Trent: Hello everyone and welcome back to another episode of the Bright Ideas Podcast, I’m your host, Trent Dyrsmid and I’m here to help you discover what works in e-Commerce by shining a light on the tools, tactics and strategies that are used by today’s leading Entrepreneurs.
On the show with me today is Kyle Doguen founder and CEO of pawstruck.com Kyle started Pawstruck back in 2014 when he was finishing college and the company has been experiencing exponential growth ever since. In the interview with Kyle, I get him to share with us a great many details of his journey, mistakes made and lessons learned.
So if you aspire to build your own e-Commerce brand, if you have not already taken the leap or you are looking for tactics to help increase your growth rate, then you’re going to love hearing the interview so please join me in welcoming Kyle to the show. Hey Kyle, welcome to the show.
Kyle: Thanks for having me.
Trent: It’s a pleasure to have you here; so for the folks who might not yet know who you are or what your company does, let’s start there who are you and what do you do?
Kyle: My name is Kyle Goguen and I own and operate Pawstruck.com; started Pawstruck in 2014 after college and I’ve been running it ever since. We primarily sell Dog treats and Dog food, focusing on premium, natural, healthy products, single ingredient stuff like [inaudible 2:18] everything related to that and we sell on our website, sell across a bunch of other online sales channels like Amazon, e-Bay, Groupon on Amazon UK, pretty much anywhere where our customer exists is where we are; strictly sell online direct to consumers.
Trent: Okay, so in terms of a key success metric that the audience would understand to give them an idea of kind of where you’re at in your journey, most folks answer this question in terms of revenue and I think you’re okay with that roughly what’s what did you do in 2018 and what did you do in 2017?
Kyle: Sure, so 2017 we’re around just kind of rough numbers $4m or so in revenue and then 2018 we’re about $8.8m and then 2019, we’re looking to about double that.
Trent: That’s pretty awesome, that’s phenomenal growth and as we continue through this interview hopefully will uncover the reasons why you’ve been growing so quickly. So, let’s— before we get into what’s really working today, let’s do a little bit of background investigation.
When you were young, was there anything in your childhood that indicated that you were going to become this super successful entrepreneur?
Kyle: I think there was a lot of stuff that indicated that I would be an entrepreneur, success might be a different story but I saw— I guess a couple two stories that I could probably bring up when I was a little kid probably like 7 or 8 I really wanted this orange BMX bike but I was excited about for whatever reason that my parents told me that I had to come up with the money to buy it if I really wanted to, so I started selling these USA flag pins at different events and door to door.
So, that was kind of my first memory of trying to make some money on the side and then the second thing, my first job ever I was, I guess 151/2 or 16 I was trying to get hired at all local restaurants and businesses and no one wanted to hire me because I had no experience, I was like a young kid, I don’t even know if I had a resume or what the resume would actually even say. But I found a guy on Craigslist who was willing to hire me and what it ended up being was he would buy returned electronics from big retailers like Fries and BestBuy he’ll buy a container load and he hired me to come in and help him weed through all the different electronics, find anything that was new or working or used or for parts and then I would help him sell that on e-Bay and I would make a commission and cut there. So, those are kind of my two early on stories of selling things both online and in the physical space that kind of got me my start.
Trent: Do you think that if you wouldn’t have that experience selling on e-Bay that you still would have ended up going down the e-Commerce path?
Kyle: It’s a great question and I actually have thought about that before. I think I probably would end up there somehow maybe just less of a direct path but it’s kind of I’ve always been pretty tech savvy and drawn to the internet and I honestly couldn’t really see myself running like a brick and mortar store, I guess that’s not really my expertise.
I’d much rather be behind the scenes and create something very scalable and not interacting face to face with the end user is probably my ideal business I guess it’s okay.
Trent: And this is aside from college, this is pretty much your first real job and you happen to be the Boss correct?
Kyle: Yeah, so in a way you could say I’ve never had a real job so I kind of ruined myself in that I don’t know if I could ever go back to [inaudible 06:14] yeah exactly but in terms of jobs, I had an e-Bay job I told you guys about and I told you about and then I went to college and I had a campus job and I also did marketing as a college rep for Monster Energy and Play Station and [inaudible 06:29] and a couple other brands like that but it wasn’t really a full time job and honestly for the most part it was them sending me a lot of free product and me giving it out to a bunch of college students and talking about the brands and the things that they were having to be promoting at the time so other than that, not a lot of jobs experience.
Trent: And what did you take in college?
Kyle: I was an Engineer, so I got my degree in Industrial Systems Engineering not something that I use on a day to day basis with Pawstruck. In theory, you know I did take a lot of classes on warehousing and optimization and some of those sort of classes that apply in a way to what we’re doing but it was much larger scale.
So, I’d be learning how to optimize like if I had 10 warehouses across the nation with you know 10m square feet spread out between them with a bunch of manufacturing processes and all that sort of stuff that’s what I learned in school in reality we have one warehouse with about 15 people in it; it’s much simpler and you’re not doing all these crazy math formulas to optimize them.
Trent: So aside from the fun of going to college or to be safe to say that your time there was in hindsight maybe not terribly well spent.
Kyle: I definitely do not regret it at all, I think I learned a lot and grew up a lot, but yeah I mean directly related, no probably not that that’s definitely still my resume and something I can always fall back on also I didn’t mention this but I had to get my Masters as well before jumping into Pawstruck actually it’s right around the same time in 2014 I was getting my masters and I started Pawstruck the same time so I just add that Master’s Degree to the list of things that maybe didn’t need to be and it was very expensive.
Trent: So, we all have to come up with ideas there’s a million different things that we could pursue and for a lot of people coming up with the idea that they think, “Man, I really should do this thing versus this other thing or this other thing or this other thing” how did that play out for you? Did you have a whole list of ideas? Had you been keeping them in a book for years or did you just kind of stumble across this idea one day in your natural course of your life?
Kyle: So, it’s definitely the latter of what you just said I actually already— I failed to mention this before but I did intern with Target in their distribution center for a summer prior to senior year in college and I actually accepted a full time job with them starting after I graduated so the plan was to work for them or honestly kind of like Interview with some other companies and see if that would work out.
At the time I had just gotten a puppy and he was living with me in my apartment and he was definitely part of the inspiration for Pawstruck in general. So it’s kind of that Aha moment when I realized that the things that I was trying to buy for him and find for him were you know expensive number one, hard to find, I don’t really— as a college student really want to drive around and go to pet stores all the time so trying to find stuff online it was kind of limited in terms of the offering and really expensive; so it’s that Aha moment whereas like well let combine my ability or desire to sell stuff online with my passion for dogs and kind of this opportunity that I had stumbled upon.
So like I said I had already accepted a job offer so it was definitely not the plan going into it, I’ve always been pretty entrepreneurial and I could see that doing that later in my life but it was kind of luck that this idea came to me and I actually decided to pull the trigger on it.
Trent: So first of all, what’s the puppy’s name?
Kyle: Tyson, he passed away a couple years ago actually unfortunately out of the blue but he still kind of a mascot of the brand and lives on through Pawstruck.
Trent: I’m sorry; but you described this Aha moment — lots of people have puppies but they’re not getting the Aha moment so you’re— and I want to go into this little bit more because I want people to really understand how the mind of an Entrepreneur works because it’s different than the mind of just a consumer.
So you got your puppy Tyson, you’re trying to buy some food or treats or whatever for him and you know this isn’t what 2014?
Kyle: 2014 may be 2013
Trent: So there’s stuff everywhere, there’s stuff all over Amazon, there’s stuff in Petco and Pet Smart, I mean like there’s no lack of stuff but yet you, this guy who’s never had a job or even a business think, “Oh there’s an opportunity here like” Why? How does that even happen?
Kyle: So I guess a couple different things, one I saw the opportunity as, there are people selling similar products but they’re huge, huge brands selling for like way too expensive or really, really small guys that were like doing it out of their basement and it wasn’t very legitimate at the time. So, I saw that kind of in between that ability to source things direct, provide things a lot more affordably and just go direct to consumer instead of going through the multiple levels of distribution that exist in the pet space.
And then the second thing, you kind of alluded to it already like the difference in mindset between kind of Entrepreneur at the time I guess someone who wanted to be an entrepreneur. I can’t help it but my mind always analyzing pretty much everything and trying to figure out everything, how is that a business? How does that actually making money, is that working so any time I’m at any sort of store or even a restaurant or a bar always wondering you know how well the business is going and how everything works together and definitely got worse or better depending on how you look at it.
As I’ve gone through the last you know 4-5 years but even since I was a little kid, I always just wanted to understand that I’ve always been curious; so I think it was kind of that mindset where I wasn’t just shopping for dog treats, it’s like everything else, shopping for Dog treats, understand like what the opportunity was there and how does— if these other people are doing it, how are they doing it? If they were doing well at it?
Trent: I have the same problem, I think just every entrepreneur does; but I said like the large brands you said they were so expensive, you didn’t know the cost of goods sold of any of the stuff at that point in time I’m assuming, you’re looking at this bag or you just looking at the bag like a consumer and going bag or whatever it was, “Ah men, that was too expensive” like you just had a feeling that was too expensive or was there any like had you actually done any research to think, “I can probably do it for a better price than that”
Kyle: No research just kind of what you described; being a kind of basically poor college student trying to get something that was healthy and natural for a dog you know I go in the store and I’m like, “You’re kidding me 20 bucks for like a couple of these dog treats that last like a half hour, an hour” and that’s more money than I spent on myself for my dog and so it was kind of processes like I’ve got to I could do this better or cheaper because most of these big companies have a huge sales staff and they have to kind of do that traditional like Keystone pricing where they’re going through multiple levels of distribution. So I mean I got lucky because I was able to do that but I didn’t do any serious research in advance.
Trent: Okay so, the takeaway folks here is this Kyle had what we all have, sticker shock to a high price and rather than leave it at that the entrepreneurial part of your mind went into problem solving mode, an opportunity mode thinking hey maybe, maybe, maybe, maybe if I do a bit of research, I might be able to find myself an opportunity here and obviously you did.
Kyle: Yeah and I guess the more I think that too, I think the biggest thing was that I realized but there’s probably a lot of waste involved and it wasn’t really that I was trying to get in the business of selling something cheaper or like lower quality or anything like that; like anything quality still our number one concern that you know I would put our stuff up against any of the big guys, it’s just more in my opinion they have a lot of waste because they’re such a big organization with so much overhead all that stuff for an e-Commerce business model is not necessary so that’s kind of where we’re able to find that opportunity.
Trent: Okay so, Aha moment in hand, now what was the first step that you took to launch your business?
Kyle: I guess the other first step is trying to do all the research that I haven’t done like we mentioned, and so we figured out like, “What are we going to sell? How are we even going to get our hands on it”? and then what was the simplest way to just go ahead and launch that? So, like every new Entrepreneur or early Entrepreneurs made a ton of mistakes in the beginning…
Trent: Did you write a business plan?
Kyle: If you could call it that; I mean I had a piece of paper when I was writing out, I was in a business student so I have business plan was, I’m pretty sure I’d google that was like you know just writing out ideas and things like that, it really just came up with all the products that I saw online doing well so you can go look at things, look at reviews, honestly is a lot just going are like my gut feeling, figuring out suppliers for things and then figuring out the easiest way to launch things quickly.
So for us, it’s like natural body parts of animals right like a cow and a pig and so on, so we’re buying these raw materials and we were able to package them using similar bagging for example; so we did not talk custom packaging for a bunch of different skews we could use the same bag across a bunch of different skews and just fill it with a different type of you know body part or dog treat for that matter. And so, that’s how we were able to start and we started with quite a few skews from the get go.
Trent: So I remember looking— I actually took a look at the pet niche– I don’t know a couple years ago and I remember because you glazed over something that you made sound easy but I remember it being not easy so I was looking at bully sticks in particular and I think because I had bought some bully sticks for my dog and I was like, “Damn these things kind of like are expensive” and but you know I’m looking for where can I source bully sticks and this is you know at a time when the internet is information is readily available and it wasn’t you know unless I wanted to buy a lot from china which I didn’t want to do.
It was not easy at all to find suppliers for bully sticks; so you talk like it was so easy, what was your particular approach and why was it easy for you?
Kyle: Yeah I tend to do that, it’s a bad habit where just looking back I remember things go that way easier than it was a definitely not easy and I don’t mean to make it sound easy, I guess realistically it’s hard, it’s a lot of time and effort to do that research, get a list of suppliers, contact them, get samples, really understand their pricing, their product, real time importing, all of that is really I guess complicated but the great thing with the internet is like honestly you can kind of figure out anything and in a way you can kind of portray yourself as much more legitimate maybe you really are in the beginning.
So, definitely portray myself as much more professional and larger given that I hadn’t really sold anything at the time but you know approaching the suppliers in a way that indicates that I could move a lot of product which was obviously maybe not the case at the beginning. But yeah I mean a lot of the supplier relationships and the supplier we were able to find, a bit of our— I guess our secret source, finding the best quality products and all that sort of and sourcing it but it’s not rocket science, it’s really just staying I guess motivated to get the job done and determined and going to as many suppliers as it takes until you find exactly what you’re looking for and someone is in a good fit.
Trent: At any point during that research, during the research phase I mean did you hop on airplanes and go see these people or was pretty much everything online communication, send me samples, I’ll look at samples and then I’ll choose who I like?
Kyle: The business is really pretty tight in terms of cash as you can imagine, so initially it was just email, maybe phone, maybe Skype but primarily e-mail which I think can definitely work obviously but the sooner you are able to build that face to face relationship to go out there the better and that’s something that we do more so now.
We have a lot of existing relationships with suppliers that we can really trust so I don’t do it as much but getting a face to face can really help and I know that’s the case based on a lot of my peers saying the same thing especially those that are sourcing from China which we don’t do but I’ve heard going out there can really expedite that process of building relationship.
Trent: So when you started you decided to— I think sell your own products, had you considered reselling products from existing brands?
Kyle: Yeah, so I guess we went through this kind of odd cycle; initially we sold only our brands and then a couple years later we decided maybe we should also be a reseller of other brands thinking their customers told us and we can add [inaudible 20:44] of a one stop shop, if our customers on a cow leg from us they probably need a dog collar at some point during a fill in the blank product.
And so, that went okay but we also— I came to the realization that wasn’t really are the right move and the right direction for us as a brand, we were just spending a bunch of time and effort and money building up other people’s brands and that’s not really what I want to do in this stage, I think for us to differentiate ourselves in the market, we need to stick to our own products and things that we have full control over and that we can fully stand behind and there’s totally value for resellers and that’s totally fine it’s just not something that we really want to get into, I can tell the viewers that generally, margins are lower, there’s a lot more rules involved, there’s a lot more suppliers that you’re buying from, you don’t have a lot of control whereas our brand we can do exactly what we want and what we want and we can sell it on any channel that we want to sell it on too.
So, we decided to kind of scale that back, get rid of all the other brands and 100% focus on Pawstruck from at this point forward, this decision was made but a couple months ago so we’re in the process of making that transition.
Trent: Okay, so when you launched your store what platform did you use originally? I think you said there was 40 or 50 products or so like I’m just kind of looking for like the first version when you said, “Hey, we’re open for business” and just be on the like kind of what it looks like at that point in time?
Kyle: So we built it on Magento community edition I can’t remember the edition number but it was before this new 2.0 rollout that lasted a couple of years, was okay to start and we had a ton of technical issues at a certain point and I’m fairly tech savvy, I can go in and change may seem out and all that sort of stuff but stuff way above my experience level and we had major, major issues and then we eventually I think it was 2 or 3 years ago switch from Magento to Shopify and I’ve been very, very happy with Shopify since.
And then in terms of what the website looked like, it was similar to what we have now but I think what a mistake that I made early on with our designer developing ways to make things to pretty, that just wasn’t really a good move for us we kind of gave up— we cut corners on much from a conversion standpoint and made things look really nice when looking back, I would have done things the opposite way and focus on providing a really good shopping experience that converted customers versus I guess a pretty. For some brands that makes sense but for us it was more of just making a really functional shopping experience that provided all the information really easy.
Trent: So on the home page of your site as I’m seeing it in my session, there’s the ‘let’s find your perfect product’, there’s ‘a can of dog’, there’s the dropdown and there’s the pick of the litter products blow it, how long has the let’s find your perfect product been above the fold on the home page?
Kyle: So that was part of our transition into Shopify, so a couple years ago that’s kind of when we scrapped the things that look really pretty and we just made a much more functional, straightforward website both on the front end and the back with Shopify a dream into parts and what we had to go through on Magento.
Trent: And is that just a Shopify app that enables that functionality?
Kyle: The kind of that quiz functionary on the about that if they were able to integrate that into the banner area.
Trent: What’s the app called?
Kyle: I do not remember but I can absolutely look up a few in the show notes.
Trent: Yeah, I would like to put in the show notes and then down below you’ve got the pick of the litter, are they manually selected or it is there an app or is there some functionality and Shopify which chooses the products that are going to be pick a litter?
Kyle: Everything in on the home page including that kind of block is manually selected and by design, I mean there are some apps that can do things dynamically and we probably could have done that but we chose that for a couple of reasons. (1) We don’t have a huge, huge catalog of our own products so it’s really not that hard to manage that and then (2) Just for Page Speed reasons like just trying to limit the number of apps and the things that are loading dynamically all the time like we’re able to just load in like a really optimized image ratio as that loads super-fast even though what you’ve seen in the home page images are actually fairly long in link and still loads decently fast.
Trent: What are 2 or 3 of your top on your preferred Shopify apps that you think are must have?
Kyle: Good question; so well I do like that one we’ve got a camera with a name that we just mentioned in the Banner, I don’t think that’s one that’s necessary it’s really like shop specific; one thing one I really do like is and it’s called ‘Rewind’ for Shopify and that basically backs up your store completely. It’s like an insurance plan, if you or one of your employees or some technical issue like takes down your website, Rewind and it’s an hour by hour or whatever time frame you can just back up your store and you could– if you have an issue today you could go revert your store to yesterday and fix all those issues. It’s awesome; I’ve used it once, you don’t have to but the one time you do, you are so happy you invested the like a $20-$50 a month or whatever that happens to be, it’s pretty awesome.
Let’s see other apps that we use one click up sell, there’s a couple of variations of that are different companies that have that; I would definitely look into that if you have products that you could cross sell or up sell I specifically like a post checkout up sells so after someone has already made their purchase, you’re not getting in their way at all, they made their purchase and now you can sell them something else at a discount. Because you’re already going to ship them a box anyway, why not do that whatever to all of you. And if you sell a product that is consumable, the best conversions that we’ve found is just sell them more of the same product, you already know what they’re like so don’t even cross sell them. So, they’re going to cow wares and there are about 50 of them well off from another 10 more cow wares at a discount or something like that it’s kind of a slam dunk as you know they already want it.
Trent: Okay and if you got a third one app?
Kyle: I guess it is a Shopify app, it’s just our e-mail service provider that we use, Clavia that hooks into Shopify, so it’s kind of cheating a little bit but Clavia is great when it comes to e-Commerce, e-Mailing and automation everything like that, like I’ve tried a couple the other ones and they just don’t really hold up to the same automation and the data you can put in Clavia.
Trent: So what have been some of the biggest challenges? Let’s divide this question into sort of two parts; we’ll call it the early the early phase so the first say 24 months after launch and then any time since then, so first 24 months after launch, what would you say were the two biggest challenges you had to deal with?
Kyle: Two biggest challenges early on, the first thing was just a lack of experience, I’d never own my own business, I had never, really or like we said like I’ve had some jobs here and there about like you know I didn’t have a bunch of experience as like an employee either or are just in the business world right; like I had to learn all the terminology like I don’t know what a purchase order is or an invoice or how they go together. All of that terminology it was that was all new for me that is especially true for anything accounting related, that was all brand new so that stuff was really difficult to overcome.
I mean luckily all of that information for the most part is available online if you know where to look but I did actually go through a couple programs and took some classes and help expedite the process. But really it’s over time you pick up on stuff especially if you’re interacting with other business owners and other business owners in your industry like in e-Commerce or something that really exploits all of that.
Trent: So what about after the first 24 months, one of the biggest challenges now?
Kyle: For me its fair share delegating, that early on period is where I guess my personality it would allow me to excel, like I am quite a perfectionist and I I’m pretty well rounded, I can figure out how to do most things whether it’s a little bit of photo editing or video editing or copywriting.
I can handle almost all about sort of stuff which is great when you’re bootstrapping at the beginning because I could make everything happen relatively cheap, relatively quickly but as we started to scale up, we started to build it was really hard for me to kind of get out of my own way and number one hire enough people to get the job done and the number to give up responsibilities when those people were in place and really trust them to do it the same or better than I was doing before.
So, it’s something I still struggle with, it’s something that I know I’m not great at naturally so I have to force myself to do it and it’s a conscious effort but it has been going better but slow going stuff.
Trent: And so have you ever heard the phrase, “You can have growth or you can have control but can’t have both”?
Kyle: Yes, I’ve heard that phrase.
Trent: Okay so for the people in the audience who maybe don’t know exactly what we mean, why don’t you explain it?
Kyle: Well, this is another kind of cliché saying around the same topic that I was very much so working in my business and not on my business. I was for sure I still am and to some extent like a bottleneck because by having so much control, I don’t have enough time to do all the things that I have control of well.
And so all I’m doing is just slowing things down as opposed to with growth obviously we’re scaling a bunch of processes up and there’s no way for me to do everything I guess to get back to your original point, you can’t really do both at a certain point the things that are going to allow you to grow you won’t be able to do all of them; like we have so much opportunity that we have right now and I can’t be a part of every single piece of it.
Trent: You mentioned the word processes, are documented processes as I like to call them standard operating procedures are they playing much of a role in your organization at this point in time?
Kyle: Yeah absolutely, it’s a huge focus of ours and I mean my opinion is it should be a focus of any business owner no matter if you’re online or brick and mortar or anything in between because that’s really what allows you to delegate more effectively faster and really scale and grow. So, for us our SOPs we Assigner for our kind of task management and communication along with slack and then within Assigner we were assigning tasks, our processes, our recipes are all documented in Google Docs or by video and then anytime there’s any sort of reoccurring task, myself or one of my employees will create a process for it and those are continued to be updated over time as things change or there’s a better way to do it but at least that that’s the goal, we’re not perfect but that’s it but we’re trying to get as much stuff documented as possible.
Trent: And of course naturally now that you’ve been on the show you’re going to go and check [flow store] right?
Kyle: That’s right.
Trent: For anyone who’s listening is know what that is flow store to as it flowstore.app and it is the software platform that myself and a business partner created for people to create SOPs for their business and it’s what we use ourselves. All right let’s talk about sales strategy, so Amazon can’t really avoid Amazon if you’re an e-Commerce business, Amazon is a big chunk of your sales.
How do they— did you plan it that way that they were going to be a big chunk of your sales or did you just sort of get forced into it that they became a big chunk of your sales and what does the strategy look like?
Kyle: I think early on I guess I would describe it as we fell into it in a way, so we sold on our website from the get go, we sold on e-Bay because e-Bay is what I do like I mentioned from my first job so I knew that world. And then we quickly got on Amazon and it took us a while to really figure out like wow a lot of people shop on Amazon obviously you know looking back.
But at the time I didn’t quite realize the power of Amazon and obviously there is definitely a lot of pros and cons selling on Amazon or any channel but for us, for our brand it makes the most sense to be where ever our customers are shopping. So, they’re a huge subset of head customers that are very loyal to Amazon and only want to buy on Amazon and that’s okay with us we’ll put our products in front of them there, if they want to shop on Groupon we’re there. Ideally you want to come to our website because you really love our brand and you found it there and there’s a huge customer base that does that and that’s terrific and you know of course we prefer that to have little bit more control and be able to communicate directly with those customers but in reality we don’t really care where our shoppers want to find us, we just want to be everywhere that they are.
Trent: So one of the deals that crossed my desk yesterday a company that’s for sale that we’re really looking at potentially buying in the offering memorandum, they talk to both of their Amazon strategy and how they’re able to get all of their products to rank within one week which— and their sales growth is phenomenal but as soon as I read that, it was a big red flag for me because I’m thinking what on earth are they doing to be able to get their product to rank in one week every single time? Any thoughts as to what that might look like?
Kyle: So you should definitely ask them and then tell me exactly what that is; I am pretty intuitive with a lot of the stuff that’s going on on Amazon and for my Brand, it’s totally— depends on people’s I guess, risk tolerance and maybe their own ethical code and all those sort of things.
There’s a lot of people who do try to game the system and that’s not really something that we try to push the envelope with, I love knowing about those sort of things more so I’m really curious and I’m like a nerd about it I’ll like to know but also just so that we can protect ourselves if any competitors are doing anything or things like that but you know my guess is whatever they’re doing, they’re doing it in a way to mimic a product that is selling really well so hopefully if they are just moving a lot of it will have a really good sales for that product by running a bunch of Facebook ads or something like that, maybe they have an existing audience that they launch to regularly, so they’re able to take that 10,000 person list that’s really passion about their product and tell them about the new product and get it ramped up really quickly…
Trent: In this case that isn’t it
Kyle: So they’re probably doing something else that works right now and hopefully something that will continue to work for them but if it’s against TOS or anything like that and I’d be a little bit worried personally, it might be a short term strategy and even if they don’t get suspended or anything like that, that sort of growth might go away some day.
Trent: My single biggest concern with this particular deal, I’ve read and I consider myself no black hat expert by any stretch of the imagination but I had read that a few years ago, you could search for a keyword, go down add to cart and just do that over and over and over again in some way you could fool the algorithm and it would increase the ranking of that product because it’s getting out of the cart many times, you ever hear anything like that?
Kyle: From the same computer?
Trent: No you had to get a whole bunch of different people to do it or something again.
Kyle: I too have heard that, I have yet to try it but according to what I’ve heard of the carts do matter in terms of ranking not sure why Amazon looks about as a ranking factor, it would make sense to me for products with lower sales lastly just because you don’t have a lot of data to go after like there’s not a lot of conversions for the whole category then they kind of have to use something else to indicate that people are interested in it but for things that move really fast, like if you’re selling something really popular, I have no clue why they would look at the carts versus sales, doesn’t make sense to me.
Trent: I would agree, it doesn’t make sense to me either. All right, speaking of acquisitions what a great segue have you made any? Because I know you have.
Kyle: Yes, in January of this year we purchased a dog subscription box company called thedapperdogbox.com The majority business is on their website, they do sell all through Amazon’s beta program subscription box, beta program limited basis and yet we acquired them in January and we’re still in the process of migrating over that business into our earpiece system and kind of taking over of the fulfillment of all of that and then once that’s all completed, then we plan on really trying to scale that up and it was a so far it’s been a lot more work than expected but overall I think a great decision on our part, it’s a brand that fits really well into what we’re already doing what we have the infrastructure of a warehouse and shipping team that can handle all the fulfillment needs.
Allows us to diversify in a way, this customer base is slightly younger in a little bit different than our existing customer base but similar enough where we can utilize some of our existing products and include them in the subscription box as well. So, it’s just a kind of fun new project and it’s something that we’re all excited about in office but also has taken up a great deal of our time in the last couple months
Trent: For sure because there’s so much more to do than when you’re selling on Amazon, there’s you’ve got to there’s so many more moving pieces that you’re now responsible for.
Kyle: Yeah to be honest it’s a lot of stuff that we’re already used to just given the film and all the stuff we have to do for Pawstruck but just a lot of stuff that comes up that you don’t think, about don’t expect, we set it up as a completely separate entity which also causes some complication from an accounting standpoint it pretty great accounting, credit cards, all the stuff that you forget about because I did it just in 2014 Pawstruck and it’s been years and years since I did that all stuff that takes time.
But it’s really exciting because the previous owner, you know her goals and kind of her whole business strategy with it really align well with what we’re doing, so it’s kind of a cool, fun and easy transition and then we’re kind of able to take her baby and essentially her dream and then up continue to grow with her like same strategy in mind, it was just something that she couldn’t do herself because she didn’t really have a big enough team to handle it.
Trent: Is the business model for the dapperdogbox pretty much the same as a bark box?
Kyle: So, it’s very similar in a way and there’s quite a kind of maybe like a handful 5-10 that are kind of very similar in the same space, I would say the difference, the major difference that we’ve— well but you might be able to figure out my name is the Dapper Dog box includes a custom/limited edition and bandanna in every box, so each box is themed and every box comes with design, we’re designing in-house with our designers, getting it made it’s like super high quality and you can’t buy that bandana anywhere else.
So it’s pretty fun, if it’s the theme of all the other treats and toys in the box that’s very— people like taking a lot of pictures, let’s just say it’s kind of a cool way to get our customers to take photos of their dog wearing the bandana, with the box with the other products so it fits really well for a lot of social media and we will definitely be pursuing social media advertising much pretty aggressively once we’re ready to.
Trent: So, from what I understand about bark boxes business model is now they’re at a point where all the stuff that goes in the box that they’re shipping is coming to park barks for free because these brands want to exposure to bark boxes large customer base by sending the samples out in the subscription box is that how it works? Because in essence, they’re selling a box of hair for $20 a month and advertisers known as brands are saying hey we’ll put our stuff too in that box but we’re not going to charge you for it, is that how it works?
Kyle: So, it depends I think depending on the box, so I definitely heard that being the case for one is in the pet space and also other like makeup brands and stuff like that they basically get any huge discount all for free to kind of put the products out there and get exposure to all these potential customers right. Bark Box possibly was like that but at some point but to my knowledge I don’t think it’s like that now because I have some other friends in the pet space we sell into the box and they get compensated; so they’re probably getting a discount but also something that I’ve seen Bark box in a lot of the other boxes doing is they’re moving more to a private label style where when you were a Bark box now, a lot of times you’re not getting products that are someone else’s brand, you’re getting Bark boxes toys, like it says it Bark Box same with all the other products there including. So I think people are more focused on belittling out something that is there is entirely so obviously, the costs are still there they’re not selling the $20 box out there but there are some other pet ones that do want a big discount. So, if anyone wants to give us product for free to put in the box by all means we’ll take it but that’s not our business model.
Trent: So when you were going through the due diligence process on this so it was listed with a broker I imagine you got to be offering memorandum just like I received yesterday you and a whole bunch of other people probably got it and now you’re competing to buy this business against other buyers, you did not have a prior relationship with the seller if I remember correctly.
Kyle: Correct, we never met.
Trent: So at some point in time when you do diligence for like just kind of walk me through what the due diligence process looked like from receipt of offering a memorandum through to will just say letter of intent.
Kyle: So, we moved really fast I guess is the first thing and it really depends on well a couple things; the seller how fast they’re willing and able to move you want to move as a buyer potential buyer and also a broker to be honest because the brokers kind of like this in between piece so the brokers are moving slower can kind of slow things down.
For us, we were all motivated to sell as to the close as soon as possible; the seller she was moving on to her next career and some other things other reasons why she was ready to go as fast as possible and we wanted to make it happen as well because once we kind of ran the financials and looked at the opportunity, it wasn’t something we were kind of miss out on, then we just try to do the due diligence as fast as possible just ensure that everything she said was true and if we knew as soon as we kind of checked all those boxes, we were ready to basically you know transfer the money right away so I think on probably took us like a month and a half which I think is fairly quick.
And that includes a kind of a full transition of everything and the main reason we’re waiting was because we were going through this in December I believe, didn’t want to wait until 2019 the beginning of the year 2019 because we’re going to start this new entity to purchase the business and we want to keep things clean from an accounting standpoint to just start in 2019 and not have to file in 2018 other stuff like that.
Trent: Did you have to pay cash or did you get an SBA loan?
Kyle: We paid cash and a lump sum which it is both obviously what she was looking for or preferred but also we felt comfortable doing that, it was just the fastest way to get the deal done also competing with other offers and stuff like that advantage.
In terms of multiple, I actually don’t remember the exact multiple offhand at this point because a lot of what our calculations were going into was how we could make the business more efficient and scalable so I remember the numbers that we kind of project out based on some of the savings we were able to provide. And then in terms of how much we paid, again that’s part of our like secret sauce that we’re probably not share elsewhere but what I would say was it was definitely reasonably priced, it was priced to sell, the business was doing well but it was just something that the owner was ready to move on from and she made a fair offer and honestly we didn’t really even negotiate a whole lot that I thought it was fair and we just kind of agreed upon a price and which was really refreshing.
It wasn’t like it’s battle that I think sometimes happens when you’re buying and selling and that might be the case on a much larger business for a lot more money changing hands but for us, it was pretty straightforward both sides are really honest with our intentions and what she was looking to get out of the vice versa it was a fairly easy process I think lucky for us.
Trent: Was her revenue at the time under-over a million?
Trent: It was under
Kyle: Under, okay so you probably paid somewhere between two and a half and maybe 4X somewhere in that range?
Kyle: Yeah, it’s definitely in that range, I mean that’s kind of the standard and if you know somewhere in there.
Trent: We are nearly done, what question did I not ask you and we figure this one out of the pre-interview that if you were interviewing yourself, you would have asked, remember what the question was?
Kyle: Yeah I do; so I think a question that a lot of Entrepreneurs or people who would like to start their own business struggle with is, when is the right time? Is it you know a period of time in your life that is easier or better to do this? Is it you’re waiting for the right idea? All of those sort of things or people get hung up on those and when they end up just not taking action and starting a business.
So, one thing I could say and I can only really speak from my personal experience is that I obviously started it fairly young right out of college and I would say that in my opinion is a great time to start a business, I was living like a college student in college and when I started a business nothing really changed, I was still you know making ends meet but kind of barely, I had student debts, I was eating pretty cheaply, rent was low and all that sort of stuff, I didn’t have a wife and kids or any sort of responsibility; so it made it much easier just to focus on the business and in the worst case scenario if the business crashed and burned, I was kind of going to be in the same place I was.
So I think if you are a young person you’re considering it, I’ll say you just you know make the jump and try it out and even if Pawstruck would have failed, I think you would learn a ton going through that process and you’re ready to kind of take that next jump if you kind of just sit there and analyze every opportunity, overly analyze every opportunity, you may never take that jump and then life gets complicated you know you get older, you get used to a certain lifestyle and you have a family or something like that and it gets hard.
And now but I am a part of a lot of the business owner and e-Commerce kind of networking groups, one thing I can say that I hear over and over again for anyone who’s at all older than me is they say like, “Wow! I wish I would have started earlier, I wish I wouldn’t have spent 10-15-20 years in the corporate world and I wish I would’ve just done it. Easier said than done but that’s kind of what my experience and what I hear over and over again.
Trent: Being older than you and having been an entrepreneur now for 20 years, I think but 20 older is harder just because wife, kids mortgages, more stuff, more responsibility. I wish I would have so I started you know at that 30, I wish I would’ve started at 25 or 24 or 23 so if you’re listening and you’re in your 20s both Kyle and I are encouraging you to take the plunge now don’t wait.
Kyle: And if you’re older, it’s not too late.
Trent: All right Kyle, thank you so much for making some time to come and be on the show, it’s my pleasure to have you here, for folks who want to go and check out Kyle’s store, it’s at pawstruck.com
Kyle: Thanks for having me
Trent: To get to the show notes for today’s episode go to Bright Ideas/265. If you enjoyed this episode I have two very small but very important requests number one help another entrepreneur discover all of the gold nuggets by sharing this episode on your social profiles or wherever else you would like to and then number two if you would take a moment and head on over to the iTunes store and leave us a 5-star rating along with your comments Man oh man I would be eternally grateful for that thank you so much.
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