The comments that we get are like the thing that I wake up for these days or you’ve helped me so much or the things that you’ve had me do or have done to our business, I don’t know man, that’s what I feed off of. It’s better than seeing a piece of paper that has a number on it in my bank account, the gratification that we’ve gotten from our Premium members, and not just premium members, but also people that listen to the podcast. I mean, I can’t tell you how many people walked up to me at ECF, not only to tell me that I was a celebrity, but the podcast was actually good, which is a high.
I mean, having that many people do it and in conjunction to this, I also had a slash, we did crack the top 100 business podcasts for a brief moment last year for, I don’t know exactly where we rank anymore, but it’s probably pretty close to that. Pretty amazing when you think back to the fact that there was zero subscribers and this wasn’t even an idea a few years ago, it’s definitely for me without question a high for 2018.
Dave: Yeah, and I totally agree. I didn’t have that on my list, but it definitely should be on the list. And I think the big high is number one, the kind of community that we’re building with EcomCrew Premium, and it’s amazing how many people are aware of us now. And not only Premium, but also the podcast and blog and everything else, and the fact that EcomCrew now is starting to finally become a company. And after five years of kind of doing this as a hobby more than anything, I think 2018 was kind of the year that it actually started to become a real business.
Mike: Yeah, exactly and it’s interesting. It’s a fun business because there’s no inventory.
Dave: I agree. I haven’t had to trade in any stocks lately to fund it.
Mike: Yeah no. So did you have another high or do I want to end with the last one I had on my list?
Dave: No, I told you I only picked two.
Mike: So my last one was 5 Minute Pitch. It was another amazing project, a definite high for me. I cannot wait for these episodes to come out. They’re going to start coming out here in just a few weeks. But it was — I don’t know, it’s just one of these things where it’s hard to explain this, the fact that I was even in the room with these people. It was amazing, Greg Mercer who is just such a public figure in e-commerce and has done done such awesome stuff with Jungle Scout and everything else he’s done there. Steve Chou who I’ve become really great friends with and runs his own podcast and blog and course which I also recommend you guys go check out over at Mywifequitherjob.com, just a great guy and another great person in the space.
We all teach a little bit differently, we have different things, so if you don’t think Premium is for you, I would go check out My Wife Quit Her Job and what he does over there, it’s also awesome stuff. And just like him, Scott Voelker who’s another big personality in the space at the Amazing Seller. He also has a great podcast and training over there. We all just gelled so well together at that event recording it, having the people come in that we interviewed and just their excitement to be there and promote their company. And then the look on the faces of the people that move through to the to the finals, it sucks — I kind of understand how the American Idol or X Factor and these shows, you always think that they’re acting when they’re saying that this is a hard decision that they don’t want to move people through.
But I actually think that part of it is true. I think part of it probably is acting on their part but it does suck telling people no. And so, that was the only bad part about it, but the look on people’s faces that got to move forward and the fact that we know that we’re going to change someone’s business for the best one whoever wins the ultimate prize that we’re handing out in May. And then all the people that also came in as guest speakers.
I got to meet people like Pat Flynn, I mean how freakin cool is that? I mean the guy is like an OG of podcasting and marketing, and the guy was maybe nicer in person than even appears to be on the podcast. It was absolutely amazing. And Drew Sanocki came in who’s a longtime friend of Andrew Yuderian, Michael Steltz, just the opportunity for that just for me was a huge high, it was awesome.
Dave: Yeah, I can’t wait to see it. I still have not seen any footage from it. So it’ll be cool to see it come May when the big finals are announced or I guess played.
Mike: Yeah, so we’re going to start playing the episodes in February, but the finals will be held live at Sellers Summit. So, if you haven’t got your ticket for that and you want to come see us live, do that. Go to Sellerssummit.com I believe and get yourself a ticket for that.
Dave: Oh, I had no idea actually that it was being played there or hosted there.
Mike: Yeah, the finals are going to be done live and Ezra Firestone is going to be our guest judge for the finals. So, come check that out.
Dave: Very cool.
Mike: Yeah. All right. Let’s get into the stuff no one ever wants to talk about, which is the lows, which I think is probably one of the things that makes us unique at EcomCrew Podcast.
Dave: Because we have so many lows.
Mike: Yeah, well, yeah, the fact that we even talk about them, I think is probably the thing I think, most people just aren’t willing to throw themselves out there like that. For me, I feel like the best advice I can give, we should probably start leading with these things and talking about this stuff first, because again, just being at ECF Live for the last week, you realize this stuff that people are going through and everyone is struggling so much. When you start to ask those questions to get them to open up about it, even people that on the surface seem like they’re doing amazing, there’s still a lot of skeletons and things in the closet that they’re having to carry around with them, a lot of baggage.
So, I have my own list, and it’s definitely not always easy and not always fun even though I would rate my life way above average. I mean, there’s still things that caused the thing not to be a 10, so ready to get into them?
Dave: I’m ready.
Mike: All right. The first one I have on here is I’m just absolutely sick of being in the office. After five years of doing that versus the previous five which were very location independent in a work style of sprints throughout the day working for a couple of hours here and then taking a break and another couple of hours, it works a lot better for my ADD mind than trying to sit here and focus for eight hours straight. And I often find myself unfocused and unproductive and depressed by it really, and its something that we’re going to try to make a little bit of a change about in 2019. But I’ve definitely realized that that was a bit of a low for me in 2018.
Dave: Again, the contrast because after having an office for five years of being off this list for two years, I’m now itching to get back into an office. So again, another contrast, people have different scenarios with their ecommerce companies.
Mike: And without a question, if you asked me this, if we do make some massive changes with this, and I’m sure if you asked me a couple years on it will be the opposite. It’s always I feel the same way about a whole bunch of things in my life with this, and I think it’s just a part of my personality and maybe just a part of an entrepreneur’s personality in general.
Dave: Yeah. I think that’s just kind of a cycle of entrepreneurism. You have that period where you’re just high and everything is great and dandy and then you just get burned out, it doesn’t matter what business you’re in, the same cycle.
Mike: Yeah, exactly.
Dave: But yeah, getting on to my kind of low for the year. This was a close one between getting sued for $100,000 and forgetting to bring a jacket to Shanghai. But I’m going to go with forgetting to bring a jacket to Shanghai. To give us some background on that, so it was January 2018, just before Chinese New Year. And doing the wise thing, we’re living in China, I figured, okay, I’ll travel up to Shanghai and inspect all my shipments before Chinese New Year, never even looked at the weather.
Shanghai is roughly on the same latitude as San Diego, so I thought okay, great, bring up bring a sweater and some jeans and I’ll be good to go. Get up there and it’s the first time in 20 years that Shanghai has seen snow, traveled to the factories, I have never been as cold in my life as a Canadian as I was visiting these factories in suburban Shanghai. I was literally freezing my you know what off, it was terrible. And then compounding things, coming back, trying to make our way back home to Xiamen, all the trains had stopped for all day because they could not apparently bullet trains cannot operate on snow, which I guess kind of makes sense.
So we got stuck in a train station for 20 hours. By the end of it, the train conductor finally came around and said in broken in Chinese and broken English, get on any train that you can. So we scrambled, finally got on a train, and the icing on the cake, I finally got a train, on our way back home and all our factories told us that all our shipments would be delayed until after Chinese New Year because of the snow and now the trucks could get all our goods on the trucks and to the port. So that was my biggest low for 2018.
Mike: I mean, it sucks, the perils of going to Shanghai in the winter. I was just as cold I think in New Orleans this last week, but it was 50 degrees. I’m sure it was a lot colder in Shanghai since it was snowing.
Dave: It was definitely colder.
Mike: All right my next low on the list here is just WildBaby in general. I mean it just hasn’t quite taken off the way that I would hope when we first got into it. And it’s funny how on the flip side of the coin after the history has been written, after the games and play, it’s so easy to play armchair quarterback. But I definitely feel that way about this. We also had a pretty big low with the one thing that was working for us throughout the year, with Facebook advertising having a demographic of mothers with kids that are zero to two, they got rid of that. So, that was kind of the final straw, but yeah, and it’s frustrating. The thing that probably frustrates me more about this than anything kind of looking about why it hasn’t worked as well as I had hoped is have you ever had a situation where you know something or you tell it to other people advice but you don’t do it yourself Dave?
Dave: I was just gonna bring this up.
Mike: Yeah, this is definitely a case study of this.
Dave: Yeah. So I was going to say that I think we have an actual module in Premium that says, do not source baby products.
Mike: Yeah, it’s definitely been — so the things that got me into it were, again, the light, easy to ship, blah, blah, blah, this stuff that I think is really important. But also there was the two things that I’ve been looking for, the things that people are passionate about. And obviously moms are passionate about their kids and some sort of consumerability thing where parents will obviously reorder clothing because the kids are growing. But the things I didn’t really think through were first of all, moms are like, they make decisions way early on, and it’s a lot through word of mouth and it’s really hard to be there at that stage. It’s hard to convince them to switch diapers for instance.
There’s a case study about this, once they make that decision, they pretty much go through the duration and same thing with clothing and other things. And it’s it’s really tough to be in that conversation. At least it has been has been for us. And the other thing that I’ve also realized which was something I do — I’m pretty hard on myself for not thinking through is the customer is a moving target. So with with something like ColorIt, the consumerability angle is there forever and there’s this long term payoff and we’re seeing it a lot now with ColorIt in the way that our net margins are continuing to increase and the cost of sales going down because once you are a ColorIt customer, unless you unfortunately like literally die, you’re going to probably be a customer for life, so the window there is much longer.
But if you’re making kids clothing targeted to zero to two year olds, the real window is two years. And if you catch the person a year into it, it’s actually relatively short and then you kind of lose your customer and the investment that you made early on. And that’s something that I didn’t really think through and it’s proven to be a struggle. And we’re going to definitely be making some changes to WildBaby in 2019. We have basically one successful series of products. These products actually do really well and we’re going to just niche down to that and focus on what’s doing well and focus on getting some profitability out of WildBaby and just having to be a niche brand for those items and probably making more and more skews that revolve around that specialized niche because it is doing quite well and there’s definitely room to grow.
But hyper targeting what WildBaby is it’s going to be, it’s just trying to be like everything for everybody for for parents or for kids or whatever, it’s going to be more niche down. Again, things that we talk about, that we teach people. Oftentimes when you’re in the middle of stuff you don’t even realize that you’re not even following your own advice and it was certainly a low for me in 2018.
Dave: Yeah, and I think part of the problem is too ecommerce is growing roughly 25% a year so every three years or so it’s basically doubling. And what’s happening is it means that a lot of brands that weren’t previously in e-commerce now are getting into e-commerce. So, these wider niches like baby are getting increasingly harder to compete with. But also what’s happening though, because ecommerce is growing so fast, smaller niches are now more appetizing than they used to be. So, I think the philosophy of niching down is even more applicable today than it is maybe a few years ago. So, I think kind of, like you mentioned, the stuff that we talk about in Premium, the more niched down you go, almost always the better things turn out.
Mike: Yeah, without a doubt.
Dave: Okay, now on to my low, and like I mentioned, this was almost number one, but the snow in Shanghai one out but getting sued for $100,000 was definitely in all honesty, that was probably my biggest low for the year. And I talked about this in a previous podcast. What happened was the buyer of my previous company, we got in a bit of a dispute over something in our EPA, the asset purchase agreement, basically around the non compete. He said, oh, you’re infringing on our non compete. I, of course, totally disagreed. But at the end of the day, it was something we just had to settle through a lot of time with lawyers and a lot of money spent on lawyers.
And even more than money, the money wasn’t that huge of a deal relative to the overall purchase price. But what happened, it just consumed almost every day, some small part of my day for weeks on end, probably months on end. And something I never wish upon my worst enemy is to be involved in any type of legal dispute because it’s just a huge psychological drain.
Mike: Yeah, I mean, I’ve been there more than once unfortunately. I think that it’s impossible as you go through entrepreneurship and business journey to not get in the situation either on the receiving end or giving end, it’s very unfortunate. And going into a situation that only people that win are the lawyers, sometimes it’s still hard to get the other side to understand that. I’m going to camp because I’ve been through it a couple of times that I know immediately going into it, the only people that are going to win here are the lawyers, let’s just figure out a way to make this work. And often time, the other party is not in that same spot. So you got to go through a bunch of pain until it does work its way out. And it sucks.
Dave: Yeah. I mean, what’s the saying that you’re not a real business until you’ve been sued?
Mike: Yeah, no, it’s true.
Dave: And truth of it — and I talked to a mutual friend that we have, and he’s actually in a position of getting sued, potentially it could be millions of dollars at the very least hundreds of thousands of dollars. So, there’s definitely scales of being sued and I’m thankful that it wasn’t a lot worse than it was, but again, it was just a huge drain on the entire year, at least the first part of the year.
Mike: Yeah. All right, so next one I have a my negatives list, this happened at the very end of 2018. But Amazon created their own brand to compete against us for one of our IceWraps, two of our IceWraps products. Two of the four best selling skews on our entire catalog are being targeted by Amazon for this icewraps brand. It’s disgustinge and it’s a direct rip off. I was showing a few people this at ECF and it’s hard to even distinguish between our product and their product. I mean, they took no shame in just using the same color schemes, same fun, same everything, they just changed, put their logo on it, and there’s nothing I can do about it, obviously, and I already know what the end result is going to be.
So, it’s probably going to be a low that’s going to carry over into 2019 as our sales solely drop because of this. But it’s upsetting because it’s going to end up being six figures probably of lost net profit in 2019 as they slowly even know our sales.
Dave: Yeah. And you know, it comes down to I guess kind of lifecycle of a product. How long have you had the product for?
Mike: A couple of years.
Dave: A couple years. And I mean, we talk to a lot of Premium members about this too about products just always after it seems a year or two of having some pretty good traction get eaten by competitors one way or the other. And whether it’s Amazon with their Amazon basics or just American or Chinese sellers, every product has a finite lifecycle.
Mike: I agree with that but this is different because when you search for like a good search you can just search for triple A batteries on Amazon for instance. And when you do that search, there’s like this huge above the fold section of our brands and they have multiple brands that sell that. So this same thing has happened now with they have just so much more real estate, it’s going to make a much bigger difference than just having other competitors. I never think about oh, I’m going to sell all the ice packs on Amazon, that’s never the way that I think about business.
I’m just like I’m in my lane, we’re going to have x percentage of sales, yes, there’s going to be competition but as long as we can stay in our lane and continue to have a decent percentage of those sales, we’ll be fine. I think that this is going to be – we’ll still sell these products but it’ll probably — my guess is that it’s going to cut them down by at least 50% over next year.
Dave: Yeah, I mean, I guess the results will be a lot more sudden than they would be if it was somebody else. And yeah, that sucks. And it’s kind of like I guess catching your girlfriend sleeping with another guy almost because Amazon you’re in bed with Amazon, but she’s apparently in bed with somebody else too.
Mike: Yeah. Okay the next one I have on my list here on the negative, this is something that I struggle with throughout my business career. But what ends up happening for me and this is going to sound sick and twisted, you and I have talked about this Dave but for the audience this will sound sick and twisted. But for me, the excitement of business and doing what we’ve done is taking something from zero and something from nothing and turning it into something. And the excitement of that and all the challenges that provides along the way and kind of being in this mode of being hit by a fire hose of lack of knowledge and not knowing how to do it, and then once I kind of get to the point where I put my 10,000 hours in the Malcolm Gladwell outliers effect, now I become the outlier guy that knows so much about that business and niche and industry, I lose motivation.
It’s like the time when you make the most amount of money and become the biggest expert, but for me, it’s become a little bit less exciting because of I come to work every day and I know exactly what I’m going to do. The things that end up becoming the things that are the unknowns are the things that suck, like getting a lawsuit, or we haven’t had a lawsuit but we had copy cat stuff, or Amazon shuts our listing down or things that used to like just glide off my shoulders because I was so excited about learning something new and the challenge of launching a new product and all those things. And now that it’s kind of been figured out, it’s less exciting.
But the thing that I’ve been able to do to channel that is to apply my knowledge to others through the speaking thing, through the podcast, through Premium. It’s really kind of renewed that bigger because I’m seeing the results of someone else like be able to apply that. And that’s something new and exciting to me, and hopefully that’ll last for a couple of more years, I don’t know how much longer that will be interesting to me. But in in the short term, at least right now, I can tell you and we talked about this in a private meeting in New Orleans, it’s still really, really exciting to me to be able to do that knowledge transfer and see so many people benefit from that.
But in my own business, it’s like, yeah, like whatever, we’re making money, whatever, and I know that sounds like I said, sick and twisted and stupid, but that’s just kind of how I’m wired.
Dave: Yeah, and that happened to me about two or three years ago, and I felt the same way where I wasn’t learning as much anymore. It felt just like a job and I was a little bit burnt out and sold the company and then kind of realized pretty quickly that yeah, it is a job that man is it a high paying job and it’s pretty easy money and at the end of the day, we all need to make income. And yeah, it’s not as exciting maybe as it was in the beginning, but the ROI that you get on your money, I don’t think there’s too many things else in the world that will get you the same ROI as ecommerce will even today. So, that’s kind of my philosophy, I’ve I guess kind of accepted the reality that, yeah, it’s a job, it’s not this exciting and new thing that it was in the beginning, but it’s still a pretty good job.
Mike: Yeah. I mean the money is definitely good, there’s no doubt about it, it’s just again kind of sick and twisted. Fortunately, this isn’t sick and twisted just like I’m jaded and just like live this realistic life of I’ve been through this before and I know the incremental difference in happiness that more money is going to give me is nowhere near what I’m looking for. I’m looking to get that in other ways. So, something I’m definitely struggling with and working through in 2019.
Dave: Yeah, I totally agree. And I’ve talked to countless people feeling the same thing, and I don’t know what the solution is. I think ecommerce still has a part of everybody’s life in that boat. I just think maybe finding other exciting things to kind of supplement it with is the key, and like we’ve kind of talked about I think I found that with Premium. That’s definitely where I get way more excited than I do with kind of traditional ecommerce right now. So, I think just supplementing ecommerce with something that is exciting is kind of the best of both worlds.
Mike: Yeah. All right and the last thing on my list because you’ve talked me into adding this one because it was your high is God darn I tell you what man, international sales last year were just really disappointing for me. I’m not going to go into a lot about this, we’re way over time, and I covered this in my goals recap for 2018. But man, we had forecasted to do, like not exaggerating here literally millions of dollars more in sales because of international sales. And we did hundreds of thousands of dollars in sales because of international sales. And which I’m sure that most people will look at in their business and be like, well, I added hundreds of thousands of dollars of sales to my business.
And I’m still happy about it as well but it’s not what we were expecting. So, it was a big letdown. It was kind of a fail and it adds a lot more stuff to our business like paperwork and things to deal with. It’s actually kind of funny as I’m saying that, I also like I’m not exaggerating, literally i just got a call from Canadian revenue as we’re recording this, I don’t know what the hell they want, but it’s just another phone call and stuff I have to deal with. I’m sure it’s no big deal but I have this text to voicemail thing. And I was like, saw the email pop up and said that this is so and so from Canadian revenue. So, it’s kind of a low having to deal with that. It hasn’t been what we hoped it would be. And I feel ‘like it was kind of a failure for 2018.
Dave: Yeah, well, and by the way, I can probably tell you what that call is for. Normally, GST returns get mailed out in January, and maybe yours was not successfully delivered. And normally, they’ll call and say, hey, we have this mail return. So that’s probably what your call is about. I totally agree, internationals is a pain in the butt from an administrative standpoint. And so if you can’t make it worth it, it’s not worth it just because of all the extra paperwork. It’s not like adding another product to Amazon.com where it doesn’t really require much. When you open up a brand new marketplace, it’s a ton of administrative work.
Mike: Yeah, no doubt.
Dave: So totally feel you there and that’s been part of my reservations with going over to Europe is putting up all that work and then finding out that it’s not going to work.
Mike: Yeah. All right. Well that’s the list for 2018. I feel like we need to end this because it’s where we usually try to target 30 minutes and we’re ending on a sad — let’s end on a positive note. Let’s talk again one more time about EcomCrew Premium. We’ve already mentioned it, but you can go to EcomCrew.com/premium. We only have registration open this week only, we have limited registration because honestly it has been better than we thought it would. I mean, the number of people we got, we have more than we thought.
And what we find is that when registration is open and new members come in, we get this influx of new members email. It’s kind of like you can chart this out obviously when people are new, they’re emailing more frequently than they do when they’ve been there for six months. So, Dave and I wanted to make sure that we’re going to be home and grounded for a couple weeks to deal with that, and we’re looking forward to all the new people that come join us and join the community.
We have hundreds of people that are already in there, the Facebook group keeps getting more exciting all the time, people are really helpful in answering other people’s questions as well, so it’s not just Dave and I but a couple of a hundred other entrepreneurs that are like minded going through the same stuff. So, EcomCrew.com/premium, that’s open this week only, next registration will open up probably around April. So, that’s going to do it for today folks. I hope you guys enjoyed our highs and lows of 2018 and 2018 review cap. And until the next one everyone, happy selling and we’ll talk to you soon.
Michael started his first business when he was 18 and is a serial entrepreneur. He got his start in the online world way back in 2004 as an affiliate marketer. From there he grew as an SEO expert and has transitioned into ecommerce, running several sites that bring in a total of 7-figures of revenue each year.