Trent: Hey there everybody and welcome back to another episode of the bright ideas e-commerce podcast. As always, I’m your host Trent Dyrsmid and I’m here to help you discover what is working in eCommerce by shining the light on the tools, the tactics, and the strategies in use by today’s leading entrepreneurs. Now back in the prior episode, number 288 you heard how Mark Daoust is helping entrepreneurs to buy and sell online businesses, and in today’s episode I’m joined by Colin McIntosh, founder and CEO of sheets and giggles based in Denver sheets and giggles or S and G as they’re referred to as one of the fastest growing direct to consumer betting brands in the U S makers of sustainable premium eucalyptus, eucalyptus lyocell bedsheets. S and G launched with nearly $300,000 in a crowd funding campaign in may of 2018 and then they won first place at a Denver startup week in 2018 they participated in Techstars Boulder for 2019 and they sold $1 million worth of product in their first 12 months of sales.
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Colin: Yeah, thanks for having me here. And I feel like I gotta go get my marketing team to start using H reps cause I don’t think we’re employing that just yet. So it is very compelling.
Trent: It is a phenomenal tool. I literally do use it every single day. I can’t imagine not having it.
Colin: A lot of my buddies, they use it and I might, companies in the past I’ve used it. So it’s one of the things I think we’re just too stretched too thin to. But you know, I’m all uh, gotta get back on that.
Trent: I understand the concept of being stretched too thin and trust me on that. So we’re going to, we’re going to do three parts in your interview today. We’re going to talk about your company and how you got it started and products and sourcing and all that kind of stuff. Then we’re going to transition and talk about marketing, how you’re growing the business and then assuming that we have time and we’re going to talk about your people and your process strategies. So let’s dive into it. So we know your company sells sheets. And I know when we did the pre-interview, I said to you really bedsheets on the internet. Like why?
Colin: Yeah, it’s sexy, right? It’s um, yeah, sexier than B2B. SAAS. Um, so, uh, basically I have a wearable tech company that I was on the founding team and a rare and best out for. Um, but I wasn’t the CEO, I wasn’t on the board or anything like that. And so, uh, I learned a lot of tough lessons with that in terms of go to market strategy, supply chain management, um, you know, philosophically when you should go to physical retail versus focus on doing more online channels. And so I was really, um, you know, when I, when I kind of left that company, um, I really wanted to do my own thing. And so I knew I needed a physical product. Um, I knew that I wanted it to be a sustainable product cause I’m big on sustainability. I wanted to be something that was largely traditionally physical retail that could help bring online with a direct to consumer play.
Colin: And then I also wanted something that was in a massive, highly fragmented commodities market with zero brand differentiation or loyalty. And that was literally exact. I wrote down on a piece of paper, the exact business model I wanted to build. Um, and I also wanted the lower complexity supply chain. Then, you know, wearable tech, which had dozens of components across a bunch of countries. Um, and so I looked at all my criteria and then this is the honest to God’s truth. I look at all of the, uh, domain names that I own and I own sheets, giggles.com. And I thought to myself, does that fit my criteria? And I say it perfectly. So for me it was a lot the opposite of like what most founders will do, where they see a problem, build a solution, and then try to build a business out of that. I built a business model that I was very passionate about and then created a POL product that plugged into that model.
Trent: So walk me through some of the aspects of the early research that you did to figure out, you know, Hey, should I go all in charge and down the road after this particular product line in this particular market category?
Colin: Yeah, so that’s another thing that I think I did slightly differently than a lot of other founders that I see. Um, a lot of times people will go full bull or towards building a product that they have in their mind’s eye or they patented, um, or the sometimes leaving it to the point we were creating thousands of units in inventory before they’d ever tested the or done the hard work of sales and marketing. For me it was very much the opposite. I basically, I, you know, I was having manufacturing meetings, I was doing a ton of research and product development and you know, thinking about, Oh, what the profit would be without spending any significant capital on that end. Um, just meeting with people and hiring a few contractors to do some initial designs. Um, and then on the, on the same time I was, uh, doing photo shoots and video shoots and content creation and launching a website for very little money, less than, you know, $1,000.
Colin: I think I spent getting everything set up, um, on the site, our photography and our copy and content, which I wrote myself. And then, um, we basically ran about a thousand dollars worth of Facebook ads, uh, to about, we had like 50 different ad variants, 12 different landing page variants, different headers, different calls to action, different images, um, different verbiage and in the copy paragraphs. And we, the first week that we ran ads, we captured emails and this is a head of a crowd fund, right? So the, the value prop, the people was, Hey, give us your email to lock in at this price for this really premium product. Um, and it was just kind of testing the brand and people’s reactions to the brand that we wanted to build. Um, see if people would resonate with the idea of sustainable bedsheets from the funny company. And it was a weird pitch.
Colin: Um, and, uh, we ended up capturing emails at a 34% clip that very first week. Um, and that was very high for email capture, um, especially ahead of a crowd fund. And so we were able to extrapolate out our eventual cost per lead by saying, okay, if we improve our capture from here, which we hope that we can, and if we have this cost per click, we have this result in cost per lead, we’ll wind up having, you know, X thousand emails at Y thousand dollars. And then, you know, email list reasonably converts at 3%. This is what we think our day one customers are going to be. This is the size of the crowd funding campaign we think of. We’ll translate it into, um, and we can basically work our way backwards to figure out what our cost of acquisition is going to be from that very first week that we were running email capture ads. Um, and it held true almost to the dollar. Uh, and so that was really cool. And that was, that was the first moment where I, I realized that the unit economics actually really could work on this.
Trent: That is fascinating. So I wanna I want to actually go down that rabbit hole further, so let’s walk us through that. Um, so you put up a landing page that basically said what, describe the landing page for us.
Colin: We’ll all we said, uh, these are, so I think to any new product launch needs three core value props in order to differentiate yourself from the existing options in the market. So ours were, it’s literally the eucalypt this is literally softer than cotton. Um, and more breathable and cooling, just a better park overall. And I wanted to leave it at that because I didn’t think that leading with the sustainability was the right call. I think that when you’re in physically, when you’re telling somebody that it’s sustainable as the first value prop, you’re telling them it’s not as good as the unsustainable option. And that’s just not not true here. Yeah.
Trent: And you had, you made it, you had not made any product yet. You hadn’t sourced it on again, line up. You just knew that you could make sheets out of eucalyptus.
Colin: Mid material research. Exactly. Yeah. So we, so we had done material research, we had done initial tech packs where, you know, we, we there their specifications for what we wanted their sheets to look like and colors and lab dips and, you know, we had done research on sizing preferences, so like we knew what we were going to do. Um, but I hadn’t committed to anything at this point.
Trent: When you said you need to, sorry to interrupt, but you say the word weed, did you have a, do you have a cofounder or is we the euphemism for you?
Colin: Uh, we as the Royal we, so a me, uh, me and then I had a contractors, um, that were helping on the marketing and product side. Um, you know, but I didn’t commit to anything until we ran these initial ads. Um, and so I basically, we, I had ice keep saying we, um, I did have a digital marketing agency, a guy named will Russell, who I love to death. Uh, we just parted ways after 18 months of working together because it’s just outgrew that type of early stage agency. Um, but he was my spiritual co-founder. Um, and he helped with the crowd. So, uh, we were putting these ads together together. Um, and then what we did was we use Shopify to build our initial site. We use kickoff labs or to build our initial landing pages. Uh, we use Facebook native ad tools in order to, uh, target lookalike audiences for early adopters and landing pages. Like you said, they all said, Hey, these are softer than cotton, these are sustainable and these are going to cost $69 on the Indiegogo. Cause that was a funny price for bedsheets, but nobody that was a and S and uh, it’s getting cost $69 for dead sheets on the Indiegogo. A normal retail price is going to be a hundred. I ended up underpricing that actually. We, we now sell our King sheets for one 50. Um, so the people that bought at 69 got a freaking steal.
Trent: So, so the value prop, the ethical bribe to interrupt you, the ethical bribe for the landing page was, Hey, give us your email address. And in doing so, we promised that when we do the are our Indiegogo, you’re going to get first kick at the can to be able to buy these things that you seem to want for 69 bucks instead of, you know, whatever they’re going to sell. Okay. So.
Colin: And we had a comp we had and we had a comparable product to bed, bath and beyond, or they were selling for one 80 for a King or you can flip this option. And so basically we were like, here’s like the price difference in the comparable sheet sets is massive for what you’re getting for this value problem.
Trent: Okay. So now let’s talk a little bit about the Facebook ads. You said you targeted lookalike audiences, but if you didn’t have an email address and you didn’t have any pixels yet, how did you target a lookalike audience? Like how did you do the targeting on Facebook?
Colin: So that was, that was where will came into play. And so we’ll had done other crowd funding campaigns for other folks before. And so he was able to use his list of, uh, you know, look alike audiences from earlier crowd funding campaigns in order to identify early adopters and innovators, people that liked back in Kickstarters and Indiegogos. Um, so it was a very, was a very warm audience.
Trent: A collector.
Colin: And that’s the, that’s the value by the way, for anybody going into a crowd fund, that’s the value of hiring an agency is that they’d done this before. So they’ve got these kind of built in, you know, and to be clear, you’re not contact those people that are already on their email list or past campaigns. It’s more of using their Facebook tokens, which they’ve consented to and opt into by sharing their information with these other companies that the agency has worked with. Um, in order to say, Hey, you might also like this other new crowd funding campaign that’s happening. Um, and so Facebook ads work, um, that, you know, that’s all I can say is that they, they convert. Um, and we were kind of, after that first week, we felt really good and over eight weeks ahead of our crowd fund, we ended up capturing 11,000 emails of people that were giving us their emails and we were capturing those at a 45% rate. Um, which was insane, uh, for me to see that literally one out of every two people that was hitting our landing pages, giving us their email.
Trent: What was your cost? What was your cost per email address into the dollars or cents?
Colin: 89 cents.
Trent: 89. Okay. Cause I remember testing something using the contest strategy and I was getting them for 32 cents. So I’m always just curious.
Colin: It honestly, it’s, it’s category by category. Um, and it’s, I know people that have gotten them for 35 cents, 30 cents. Like you said, I know people that are paying $2 $5 per email. Um, depends on, uh, item price value prop. If you’re doing a social sharing piece and you have this organic, uh, kind of like you said, just this waterfall effect. Um, we did have a social sharing option that accounted for 15% of our emails. People were sharing and, and joined a new contest to win free set of sheets. Um, and so that was a definitely part of it. But, um, overall, I mean 97 costs for email, uh, email list converts at 3%, let’s say. Then you need 30 emails, 33 emails in order to guarantee yourself, uh, you know, a single sale. And so basically you can say, okay, my cost of acquisition is gonna be about $30 from this email list.
Colin: And then you can kind of build it into their, uh, your margin and see if you’re actually gonna wind up making money. And that’s just your paid acquisition. That’s an order to snowball on day one and actually reached the front page of Indiegogo or Kickstarter or for them. A ton of people are gonna discover you for free. Um, and so the email list is really crucial tool on day one of a crowd funds who, let’s say I have 11,000 emails that should translate into if I’m doing things right, 300 customers at 30% conversion clip or 3% conversion clip or maybe 404%, 202%. I’m going gangbusters, 505%. Um, and so that, you know, multiplied by $100 average order value is going to yield anything from 30 to $50,000 on day one, uh, of the crowd fund. And that is going to put you on the front page of Indiegogo and Kickstarter. And that’s exactly what happened. We did 45,000 on day one and we’re the number three trending products.
Trent: Damn, dude, I love how you went at this with pure mathematics conversion rate assumptions. I think that is absolutely a brilliant way to do this. How did you learn how to do that?
Colin: Um, well I used to be an SAT tutor. Uh, so I love a just quick, uh, you know, I, I love directional decision making where it’s like this number points here. Um, I think I a, I’ve always been really good. I went to Emory university, I majored in finance, econ. I love, uh, numbers, worked at, um, the world’s largest hedge fund called Bridgewater associates. So yeah, I got fired. I didn’t, they didn’t, they didn’t, they didn’t, they didn’t teach me much.
Trent: I’m a big fan. I’m a big fan of Ray Dalio, that guy, but I liked the principles.
Colin: Yeah. Yeah. I, the principles are, are great. Um, I could, I could talk to you offline about that a little bit more. Um, but, you know, I, I Bridgewater for what, it was a really interesting place to start my career. A lot of stuff stuck with me. Um, being direct, honest, uh, transparent, uh, you know, and so that, you know, I think that the problem solving are actually, um, is one of the things that stuck with me the most from Bridgewater about kind of, is it the people or the machine that have the problem? And then if you can identify well that it’s not the people, then you have to change the system, but you can identify that the system should be sound with the right inputs, then you gotta figure that, okay, maybe I have a people problem. So there’s, there’s all sorts of stuff that I learned from that. But I think the, on the crowdfunding side, it was just reading different resources, understanding what it takes to have a successful crowdfund. Generally speaking, you want 30% of your overall internal goal to come in on day one, um, or at least by day two. And so if you want to do $100,000, the campaign, you’ve got to do 30 grand on day one. And if you have a $100 average order value, that’s 300 customers. And if you have 300 customers, then you need a 10,000 person email list. And that’s 3% that’s working.
Trent: Yeah, it’s pretty simple. Math. When you, when you work backwards, it’s pretty simple math because now you can figure out, okay, so if I’m going to spend X to acquire that email list and I’m going to sell 50 grand worth of product, given the margin that I perceive I’m going to have on the product, you can see if one is going to pay for the other. And I’m assuming in your case to crowd fund was a profitable event, or was it breakeven?
Speaker 2: It was, it was just about break even. I would say it might might’ve been slightly unprofitable, um, in the long run. But the important thing about, cause we did, you know, we had a defect rate on our first shipments, a thousand, you know, we sent out 10,000 units, I think like 6% or more of them were defective. It was awful. Um, and so, you know, replacing those and managing those customers’ expectations and that sort of thing. Um, you know, that was really a harder, it’s a hard time and a hard experience for us. But, so, you know, I think on the end of the day we’d lost money. Um, but the major thing about the two 84 that we ended up raising was that it was the largest Indiegogo ever for bedsheets. Um, and there were, that’s a funny qualifier, right? No. Like how many beds?
Trent: You’re probably the only for bedsheets.
Colin: It’s funny, but no, that’s what people think. But there were two others on the same day as us actually, and one of them, yeah. And one of them raised 15,000 and the other raise 50, 50,000. So we blew them both out of the water. Um, I attribute that entirely to the brand. Um, and so, you know, the, in our preparation, uh, and so the, the biggest thing with that was that it got the attention of a lot of folks in Colorado, which is where we’re based. And, uh, you know, I ended up, uh, applying to pitch a Denver startup week in September of that year. The crowdfund ended in June. I went to India right after that, made sure that our, our manufacturers were on pace to hit our timelines of shipping. Um, I ended up winning first place in Denver, startup week in September. There were investors in the crowd, um, who ended up, uh, you know, investing in the company. We ended up raising a small seed, uh, pre-seed round at the end of last year.
Colin: And then that also happened to be where we met with Techstars, um, who asked us to come to, uh, the, our deplore apply to the Techstars Boulder program in 2019, uh, which we did from January through April. So really it’s, it’s like the type of, it’s the type of story where it’s like just one thing leads to another and you always have to be saying yes to every opportunity. And that’s a lot of travel. It’s very little sleep. It’s a lot of getting in front of a crowd and, and Hocking your wares. Um, but you know, it’s, it’s definitely something that I think is, uh, why been able to grow so fast. It’s just how, how often do I do think.
Trent: so you were to, to summarize this first bit of our conversation calling, you were able to validate your business idea to a high degree of certainty for about 11 grand.
Colin: Um, yes. Um, I would say that we validated it in the first two brand or three grand because the first week where we spent $1,000 on the ads or from our email conversion rate was like 35% and that was even going to be good enough to, to go for it. Yeah. Um, and then that was when I turned on the gas and tapped into my personal savings. Um, and to some friends and family money spent about 10 grand a preparation, like you said, to get the 11.
Trent: But now you’ve got it, but now you’ve got data and you’ve got a story of how you’re going to say this is how my data that I’ve accumulated in the first two or three days is going to actually convert into revenue going forward. And so you did 300,000 in your crowdfunding campaign, but about 50,000 of that, I think you said came from your email list. So the rest came from getting on the front page of Indiegogo, is that right?
Colin: Um, I would say that there was a number of things we, so we, so we did a definitely at least 50 grand from our own email list. Actually probably more than that because we hit them back up for a cover add ons, pillow out on our, we launched comforters during the campaign. Um, and so I think all in all the email list might’ve been closer to like 75 or 80 or around there. And then I think another chunk of about 90 came from Indiegogo discoverability. Um, you know, being on the front page, being their newsletters. Um, and then I think the remaining 100 or so was us. We were running Facebook ads throughout the champion. Uh, and so we were spending money on Facebook ads throughout the campaign, driving people to, uh, our Indiegogo landing page.
Trent: Yup. Yup, yup, yup, yup. Okay. I’ll tell you, I’ve interviewed a lot of folks, a lot of folks in, you’re on my show over the years, hundreds of them. And your launch strategy is probably either first or second in terms of clever, of how you launched your business early on.
Colin: You done two, two 88 of these. So
Trent: Yeah, I’ve been at it a while.
Colin: No, I mean that means a lot. That means a lot. I appreciate that. It was honest to God. It was born out of a lot of heartbreaks. I’m in pain from my last company, you know, I got laid off, uh, Monday at 1:00 PM, uh, and we all did. Um, and so that was really hard cause I had written that business plan when I was, you know, 23 year old kid for that last company and saw sprays, millions of dollars and we had 30 people working in downtown Denver and we were in target and Brookstone and HSN, QVC. Like we had a lot of great stuff going and it just ended up not working for a number of reasons, but that was, I was sick to my stomach. Um, and three weeks later I found that S and G, um, trying to take those lessons and, and be a little more methodical, um, with, with my own company.
Trent: Yeah. Yeah. Well, indeed you were. Okay. So let’s talk a little bit about the product because obviously if you, if you’re a great marketer but your product is crap or your margins aren’t sufficient, you’re not going to go very far. So gross margins on betting, what does it look like?
Colin: So, so, so this is actually, this is our packaging. Um, and so it’s designed entirely for a direct to unboxing experience. You can see it’s nice and it’s dimensionally not too massive. Um, is actually our new throw blanket. So it’s not actually our cheats, but this is any throw blanket you can see right when you open it since sheets and negotiate. Yeah. Social call to action and talk sheet. That sheet giggles. And then, you know, you got the rap tag and the rabbit tag is like there three. Alright. So the rap tag is very cheeky in a sense of the, you know, it says, uh, I suggest activities play with puppies, sleep in, um, movie nights. And we get a lot of folks that, yeah, tag us right away. And, um, this is the, the throw blanket that we just launched. Also, you’ve looked this, um, and then the sheets also have an eye mask. Um, and a few other things in there, but I’m glad you brought the product because I completely agree with you that the marketing is what gets the first sale and then product and customer services, which gets every sale after that and you cannot exist without the last two. Yeah.
Trent: All right. So again, going back to gross marches, doing all of that extra stuff that you’ve done, what impact did that have and how does that translate into a gross margin?
Colin: Um, gross margins for us, I mean, so manufacturing margin, gross margin, net margin, and um, we always try to stay above, um, 20% net margin, uh, all in. Um, and so that includes, uh, cogs and includes, uh, marketing costs. Return rate, uh, includes shipping, logistics, three PL freight duties. Um, we planted a tree for every order, so that’s about 1% margin share every order we plant the tree. Um, and so, uh, that all works into, uh, I always try to keep it above 20%. Now of course, the largest variable component of that is going to be your marketing costs because your cogs are effectively set until you hit a certain amount of scale. Um, you know, you’ve got your duties and freight and three PO and FedEx fees, which are fairly set. Uh, and then you also have your return rate, which I wouldn’t say is out of your control, but it’s partially out of your control.
Colin: And so the number one thing in that variable cost structure is going to be your cost acquisition. And so, uh, generally speaking, if we can’t hit above a 20% net margin, uh, we tend to turn down the advertising spend, revamped, see what’s going on, and then move forward from there. Um, and we have taken a little bit of investment money so we can’t, we don’t have the luxury of like going totally dark for a month to try to fix things. But I have set the expectation with our investors that that’s the way I want. I’m wanting to run the company as profitable first and scalable second. Um, and so, uh, I’m glad that I set that expectation cause it gives us leeway to figure out problems when they arise.
Trent: How much money did you raise?
Colin: We just closed a one point $3 million financing round and uh, well we announced it in August. Um, and so that was a pure growth round opportunity round. No economics. That’s, that’s going to have to stay private unfortunately. Cause that’s not, that’s not disclosed, uh, on Crunchbase or anything. But, um, I think the terms were super reasonable. Um, you know, for the most part, uh, me and my lead investor set them and in hand where we came to an agreement pretty early on on what everything will look like and what we came out of tech stores in late April. Uh, and Techstars is just, I can’t recommend that enough for people to apply to that with a young startup. Um, and we came out with a head of steam. We were on stage at demo day, uh, and you know, we were in kind of a ham on stage. So I had the audience laughing and enrolling in, uh, like five minutes itch. And the, the feeling I wanted people in the room to leave with.
Colin: And they were mostly, a lot of them were investors, like a thousand person audience. Um, was, how could I have missed this company? Um, or like whole, you know, Holy shit, like a bedsheets company is like the most impressive company on stage at tech stars this year. Um, and you know, like that was, that was what I wanted in the field. And so, um, you know, we really, we, we played up the traction you I think. And so in January we did 63, 10 sales, February 53, March 75, April one, 23, um, and then orders number of orders, uh, revenue, uh, thousands of dollars that, sorry, 63,000, 50 3070 5,001 23,000. And then in may we did over one 50. So we had this really nice acre for the first five months of the year. And I got on stage and I was very transparent and I was like, here’s what we’re doing, here’s our net margins, here’s our cost of acquisition.
Colin: He was, you know, our repeat buy rates, return rates, everything, every metric down to the second decimal place. And that type of transparency basically allowed people to, yeah, it basically a lot of people in the room to be like, all right, like, um, it wasn’t, it wasn’t a visionary pitch. It wasn’t like a, here’s an idea or you know, here’s our early traction. It was just very, very, here’s our net margin. If we pour this much money into marketing it all three X our trajectory, I would like to do that. Um, let me know if you’re interested in doing that. And like, and you know, it was, uh, it was, I think we closed it around. I’m like six, three weeks. Uh, it was really fast. Um, and that was very, I feel very grateful for that cause I know that it won’t always be.
Colin: Um, but uh, but yeah, and so we, we just had a lot of community connections. Most of the money’s Colorado money. We got some angel investors in New York and San Francisco and a few other places, but I stayed away for the most part from institutional money because a lot of the expectations are 20, 30, 40 X or bust. Um, and I really don’t like that from a business model perspective. Obviously it puts an extremely high strain on the company, increases risk of failure, increases failure points, and then the, I just don’t, that’s not my vision for this company. I want to have a company that allows me to be free and independent. Um, and you can’t do that if you’ve got a board of directors that you’re, that are Hawking over you, that are asking you why you’re not growing, you know, 10 X, uh, every quarter. Um, and so, uh, yeah, so with, luckily all my investors are on the same page as me and, um, I’ve pitched this as like a good business to invest in if you want to a triple and not necessarily a home run, which is an odd pitch for a founder, I think.
Trent: Yeah, absolutely. All right. So we’re now going to transition to marketing because now that you’ve, you know, you’ve validated your idea, you raised one point $3 million and now you gotta grow the site. So, um, you’ve been at this, now have you, have you completed two full years of revenue?
Colin: As of last weekend? Two years since founding, but 18 months since pre-sale on the Indiegogo and only one year since we started shipping and recognizing revenue.
Trent: Okay. So if you had to, I was going to ask you, your year over year cross rate, but you don’t have two years yet. You’ve got to run rate. So What, what does that look like? The growth do year over year gross rate on your run rate?
Colin: so September this year was about six to seven X the September of last year. Okay. Um, and then, uh, we’re forecasting that November, December are going to be come bind about four to five X last year. So overall wrong, like a, a four X type year over year growth trajectory from 2018 to 2019. But the monthly, the monthly revenues are, um, are significantly more than the corresponding months last year, which is nice. Yeah. Um, so yeah, I would say about four to five X overall.
Trent: And you’re doing this process.
Colin: Yeah. Profit. Profit, yeah. Yeah, yeah. We’ve, we burned extremely little cash, uh, since the round closed, uh, four months ago.
Trent: So the money’s pretty much just still sitting there.
Colin: Which is, you know, sitting there maybe the wrong time, biding its time. The money’s biting its time where you know, it for me, we’re or she company. So will gifting season is definitely like a more on Amazon now. So like there’s going to be black Friday opportunities and other other stuff that are just going to go over the answers. Um, so while the gifting season we’re going to see a bump for sure. Um, and for everybody listening, I would encourage you to get the sheetiest ever this year and, uh, somebody’s box full of sheet, uh, uh, you know, the, it’s kind of a fool’s errand for us to bump our ad budgets in November, December, especially during political seasons, um, in November. Um, and then basically, uh, you know, compete with all those higher, uh, CPMs. And so we’re going to basically wait until June, January, February to turn on the spend and, and ride that, uh, downswing and CPMs since we have an evergreen product.
Trent: Yeah, absolutely. Although I would imagine, you know, people are going to give sheets as a gift. So.
Colin: And that’s one of the reasons we introduced the throw blanket, which is $39 price point versus $100 plus price point for the sheets that I think this is a lovely, lovely gift. Um, and it’s like a really, it’s a really premium gift. I think that we should charge 80 bucks for this, but I wanted to blow it out and be more competitive with fleece blankets out there. Um, by the way, that something interesting in terms of marketing and product development is that, I don’t know if your audience is familiar with, um, some tools I can tell you like Amazon relative search frequency. Um, but one of the reasons we launched a throw blanket is because it’s like search term frequency number, like one 59 on Amazon, which is enormous. Clean, clean sheets is like 500 or whatever. Um, and so this product for me was like a no brainer because the search volume is so tremendous and all of the major players are selling at 25, 29 bucks. And so I don’t think that $39 is that crazy when you’re talking about the quality and sustainability difference in it. And so this is also a, an entry level kind of lead gen for people to discover our fabric and in mass on Amazon and a much higher search volume categories.
Trent: So you mentioned tools and you mentioned the phrase search term frequency. So I live in a world of just doing keyword research. I use tools like viral launch a lot of the times where, you know,
Colin: I love, I love viral launch. You guys, they were great.
Trent: Yeah. So is that the tool when you, when you talk about search term frequency, is that one of the tools that you’re using to discover that
Colin: I’m using Amazon’s native tools instead of South central. Um, and so I did look at viral launch. Really great guys. I think that we’ll probably use them in the future. Um, but I wanted to stick with him things on the native tools for a little while longer. So you’re able to see really awesome data on Amazon nowadays about search frequency. Um, click through share conversion share. It’s pretty nifty.
Trent: Okay. I’m just typing a note here for the show notes. All right. Uh, these days, so now that you’re on Amazon, has it become the dominant channel? Are you getting most of your new customers or I should say orders cause you’re not getting customers from Amazon. You’re just getting orders.
Colin: True. There is a big difference. Uh, it’s month by month. So, uh, you know, July, Amazon beat the website, August and September, the website beat Amazon. Uh, I think that no, October Amazon will November and December, I would have to assume that Amazon will win, um, because of the urgency of, of timelines for orders, you know, uh, for Amazon prime, uh, and the placements that we’re doing with Amazon, you know, we’re doing some cool marketing stuff with them. Um, I was actually, um, just at a great event with Amazon in New York, uh, where they, you know, hosted this small business, um, you know, shout out to them how small business holiday spotlight. It was really cool. They got a bunch of press in the room, picked some businesses that they really like some small businesses and uh, we were able to meet people that I would’ve never been able to meet just on my own.
Colin: Um, give them the products, literally pass them into their hands. Um, and it was, this is literally just last night. I, Amazon’s such a terrific partner in so many ways. And then of course the double edged sword is that you’re not getting customer right. You’re getting the order. Um, now I think that there’s certain things for start ups to be able to get around that and be slightly, um, more creative. Uh, so like the packaging, right. Eight should always be a vehicle to drive people to your website. Um, and to your, um, your email list if possible. Um, now of course you have to stay within Amazon’s terms of service and make sure that you’re not doing anything on board. Uh, but, um, yeah, I mean we had different stuff in here that will, uh, make people want to discover more about the brand and, and look us up.
Trent: So now that you have a steady flow of customers, are you, is there anything that you’ve been doing to engage in direct dialogues with your customers to learn more about, to get product feedback, to learn more about who they are, where they hang out, to learn more about your, that target customers that you can obviously make your ad campaigns better in your products better?
Colin: It’s a great question. I, I, uh, unfortunately not in the time recently because we’ve been so heads down on trying to deal with these growing pains and hire new people. Uh, but my new director of marketing, Sarah and I were just talking about we want to do a Facebook, uh, focus group, uh, like a hundred of our best customers, people that we engage with us, that we know them, they email us, they call us. Um, and so we want to add them to like a secret Facebook group and then basically just have them comment on product development ideas, um, preferences, things they’d like to see, things they disliked, things they like. Um, so we actually are in the process of doing something very much like that until this point. We’ve just done Google form surveys to find out color preferences, bed sizes, uh, you know, we do extra deep pockets on our sheets, uh, to fit 20 inch mattresses. Just because an overwhelming number of people in our initial survey a year and a half ago said, I can’t find sheets that fit my thick mattress. It’s impossible.
Trent: Yeah, it’s annoying. I have a sec mattress drives me nuts.
Colin: Yeah. And you read it, you know, you go on she, she company websites and it’s like we fit 15 inch mattresses and it’s like why I have an 18 inch mattress? Like what do I do? So yeah, so we, we do, we listen to the customer, we do things almost directly as they tell us. I don’t have any, um, significant attachment. Actually. It’s a really interesting, both like a con and a benefit to me starting this company that I was not obsessed with betting when I started the company. Now I am, uh, but when I started the company I was totally product agnostic. And so my I products are strictly defined for whatever is going to sell best, whatever the market is going to resonate with the most. So our top five colors are just ranked in court [inaudible] for what people said in their initial survey, our bed sizes that we launched with literally just 95% of the market based on the top seven sizes. Um, and you know, avoiding skew proliferation while still hitting 80, 20 market demand is really, really important. Yeah, absolutely.
Trent: Of all the marketing activities that you’ve undertaken so far, is Facebook continuing to be the biggest driver of new customers, or have you experimented with Google, Google shopping? What other things have you done?
Colin: Uh, uh, I, uh, Facebook still the best. Um, Instagram is up there also. This is our cupboard. Um, I, I, we are now doing more Pinterest advertising. Um, and so we’re currently in the learning phase with Pinterest where we’re, uh, figuring out what performs and what doesn’t. A Google branded search terms crush, obviously. Uh, we’re also always advertising on, uh, high intense keyword searches. So eucalyptus in heats, um, you know, we dominate that, that type of category. Um, and then, uh, we also are doing a few things. Um, we’re starting now with some YouTube advertising and then, uh, we just started three new things, podcast sponsorships. Uh, we started doing newsletter sponsorships. Uh, so, uh, you’re familiar with things like the Skimm, um, or other similar daily read newsletters in the morning and those convert really well. Uh, and then the third thing is we actually started sponsoring some YouTube creators.
Colin: Um, and so we always be find funny Youtubers that we really, really just crack us up and we just reach out to them. You know, maybe they have a couple of hundred thousand subscribers and we’re like, your videos kill us in the office. We’d love to support your work. And they actually will make us ads that are usable in other channels. And then they’ll put those ads at the end of their videos and we see freebie you send cost of acquisition is on those, not as low as like a Facebook, but um, combined with the, the hundreds of thousands of impressions, I think it’s actually pretty decent span.
Trent: How many people do you have in your marketing department to help you get all this stuff done to your director of marketing, your director of marketing in you?
Colin: Me and my director of marketing and a marketing associate. Um, and then I know it’s, it’s crazy. We’re by, my favorite metric is revenue per head. Um,
Colin: No, we’re, we’re stretched way too thin. Um, you know, now that being said, when I get to go back to my investors and I get to say, Hey, we just made you know, X hundred thousand dollars this month, um, with five people, uh, our investors are like she yet, uh, as a, so, you know, it’s like, it’s really, it’s really, um, it’s too much though. I and my team knows that and I know that. And so we’ve got some job openings up there, head of content marketing, a logistics manager, and then probably a full time copywriter as well. So, um, that’ll probably bring us to eight or nine by end of the year. And then I think that we can hit our next inflection points with 10 feet or less.
Trent: Do you have an affiliate program?
Colin: We do. We actually just opened up on sheriff sale, um, last week and so we are going to start doing affiliate marketing. But that being said, I haven’t done this Liam marketing before, so it’s a little daunting and I don’t know, aside from rejecting all the terrible discount sites, um, you know, employing that is going to be, I think, a bit of a challenge. So we do, we do have a PR agency now that’s just beginning to reach out for virtue for holiday gift guides.
Trent: Okay. Sorry. I was getting a text from my wife who’s also trying to, she needs to zoom account and I told her, don’t.
Colin: Oh, by the way, if you have any advice on the affiliate program, let me know her or another podcast number that I should listen to. I would love to, to dive in to someone who’s really been there. Done that.
Trent: Yeah, I don’t know that, you know, I’ve got one, a one friend here in Boise, a fellow by the name of Nathan very, who runs a email marketing software company called convert clicks. And I know that affiliate marketing for him has been big, big, big, big, big. And so he has, um, they basically do two webinars a day, every day. So he has one person who’s full time. When I spoke to him, one, maybe it’s more than that now full time job is just finding potential affiliates, something that’s a sales person. And then the other person went to broad school for broadcast journalism. So they like talking in front of cameras and they do the two webinars every single day, day after day after day after day after day. And that for him has been wildly successful. I would imagine given the number of, you know, lifestyle bloggers that are out there, um, who’ve built, you know, sizable followings, um, that it would be pretty successful for you.
Colin: I think. I think you’re right. I think that I got, I get Carl, he’s my marketing associate. Get him some, some hours every day, flexing that muscle and see what we can pull on it and see if we make sense to hire a full timer. It’s a good call. I’m learning from you. Teach on. So this is very, very helpful.
Trent: Yeah, I would, I definitely want to keep a dialogue going on going with you and we’ll talk about that more later. I do, I do kind of one-on-one masterminds every time I find someone who I think that’s a guy I need to keep in touch with each other.
Colin: That’d be great. I would love that. Um, but yeah, sorry, we’ve gotten digressed from the.
Trent: We have rabbit hole, rabbit hole, rabbit hole. Come back up. Okay. So, uh, do you know what your blended customer, I’m sure you do, your blended customer acquisition cost is,
Colin: I know, yeah, I know by heart. I don’t, I don’t wanna I don’t want to say it because our competitors, people, people are starting to get wise to us. And I mean I’ve got, I’ve got Brooklyn and bowling branch and parachute and um, you know, people breathing down my neck. Um,
Trent: Um, so let me ask you how, how would disclosing, cause I’m curious if you said, well, it’s $74 and 19 cents. How does that actually help them? What, like why would you be cagey with that number? Because you’re not talking about this specific strategy.
Colin: Hm. The, the biggest thing is that I want them to sweat. So I just, I, I just, I want them see, and I know through the grapevine it’s a small world. Um, I know what, um, some of their ad spend or revenue ratios are. Um, and I know that we’re doing a heck of a lot better than some of them. Um, and so I really like to keep that a little close to the trust. I will say that my target is to always have ad spend to revenue ratio be under 25%. Um, that’s our sort of max cap where if it’s over 25% ad spend to revenue ratio, I get, uh, I get a little squeamish and we’ll figure out what’s, what’s the driver of that a bad thing.
Trent: That makes sure that, that myself, and understand that ratio, you do a a hundred grand in revenue in a month, you don’t want to spend more than 25,000 on ads,
Colin: Correct. Correct.
Trent: Yeah. Are you willing to share AOV, LTV, or payback period to how long it takes you to get your money back after you acquire a customer?
Colin: Oh, we’re profitable on the first sale. Um, and we’re, and we’re, we have a, um, almost, I’m trying to think of which numbers I can the Lord our, our AOV is like, you know, 150 bucks happy. I’m happy to, to share that. I mean, you know, a hundred dollar average item price, 1.5 items generally speaking. Um, and you know, the, the LTV to CAC ratio for on the first order is uh, uh, almost two X. um, and then we try to get that to three X or higher with repeat purchase by repeat purchases. And I think we’re, well, we’re well over that number right now. And so that’s, that’s I think decent enough detail. I would say that like, I don’t like to be like a lot of other startups are like, Oh yeah, we’ll acquire the customer and then we’ll, you know, up sell them on this other stuff and make our money back over time. We can’t, we can’t really do that. I assume that the first sale will be the last sale for every customer. Um, I don’t think that’s accurate. And in fact, I know that’s not accurate. I know what I re eat by rates are I know what percentage of our business it is. Um, but I think that it is, uh, important for me to assume that that first sale will be the last sale and makes it very, it forces us to be profitable and that first sale.
Trent: And I think that that is a brilliant strategy. You know, yesterday or two days ago, I interviewed the CEO of a software company, uh, for another podcast that I’m launching, cause I have software company and he was talking about how, you know, he hasn’t raised any money and he’s got competitors that have raised North of $300 million and they still aren’t profitable because they’re focused on vanity metrics. They’re running, they’re running around like drunken sailors and they’re spending other people’s money. So there’s not that sense of accountability. I think that there is, when you’ve got a lot of your own money and now he’s, you know, he’s put the time and the effort into bootstrapping his business. And as a result, he now has like a profitable company that he’s got total control of still.
Colin: Yeah. And I think it’s interesting that, um, you know, I see this all the time with startups that raise so much money is that they just, they just, it’s, it changes the way you think. It changes your entire approach to your marketing. It becomes more about aggression and, and about a sales at all costs you that makes you, that makes you produce products faster and potentially the shot here, it makes you hire a larger customer service team, which let’s be real. When you’re hiring a lot of people do customer service, you’re going to hire a lot of people that are not very talented because you need to fill up people that are answering emails and phone calls all day. And so what ends up happening is you end up having higher initial marketing costs, worst products, and a worse customer experience on the back end because you grew too fast and you grew for the wrong reasons. And so I think that, I think that changes your entire approach. And, um, you know, I think that philosophically, like I think more people should be focused on how can we make money on the first sale from day one. I saw this great article in the New York times the other day said, um, the new mantra in Silicon Valley making a profit is now a sexy. And I was like, what a concept, how many, how many failed IPO is that it takes, um, before they figure that out.
Trent: All right. We’re, we are running out of time, so we’re, I’m only going to ask you get to ask you one question around people and processes. Um, and that is this, how important or how much effort have you put in so far into creating documented business processes for all the stuff that you guys do?
Colin: Oh God, what a great question. Um, if I can be completely honest, uh, very little. Um, we have started documenting return processes, uh, what to do in certain customer interactions scenarios. Most of them, the customer service side might, my CS rep Emily is fantastic and uh, I could not do this without her. And she’s really done a great job of, uh, documenting a lot of the most difficult interactions that she has so that way other people can, can cover that when she’s out or when we expand and hire new people. Um, on the marketing side, we document all of our numbers, all of our numerical data, so that way we can look historically, literally day by day for the last 400 plus days process. But during important data, which is, it helps me strategically to think about what, what processes I need to do, what I used to do. I make notes in the data and I say, we were doing this at this time and we jumped this at this date. And that’s able to help me see swings and retinal swings on. But no, other than that, we don’t do a lot of documentation and I want to change that. I think one of, if I can be a little introspective, I think at Bridgewater there was so much documentation when I began my career and I was literally just writing what they called machines. I was like writing machines and I like, I hated that. And so I think that’s influenced me to shy away from that and be a little more from the hip. Um, but it doesn’t scale. So yeah. You gotta document. Yeah.
Trent: All right. So we, we’re out of time for this episode. The company is Sheets and Giggles. The founder is Colin McIntosh, who is one of the brightest guys I’ve ever interviewed on my show in terms of knowing his numbers. So if you’re an eCommerce entrepreneur, I suggest you listen to this episode twice at least. So call him. Thank you so much for being on the show.
Colin: Yeah, thanks so much for having me. Trends. This was super fun and I’m, I’m looking forward to, uh, speaking again sometime in the future.