Amazon is crowded. Everyone and their mom is hawking something on Amazon, and since there’s only a finite number of stuff most people are willing to buy, everyone is clawing their way up from the competition to page 1.
One tactic sellers employ to get more sales is to lower their prices. The lower your price, the more sales you get. It only makes sense, right?
While it is true to some extent, at the end of the day the race to the bottom hurts the most important thing in business: profits.
In this episode, I am joined by 5 Minute Pitch contestant Amanda Wittenborn of Amanda Creations to talk about how lowering prices can actually hurt your business, and conversely, how raising prices can make you more money.
In addition, we also discuss:
- Whether it’s better to learn how to market a new website or hire an expert to do it
- The most important factors that influence the ability to scale
- How a business can stay relevant in 2019
Amanda is a designer who is passionate about spreading joy to kids and convenience to moms by offering custom design services for every celebration. Check out her creations here.
Thanks for listening to this episode! Until the next one, happy selling.
Full Audio Transcript
Intro: This is Mike and welcome to Episode #245 of the EcomCrew Podcast, and hello still from Hong Kong. I’m spending about a week here, getting acclimated to the Asian time zone which is always fun, recording this at about 7am, got up at 4:30 this morning, slowly but surely getting on Asian time. Then the morning before that was 3am, so I think about one more day will be pretty much on Asian time. I’m going to be over here for several weeks. I try to get into town a little bit early to just acclimate. I found that just hitting the ground running is pretty tough.
So I had a couple fun days here. One day we did a cable car ride up to go see the Big Buddha which was awesome, something different; always try to do something different when in town. I had some good food and this morning going to make our way down to Hong Kong Central. Get ready for all the action of the EcomCrew mastermind, the Global Sources Summit, our meetup and we have a couple of awesome people coming in from Cebu. Our team back in Cebu that does EcomCrew with us. We’re going to spend a couple days with them here and show them something different in life.
I think they’re used to being in Cebu and they have never been to Hong Kong, so I’m definitely excited to see the looks on their faces when they see the big city because I think it’s the first time that they’ve traveled to someplace this big. I mean Hong Kong is insane. One of my favorite places I love playing tour guide, so I’m looking forward to them landing and doing that. But today we have another 5 Minute Pitch guest. Today it’s going to be Amanda from Amanda’s Creations and a party in the box. And Amanda was on 5 Minute Pitch as one of our contestants, really just awesome business.
I don’t want to give too much away because I want you to hear it in the podcast. And I also want you to go over to 5MinutePitch.com and go check out 5 Minute Pitch along with Greg, Steve, Scott and I. We did this collaboration along with some guest judges each week. And I think you guys will love it. If you haven’t checked it out before, go to 5MinutePitch.com and check that out. Today we’re going to be interviewing Amanda, talking about her business and a bunch of actionable stuff to help her. So it’s kind of an Under the Hood but not exactly because I already knew a decent amount about her business.
But I think you guys are going to enjoy hearing about her business and some of the action items for her to continue to grow her business, and just, I think you’re going to fall in love with Amanda, like all of us on the show did. She is just a ball of joy and energy and also passion. She really loves what she does and the effect it has on people. I saw a lot of similarities in her that I find with EcomCrew. I obviously love helping people and she does it in a different way. She does it by creating greeting cards and invitations and throwing parties for kids. And she loves the way that that does for her. So anyway, without further ado, let’s get Amanda on the show.
Mike: Hi Amanda, welcome to the EcomCrew Podcast.
Amanda: Thanks, excited to be here.
Mike: Definitely. So let me give people a little bit of a background. I first met you through 5 Minute Pitch, which is a project that was a collaboration with Greg Mercer, Steve Chou, Scott Voelker and myself. And we had a bunch of different guest judges, and you were a contestant or I guess our contestant, I should say, on the show, but you were in the round of 32, and then made it into the next round. We haven’t released the rest of the episode yet so we won’t talk about what’s happened there. But we met you there and I thought it would be cool to bring on some of my favorite contestants from the show.
I thought you had a great business and that would be something that would be fun to talk to the audience about. And it sounds like there’s a few things that you can use our advice and help on. So we’re going to kind of, turn this into one of our Under the Hood segments. It’s not officially Under the Hood, but it kind of is the same type of format. But yeah, I mean it was awesome getting to meet you, you have such an awesome business and I’m looking forward to chit chatting with you and letting people know about your business and then trying to do some coaching.
Mike: Yeah, so I usually ask first question out of the gates with these, I think it’s appropriate here just so people can get the background, because your background of why you started the business I thought was awesome. But how did you get started in e-commerce?
Amanda: Yeah, I’ve always been super passionate about birthday parties. And I used to like hand make birthday party things, decorations and invites and stuff. My oldest son just turned 13. And I remember for his first birthday party hand making all the invitations and decorations and everything. And one thing led to another, I couldn’t really find party supplies that I liked. And I was running out of time to make things and so I ended up teaching myself how to do it digitally. And so I just started designing these party supplies just to use for my own kids parties. And one thing led to another, friends were having me make them for their parties and then somebody suggested, oh, you should sell these.
And I thought, oh I don’t know, nobody is going to buy this. But I thought, okay, I’ll try it out anyway. And one thing led to another and here I am selling it and evolving and offering new things and listening to what is being requested out there and just modifying as I go to turn my creativity into something that’s useful for other people.
Mike: Yeah, and you missed one important thing there I think that you should definitely mention because I get like now here I am. But like here you are, for both of you and your husband have left your full time job and you’re doing this full time.
Amanda: That’s right. Yes. End of July last year, my husband left his corporate job and joined me in the business. So I think we’re almost at the nine month mark for having him home working with me. And that’s been a whole new adventure.
Mike: We don’t have time for the therapy sessions on now. But it is awesome. Sure it’s cool being able to spend more time with your kids and having the flexibility to do things with them. Or if you just feel like throwing your feet up on the couch one day and not doing much, you don’t have anybody else to answer to do that.
Amanda: Absolutely. I mean, that was a conversation my husband I were just talking about is okay, why have I worked so hard and what have I worked for? And it’s exactly that so that nobody else has any control over our time.
Mike: Yeah, and we already know that your husband likes to put his feet up on the couch. We saw that in that video that you guys did.
Amanda: Right. Now we’re going to live it down.
Mike: He’s never going to listen to this now so you don’t have to worry about that, but yeah, that was a funny video. Just so people know the context, there was this video that Amanda and her husband put together about how the lazy husband or the procrastinating husband let’s say was supposed to be in charge of putting together the party for the kiddos but was watching too many soap operas, eating bonbons on the couch and realized at the last second that they needed to put together the party.
And Amanda has this thing called party in the box that’s basically you just buy this box and everything is there that you need to do the party from the plates, the tablecloths, the things you hang on the wall and streamers and stuff, which was her product on 5 Minute Pitch. So I think that it was funny because we were joking about how he’s lazy [inaudible 00:07:40] it’s like if he heard that he’d be so mad at me.
Amanda: That’s right, that’s right. Yes, he is a hard worker. But yeah, we totally played into that the dad is there sitting on the couch and mom is running around getting all the party stuff together. And all she needed him to do is do a little decorating…
Mike: One thing, I asked you to do one thing.
Mike: Showing that the party in the box is so easy that even dad could do it too.
Mike: Yeah, that was perfect.
Amanda: Just a little cheeky but…
Mike: Yeah, I thought it was — I mean, he had us laughing. So I think it worked. It was good. So cool. So I mean, let’s talk about 5 Minute Pitch. We’ve obviously discussed what we’ve been doing on 5 Minute Pitch quite a bit on the show here, but I’m just curious, I haven’t had a chance to talk to a lot of contestants since they’ve been on the show. How was your experience with that? What did you think of 5 Minute Pitch?
Amanda: It was an awesome experience. Anybody that I know that is running a business of any sort, I’d encourage them to submit a video and just do it because the personal growth that came out of just participating in that has been amazing. You can’t pay for that kind of personal growth, or I would have had to pay a coach thousands of dollars to get all of that in there. So just the process of deciding what needed to be talked about, needed to be said in five minutes and what can I really say in five minutes that really highlights why I should win $50,000? I mean, it’s a $50,000 five minutes, right?
Amanda: So really having to drill into okay, what is it that makes me awesome? What is it that makes my business awesome? And it forced me to recognize some of the things that I never took time to acknowledge about what I’ve been doing. I’m always looking for the next thing, I’m always looking to grow and wanting to do something better or whatever. And it was really great to just stop and take a minute and go, wow, look what I’ve already done. And so that was — I just — I’ve really appreciated the whole process of it. And I mentioned a few times like how extremely far out of my comfort zone it was to even enter. That email came through, I read it and I thought, oh, no way.
Amanda: I closed the email. And then it’s like a little tap on the shoulder. It’s like, no, maybe you should do that. I thought, oh, gosh, I don’t know. But it was one of those things like if you’re afraid, then it’s probably what’s best for you right? So, I did it anyway.
Mike: A friend of mine taught me a great lesson one day, which is; sometimes you got to do things that make you uncomfortable. I started thinking about that and he was right. I was always kind of leaning towards the things that even though I was having success, they were just the things that were comfortable to me and were easier for me and that would be the things I would gravitate towards. And specifically, the thing that he was talking about at that exact moment was trying to get me to go speak in front of 300 other ecommerce entrepreneurs. I’m like, there’s no way in hell I’m ever going to do that. But then he convinced me like, sometimes you got to do things that make you uncomfortable, and look where that’s taken us and look where that’s taken you into 5 Minute Pitch.
Amanda: That’s right.
Mike: What you were saying, let me make a case, I’ll do my 5 Minute Pitch, but it’ll be like more like a one minute pitch of why I think you’re awesome and why I think your business is awesome, which is you have a business that came out of a need. I always think that businesses that start that way have a much bigger chance of being successful because there’s some personal interest or passion in it, besides just the money. And obviously, making money in business is important. But if you can layer on top, something that you have a personal interest and passion, I think that that’s awesome.
I think that you’re awesome just like I mean your acumen and stuff on the show was really neat. Like how you took the stuff that we talked about on the first talk that we had and then came back the second time and I just thought that that was really cool. I think more than anybody else from the different rounds, you really exhibited the ability to learn and change and just kind of reevaluate, which I thought was neat. I think you have like this incredible defensive business because you’re the one creating all the artwork, right? So it’s all copyright protected, and someone can’t just go to Alibaba and take your stuff and sell it.
And then the last thing is that you have something that’s one of these consumable and repeat business type things. So if you can develop a relationship with these people, they’re going to buy from you at each of the holidays, or each of the parties and kids are doing more and more things today than ever. It isn’t just a birthday party but there’s a lot of other things that happen in between. And I think that you have a really great business. The numbers show that it’s a great business and hopefully since we talked six months ago on 5 Minute Pitch things have been going the right direction since then.
Amanda: Yeah, they definitely have. We’re seeing projected growth that we anticipated from last year, which is really exciting. And yeah, I definitely have a passion for what I’m doing and my customers matter, their kids matter. I love when somebody emails me and they’re like my daughter had this crazy idea. She wants to have an Egyptian party. I can’t find anything for that. And I’m just like, I got you covered.
Mike: Yeah, I like that.
Amanda: Nothing lights me up more than let me give you something that’s not there. And knowing that this little girl got this amazing Egyptian party and her invite was cute and I made a little game for her party too. And I just, I love to do those things. So I love — I’m like, kids come up with the greatest ideas for party themes, crazy off the wall ideas. I’m like send them my way because I love creating. The crazier the idea, the better.
Mike: I love it. Yeah awesome, cool. So I think the main thing that we wanted to chat about today on the podcast is some advice that we can give you and I think that hopefully these are questions that resonate with others that are listening. I find that what ends up happening, what I’ve learned at least from doing a couple of hundred of these episodes now is everyone’s got the same struggles and problems but very few people are willing to make themselves vulnerable and talk about it. So if you’re out there listening, I encourage you to sign up for an Under the Hood segment or talk to other people in your community. Be more like an Amanda here that will make themselves out there and talk about these things. I think it’s super important.
So we had four things that you had asked us to talk about today. I’m just going to go through those real quick and then we’ll circle back around and help you with them one at a time. So the first one here was you were looking for advice on how to market a new website like if you want to create something off Amazon, your own Shopify store, and have that be a freestanding website, should that be something that you figure out on your own, or hire an expert to do? The second one here will be just pricing your products or typically more than your competitors it sounds like and how to deal with that and how to work on pricing. That’s it’ll be an interesting conversation.
What are some of the most important factors that influence the ability to scale? Which again, another great question I’m looking forward to talking about. And then how is the e-commerce platform changing and what should you be doing differently to ensure that your business remains relevant and successful in 2019 and beyond? Does that all sound fair?
Mike: Awesome. All right, so let’s circle back around and talk about the first one, which sounds like you’re contemplating doing an off Amazon component to your business. And it’s probably overwhelming because there’s like this whole new platform and everything that you do need to learn to do that, and how you should approach that. So maybe, is there anything that I missed there or maybe like kind of reword that a little bit to make sure I cover everything in my response?
Amanda: So I have a website and it’s almost finished up to the way I want it, and it’s time to start marketing that through social media. And I’m at a point in my business where I’m not new. So I feel like when you’re new, you have the luxury of learning how to do everything yourself because you have no money. But I’m at a point in my business where I do have some income coming in. And should I be taking the time to learn how to market on Facebook or should I be hiring an expert that already knows how to market on Facebook so that I can focus on where I’m an expert already? Do you think it’s important for e-commerce business owners to know how to market on each of the different social media platforms or do you think it’s okay to hire out for those things, so that I can really do what I’m best at?
Mike: Got you. Okay. This is a tough one, because it depends on a lot of factors. But let me — and I’m going to go over all them. So don’t worry, I’m not going to — it’s not a cheesy response of it depends. So I promise I’m going to get into some details here. But here’s the thing. Here’s what happens with a lot of businesses, you start making money and the desire is to continue to grow. And that’s just a natural thing, something that we all go through. But you mentioned something really important like you were saying like you didn’t have the “luxury” of paying someone else to do it when you’re first starting because there was no money.
And so what ends up happening a lot of times, and I’m speaking for myself here as well is when you have money, you’ll spend it more carelessly than when you didn’t. And so it just, it’s easy to be like, I’m just going to hire somebody to do it. You feel like you’re putting your faith in someone and you hope to get good results. But typically, those results aren’t as good as if you were to go just figure it out yourself in the grassroots type sense and do it. Now, I mean, obviously a business gets to a certain size at some point where it’s literally impossible to do all those things, you have to hire out. But I still think you’re probably a little bit early and you probably would be better off if you figured out a lot of this on your own, especially Facebook.
There’s a couple of things that I refuse to hire out for, or just get some type of third party to do and one of them is SEO, because I think that it’s a really dangerous proposition to have another company doing SEO for you where the repercussions for you are way worse than they are for them. If you get a bunch of spammy links, and you go to zero, the worst thing that happens to the SEO company is they lose you as a client, but for you like you have, your business goes to zero and your entire business could fall apart, and you might not be able to ever recover from it. So the stakes are way higher for you.
I don’t think that it’s as extreme in Facebook land because you can always stop anything in Facebook marketing and stop the wasteful spending at any time. But I’m someone that really believes in delegating and hiring to solve every problem that I possibly can so I can continuously be learning new things myself, train someone else, go on to the next thing, learn something, train somebody else. This is one of those things that has been for me very difficult to be able to do that with. And I’m in a mastermind with other Facebook marketers who spend I think it’s $10,000 a month or more as the minimum. And the thing that comes up constantly in that group is people hiring a third party they think they found Nirvana where they can hire a company to help them with their Facebook ads because it is very time consuming.
And the best case scenario that I’ve seen come out of that is they’re happy with them for a few months, but the end result with everybody is that they regret doing it and they wish they kept it in house. And the stakes are just higher for you than it is for the marketer, your interest aren’t aligned. They get paid based on how much money they spend not how much money you make and things of this nature. And they end up having dozens or hundreds of clients and you can never be the most important thing to them.
And if you don’t know the platform and know all the little idiosyncrasies and the things that they’re telling you, then they can easily smokescreen you because it can be a pretty complicated platform. And they can say buzzwords and things that are above your head and you’re shaking your head. Yeah, okay, that sounds normal when if it was someone like me they were saying that too, I could say I call BS and you’re just full of crap. So for those reasons, I think that it’s important for you to learn that platform and figure those things out and where I would delegate and hire are on the things that you already know how to do and get people to help with the things that are already taking your time that you can easily reproduce.
And I would think a lot of those things in your business can be reproduced, even as much as which may be things you haven’t thought of even as much as the designs for the cards. Those could even be done by somebody else and you can just manage a team of people doing those things. We’ve had a lot of luck with ColorIt. We never do any of those designs ourselves. It’s all original artwork, and we did it with a third party that we just paid and bought the rights to the original artwork we were doing. And that was a way for us to do that. So I guess the long and short of it is I think that you should work on that yourself.
Amanda: That’s good. That’s really good advice. And it kind of solidifies the decision too. I did actually just hire another graphic designer. So I’m still focused on designing the invites, which are the bread and butter of my business. And that’s really what I love to do. And the graphic designer I hired makes matching items.
Mike: Yeah, perfect. Yeah, I mean, so that I love because it sounds like basically if I was to paraphrase that or whatever, you’re making the theme and the original design like the print or whatever the original artwork and then someone else is then extrapolating that and saying, okay, we’re going to make different sizes and different — there’s going to be a birthday card version, there’s a banner, a placemat, plates, whatever, and they can re-adapt that original design that you’re doing and leverage your time and your design instead of you having to do all that.
Mike: Yeah, I love that.
Amanda: I used to go make the matching items and now I have somebody that’s doing that. So I still get to create the theme and the funny phrases and the colors, and then they just work off my design to make matching items for the set.
Mike: Yeah, I mean, I absolutely love that. So that leaves you time to do one of two things, or maybe both things where one of the things can be that you just have time now to make way more designs, to be more prolific, or the other option is, you take that time that you would have spent making up with other designs and spend some time on Facebook land.
Mike: Perfect. All right, so before I move on to the next question, I think we kind of solved that problem the best we could.
Amanda: For sure, yeah.
Mike: Awesome. Cool. So let’s talk about pricing, which is going to be another fun debate here. So basically, again to rephrase, and then you can let me know if I got it right. Basically, you are the highest price thing out there; people see success in what you’re doing. So there’s a bunch of competition flooding into the market, and they’re trying to play the game of race to the bottom, they’re certainly pricing their stuff under yours and you’re concerned about that.
Amanda: Yeah, my ultimate goal is make more money; do less work, that’s what we want to do, right? And so I’m at a higher price point, which means I work at a lower volume of sales. And competitors, they’re some of them are as low as half my price and obviously, their volume is much higher. And so I go between, do I lower my price and increase my volume and would that end up making me more money in the long run, or do I just kind of keep it at the premium price and keep it more of a boutique style brand and just grow it from where it’s at? Because it’s not like I’m not doing well at my higher price, things are going well. So I don’t have to do it but I wonder sometimes. And how would you even figure out if it’s worth it?
Mike: Yeah. So this is something I’m really passionate about. And it’s very timely because I didn’t have some out for a long time but we were focusing on this specifically within our company like basically right now as I’m talking to you about this. So it’s super fresh in my mind. So first thing I would encourage you to do is make a spreadsheet and basically and I don’t know what’s the average price point you’re selling something? Is it like 15.99 or what’s your…
Amanda: Our invites are 24.99.
Mike: 24.99 okay, good. I mean, I was just pulling a number out of my rear end now. So 24.99, so I would make a spreadsheet that it starts at let’s say 17.99 and go up in dollar increments 17.99, 18.99, 19.99 up to like 29.99. And figure out how much profit you would make selling one unit at that price and just know what your margin capacity is at each dollar level. And basically, as you go down in price, you’re obviously going to make less margin. But what happens is it’s not linear, it’s going to be curved. As you lower the price, your percentage profit is going to go down because of the fixed costs that Amazon has, the pick pack and ship fees part.
So as you go down in price, that portion in a percentage amount is higher, so your net profit goes down quicker as you go into this race to the bottom. The effect is more profound as you race to the bottom. So you want to know what your margin per unit is at each level. And you would start at 24.99 and then figure out how many units you sell per month. Let’s just say it’s 100 as a for instance, you just sold 100 units at 24.99. It will be very interesting to you, it was definitely interesting to me like how many more units you’ll need to sell 23.99 or let’s say 19.99, just to make the same amount of money that you’re making, total dollars net profit at 24.99. It’s pretty extreme.
And I’ll run through an example here with you and I’m going to do this on the fly while we’re just talking. We have one product that we sell at 12.99. And let’s just say we’re selling 1,000 units. So if we sell 1,000 units at 12.99 of this product, we make $1,202. If I was to lower the price, let’s say to 11.99 and we’re again trying to target $1,200. So I’m going to go 11.99, let’s see how many more units I need to sell to make the same amount of profit. Let’s see, again, I’m doing this — this is this is like podcasting 101, you should never try to do this on the fly, but I just did. So if I lower the price by $1, from 12.99 to 11.99, and I was selling 1,000 units per month, I’d have to be selling 2,750 units to make the same amount of money at that $1 lower price.
So yes, it’s really cool to my ego in some ways, I can sell only 2,750 units, but it’s 2.75x higher volume just to make the same amount of money. The net result is I’m making the same amount of money. And again, this is an extreme example, because this was already a product that we were when I was testing at 12.99, which is actually what we’re selling it at right now, it’s already like our floor margin, so you’re going to notice on less extreme examples there on your stuff. But maybe the answer is actually that you need to sell it for more in some cases. But what I would what I would be doing is taking — I never like to do this with my best seller.
So I would take like my third best seller or something in that range and start playing around with the price, use something like Profit Peak, and see what the market can do. What we learned last year when we were playing around with this is that we were able to actually raise our prices in almost every case was actually the right answer. And we sold fewer units yes, but we made more money. And at the end of the day, the game is how much net profit can I put in my pocket and pay for my kids’ education.
And the whole saying of revenues are vanity and profits for sanity, it’s nice to go to a e-commerce event and say, I sold $10 million of the stuff last year but I’d rather go to a conference and say I sold a million dollars of the stuff and made a half a million dollars than I sold $10 million worth of stuff and made zero. You can easily — and this is the problem I think with a lot of stuff in e-commerce, it’s socially acceptable for people to talk about their revenue numbers. I wish that people would start talking about their net profit numbers more, because at the end of the day, if you are just doing it to just to be able to gloat that you have a business that sells a bunch of stuff, it’s actually the wrong way to look at it in my opinion.
And by selling more volume, you create more problems for yourself. You do solve some things like if you have logistics stuff, there’s extrinsic things you got to think about. For us like okay, there’s some extra value in selling a full container worth of goods, ordering a full container worth of goods at each time, maybe we get some better pricing from a manufacturer. There’s other things you have to think about. So I don’t want to say that this is all a decision you can make in a vacuum but I know a little bit more about your business. You’re sourcing things from the States and there’s probably little advantage for you to just blow up your volume for no other reason, just to be able to say, I sold a bunch of these cards.
So I would I would put that spreadsheet together. If it’s something you need help with, I can maybe help you offline, and you just figure out, know the numbers like going into it and you can make that spreadsheet and figure out exactly where you stand there. And the end result might just really be raise your price and sell fewer things, and you’ll make more money.
Amanda: Yeah, no, I love that I’m okay with raising my price. And in fact, that’s exactly how it happened when I first started; it was like, what can I get away with, what price could I get away with selling it at? And I kept increasing it and people kept buying it and I thought, well, hey, if they’re willing to spend this, then why not charge that. So, I am going to put this spreadsheet together and just see what the volume difference would be. And you’re right. I mean, the reason I shy away from it is because of the logistics of it and processing that many more units would create so much more work for us.
Mike: Yeah, for no extra gain. That’s the problem. If you’re doing it for a reason, it makes sense. Like if I lowered this price from 12.99 to 11.99, and I could sell 5,000 units, then it makes sense because I’m actually putting more money in my pocket. But if I’m selling 200 more units because of it, and without knowing your numbers and looking at this on a skew by skew basis, what could actually be happening is you’re actually losing money by selling more.
And we were finding ourselves in that position when we weren’t looking at it granular enough because our overall company, yeah, we sold 200 more units so we were selling, sales are way up and it looks great. But the reality is, again, we were starting to shoot for how can we put the most money in the bottom line of the company? And the answer in a lot of cases like I said was just raise the price. And in a lot of times, there was actually a couple of situations where we actually started selling more units at a higher price. That was more of the rarity but most cases it didn’t make that much of a difference in terms of the units we were selling. It was just, we were just making more money.
And there’s another whole thing about psychology. People that are looking to throw a party, they’re looking to do a good job for their kids; they want it to look not cheesy and cheap. If it’s 27.99 it must be good. You convince yourself of this and the 27.99 one is probably higher quality than the 15.99 stuff. I mean, people shop at Walmart and party supplier, the dollar store and understand the difference between the real cheap crap and something that’s just like a little bit more expensive. And if you’re just on Amazon, you can’t look and touch and feel. A lot of times people would just be like, yep, I want to do good for my kids. I want them to be happy. I want this to look good. And it’s not just for the kids unfortunately; the reality is you’re also trying to impress the parents.
Mike: And impress your friends. So I mean, you might spend more money because of that than anything. So you might be surprised at what would happen and now I’ll just try it on one or two skew basis as a test. There’s nothing wrong with doing that, you can always put it back and see what happens like on, like I said, around your third best-selling. You have to do it on a skew that has enough volume that you don’t get what’s called variants. Because otherwise, if you do it on a skew that you’re only selling 10 per month of, and in one month, you sell 10 and next month you sell 12 that’s a 20% gain.
That sounds really great. But because you’re selling so few, it could have just been just variants are an anomaly that you sold two extra. You can’t make a life decision based on that. But if you have a product you’re selling 500 a month of, in one month it’s 500 then the next month it’s 600, you can probably make a pretty good educated guess that that thing you changed was the thing that caused the effect.
Amanda: Yeah. I’ve noticed too, I’ve done custom graphic design service in the past and it seems like the lower the price, the more problematic the customer.
Mike: Mm-hmm. Yes. That’s another thing to think and know about absolutely. We’ve experienced this too ourselves, obviously up there years of doing e-commerce. And yes, it’s interesting how the cheapest customer is your biggest problem.
Amanda: That’s right. And so that’s another reason I priced higher out of the gate because that was just something I’ve learned over years of doing custom graphic design. When I charged more, my customers were a lot more appreciative and didn’t give me a hard time.
Mike: Yep absolutely. Cool. So you think we covered this topic?
Mike: Awesome. All right, let’s move on to the next one, which is the most important factors that influence scale. You want to maybe elaborate a little bit more on that and then we’ll get into this topic.
Amanda: Yeah, obviously everybody wants to scale their business and be able to do it with ease, not a lot more work on my end but able to grow the business and not grow the same amount of work. So I don’t want to grow the business 20% but now I have 20% more work. So how do I still be able to put my feet up on the couch in the afternoon and bring this company into the $5 million range? How am I going to grow it?
Mike: Okay. So, first things first, there’s nothing easy. There will be no ease of anything. It just, I’ve been through this too many times, that’s just the reality. So there will always be you go to the next level, they’ll be another challenge and those other challenges and this is just going to be something you have to be comfortable with. And if you aren’t, that’s fine too, but just be cognizant of that and shoot more for a lifestyle business than to get to 5 million. I think you would have absolutely no problem getting to 5 million by the way. I think that should be the natural progression your business would go through based on what I know about your business and what you’re doing and some of the things we’ll talk about here in a minute. But it will not be easy along the way.
So one of the things that’s going to influence the ability to scale is going to be money, cash, because if you’re going to get to 5 million, let’s say you’re at 1 million right now, which is about where I think you are based on our previous conversations, if you’re going to be at 5 million, you will need five times the amount of inventory to be able to do that. That’s just a reality, you aren’t going to be able to sell more with less, unless things are incredibly inefficient right now, which I doubt that they are. All things being equal; you will need five times the inventory. So if you have $200,000 in inventory right now, and just again, I’m throwing out completely random numbers…
Amanda: Yeah that’s fine.
Mike: You will need a million dollars in inventory to be that $5 million dollar business if that’s where you want to go. So you have to get your hands on $800,000 to get to that point is what it comes down to. So that’s going to be probably the biggest factor to influence scale. So in order to do that properly, I think there’s a few things. Number one, you probably actually want to keep your margins higher. That’s another thing like to try and grow your businesses based on pure volume is going to hurt that equation. If you have higher margins and you’re growing, you can grow faster organically than if you’re trying to just push the pedal down for no other thing then just to get to the volume. So keep that in mind.
It’s also going to help your ability to get funding. If you have a really healthy business and you know your numbers and you’re producing really accurate and well done financial statements and you’ve been in business for at least two years and you follow two years of tax returns, this is the time that you can start getting financing from banks. And I would establish that relationship whether you need it now or not immediately. Go find the local bank that you can get the best relationship with that’s willing to lend you the most amount of money and that you can develop a longer term relationship with immediately. It’s important to — the banks will always lend you money when you don’t need it. So it’s an old saying.
So you don’t probably necessarily need it right now but I would do it right now so you have it for when you do need it. And yes, you’re going to pay a little bit of interest on the money to do it, but you’ll have a line of credit at a reasonable interest rate rather than when you start to really explode and you need the money in a panic, you’re going to pay panic interest rates and not have as good of a relationship. So if you can establish a bank relationship, I would do that immediately. I think that’s probably the number one thing actually is that cash flow thing.
And the next thing is going to be your ability to grow as a business owner and to delegate some of the stuff we were just talking about in this last thing. Amanda is going to have to be a very different person at a $5 million company than at a $1 million company. And again, I’ve been through this where right now it’s like I think just you and your husband and you hired one graphic designer. To get to 5 million, you’re probably going to have a staff of five to 10 people or whatever it might be. And you’re going to have to develop skills in managing people and delegating to them and letting them just do their job and not — it doesn’t have to be Amanda perfect, just it can get done 80% as good as you, but you aren’t the one having to oversee it and do it, you can just hand it off and do it.
These are other skills that are going to be really important to develop and to be able to get to that next level and scale. So that would be the next thing. The next thing I would say, something else we haven’t talked about and thought about yet, but I would say your ability to scale is going to be building more of a moat around your business. I think you’ve done some of that naturally by just having unique designs and things of that nature. But it’s only going to probably get so far because people can still copy themes and ideas without copying the exact artwork. So the thing I’d be working on is building your branding, your fan base and getting more of a personal connection with Amanda’s Creations rather than just worried about the transactional businesses selling things.
And this is a lot of upfront work but it’s building your social media list, getting more followers and fans or likes or whatever the platform calls it, getting more people on your email list, getting more people on your Facebook Messenger list, developing some data on some of these people like when is their kids’ birthdays and which holidays do they celebrate the most and then being able to like do some automated email campaigns and reminders around those things that over time, if you can get this data and work on this stuff over the next couple of years, this will help your ability to scale because in e-commerce it should be the most expensive customer that you’re getting is the new one right now. And the most efficient one that you’re selling to was the one that you sold to in the past.
So if you can develop your ability to sell more things to the same people, I think that that will have an instrumental effect in your ability to scale, and a lot of these things can be done in an automated way. So if you are getting more sales through your own platform, or you’re putting things in a box that goes out to Amazon customers and having them fill out some of this data for you like as enticing them with a gift, or whatever it might be to go do that. And you can then email them next year and say, oh, Charlie’s birthday is coming up again in three weeks or whatever timing you think is good.
We appreciate your business last year, do you want to throw another theme party from Amanda’s creations, here’s 10% off or whatever it is and hitting that customer at the exact right spot with some automation, I think can really blow your business up in a good way over the next few years. So those are the things that come to top of mind for you over the next few years to scale and do those things.
Amanda: Yeah, that’s great, so much great advice. I’m glad I get to listen to this again, I’m taking notes fiercely.
Amanda: We will get you — your podcast will be out publicly, you can listen to as much as you want, you’ll also get you the original file.
Amanda: That’ll be great. That’ll be great but also great for other people to hear too, because it probably applies to a lot of people.
Mike: No doubt. All right, so let’s — first of all, do you think that we covered what we needed to there on that particular topic?
Amanda: Absolutely. Yes.
Mike: Cool. So the last thing you had here is how is e-commerce changing and what would you do differently to ensure your business remains relevant in 2019 and onward? So again, thinking about that in terms of your own words, and maybe something I’m not fully getting there, let’s chat about that for a second.
Amanda: Yeah, just social media is constantly changing e-commerce, do you feel like it’s still in beginning stages where it’s still growing and it’s going to become more popular and what kinds of things do you recommend making sure that I continue to do in order to stay successful in the e-commerce space?
Mike: Yeah. Perfect. So yeah, I mean, I think this is kind of building on some of the stuff I was talking about in the last topic, but some other things I can think of here. Yeah, I always say, you should be skating to where the pack is going not to where it is, because otherwise the world will pass you by before you even know it. And so I think in terms of how you’re going to be relevant in 2019 and beyond, is to be thinking about Amanda’s Creations again, more as a brand and not just like an Amazon business where just it’s worked great to this point. And I think if you were starting over, I would do it the exact same way. I don’t think you’ve done anything wrong to this point.
In fact, when we teach our premium students, we always kind of say just shoot for Amazon first, it’s so much easier and don’t diversify until you have a reason to diversify, etc. because there’s lots of people doing a whole lot of things out there and there’s lots of opportunity, but you can drown yourself in all these opportunities. Just focus on what you can focus on. But as you continue to mature as a business, I would be thinking of yourself as a brand and not just the transactional business on one particular channel. So it shifts the focus of Amazon being my business to Amazon being a channel and that allows you to free up your mind to I can get sales on my own site, or I can be selling on eBay or some other third party site or maybe even retail environment at some point because you certainly have the margins to do that.
And you have unique designs that I think a lot of retailers have. I wouldn’t look at that as a 2019 thing but down the road as you’re growing I think that that could be another option for you. And you can start getting into those signals — getting out of the single channel mindset and thinking more as a brand where you are Omni channel and wherever the sale comes from, you don’t really care about as long as you’re getting sales and it’s identified as a brand and you’re building a brand. So I think that the successful ecommerce businesses moving forward are going to get this because the reality is, is that Amazon is a channel. Just starting a new business and selling widgets on Amazon is getting harder and harder.
The competition’s getting to be more and more, there’s already people copying you and just undercutting your price, and they don’t have a lot of creativity, they’re just doing it and they’re getting some of your sales. But you can’t worry about that, you continue to grow, and build this motor on your business and develop the brand. So those are the things I would be thinking about because things come and go. I mean, Amazon is the dominant force right now, but they may not be in the future. Maybe some other platforms start to rise and compete with them a little bit. And if you’re thinking yourself as a brand, you won’t be stressed about Amazon, you’ll be thinking more as a brand.
And I do think that ecommerce without question is going to continue to grow. I mean, I think that it would be asinine to think that e-commerce as a percentage of overall retail sales is not going to continue to grow year over year. People are not going to go back to malls, right? I mean, just ecommerce is too darn convenient especially for products like you’re selling. And that’s the whole idea is convenience here with all the things that you’re doing, especially with the party in the box idea that you had. So I would be thinking in terms of that. And that’s how I think you can stay relevant in 2019 and beyond.
And so in order to do that, in addition to the things I just said, and to work on the brand stuff, I would be putting out a lot of content right? It’s like how to throw a — what was the thing you just did? The scare — it wasn’t a scarecrow, but it was — what did you say the other part of the example was?
Mike: Egypt thing. I don’t know what I was thinking about. Yeah. So it’s like you go put a YouTube video, it’s like how to throw an Egyptian themed party and obviously a lot of the stuff that’s there is almost like product placement for your brand but you could be putting out lots of content with that stuff. You could be doing a lot of testimonial and brand awareness stuff where like if there was a party, you can get them to take a picture and tag Amanda Creations or send you the picture from that and give them 25% off their next order or whatever. Those are things that help you get your existing customers buying more but also just increase your brand’s footprint because you’re out there producing YouTube content or doing blog content and getting a bunch of like really amazing user generated content of people doing their own parties and building a library of that stuff.
And that’s really what made ColorIt so successful. We worked really hard getting like literally thousands of pictures from our customers of them holding our products or them drawing our artwork. And I think that you could do the same where parents which they love sharing this stuff anyway, there’s probably already sharing on Facebook or Instagram with their friends anyway tagging you or sending that picture to you is not that much of an extrapolation to think that they would do that. And then you could use that in your marketing material, showing the thousands of people who have bought Amanda Creation stuff and used it, which I know you’re already really proud of and emotional about anyway. But seeing that would make it even more real and allow you to do even more amazing marketing.
Amanda: Absolutely. And you think that’s easier to do off Amazon?
Mike: I mean I think you can do it from Amazon as a start, just don’t think that Amazon is your only channel. I mean, the way that I would approach it in the very beginning would be to include one extra piece of paper in every one of the sets of cards that you send out that offers them a 25% discount or 10% discount or whatever it might be if they send you a picture of their party, or whatever it is, like send us a picture of your — I guess it would be a party in almost every case. So if they do that, you can just send them Amandacreations.com/submission or whatever URL you come up with.
And that way people that are buying off Amazon are going to leave you or send you a picture, they’re going to give you their email address. You can also ask us some questions in the forum in terms of what their sons or daughters name is, and when their birthday is. And that way you can email them ahead of time and give them a discount on future orders. And you can offer that coupon to be good on Amazon or your own site, but also get that picture from them and as a testimonial and start thinking in terms of again of Amazon just being a channel and not your whole business.
Amanda: Yeah, it’s a great idea. Thank you.
Mike: Yeah. Cool. So we covered a lot. Do you think that you have a few things to go off and talk to your husband about and tell how much more work I just created for you guys?
Amanda: Oh, yeah, I was just thinking like, oh, I got years of work now. Let’s do it.
Amanda: Yeah, we’ll stay busy this for sure.
Mike: Yeah, I’m sure. So yeah, I apologize for all the extra work. But I’ve been looking forward to chatting with you about this stuff because we only had like five minutes obviously in the 5 Minute Pitch room to really discuss and obviously, the other guys had a bunch of other ideas as well. And it’s been fun chatting with you and the finals of 5 Minute Pitch are coming up pretty soon. So I will see you in Miami. And that should be fun.
Amanda: Yeah, I’m very much looking forward to it.
Mike: Cool. Well, best of luck with everything and we’ll talk to you soon.
Amanda: All right, thank you so much.
Mike: Alright guys, that’s going to wrap it up for the 245th episode of The EcomCrew Podcast. Head over to EcomCrew.com/245 to get to the show notes for this episode. And if you have a minute, go over to iTunes and leave us a review. It means a lot to Dave and I. All right, signing off from here in Hong Kong, and we’ll be back with another episode next week. And until then, happy selling and we’ll talk to you soon.
Outro: Thanks for listening to the EcomCrew Podcast. Follow us on Facebook at Facebook.com/EcomCrew for weekly live recordings of the EcomCrew Podcast every Monday. And please, do us a favor, and leave an honest review on iTunes, it would really help us out. Again, thanks for listening, and until next week, happy selling.