Rebuilding a Million Dollar Brand: 3 Year Update

It has now been an entire three years since I launched this series tracking my progress in launching a brand straight from scratch. In this post I'll give a breakdown of my revenue numbers for the month of June 2020, how that compares to 2019, and a summary of my wins and losses for the year.

We have an episode about this subject on the podcast. If you'd like to listen, you can find the episode by clicking here.

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Revenue Update

After three full years since starting my brand, revenues were just over $200,000 per month. This is just over 100% more than the same time 2019 and is roughly a $2.4 million/year run rate.

I often put June 2017 as day 0 for this brand as this was when inventory finally got into Amazon warehouses and available for sale (of course, I had spent a ton of time before this working on developing and sourcing the first products).

Above are the sales figures taken from my primary Amazon account. I also operate a second Amazon account that does around $15,000 a month in it.

I now have approximately 20 products, though this is closer to 50 actual products if you take variations into account. Quite a few of these products ran out of stock during the month of June and my sales continue to follow the 80/20 rule as shown below, with a small number of products accounting for the majority of revenues.

Wins

• Photography overhaul & increase in Conversion Rates: Earlier this quarter I dedicated dozens of hours to totally revamping our photography and graphics design. This meant a few things:
  Photoshop Retouching. Paying serious money for serious Photoshop retouching. Almost all of our products are difficult to shoot photos of. I spent close to $100 per photograph to have them retouched and the results were AMAZING.
  VIP/Influencers Program. Heavily recruiting ‘influencers' for media. Most people utilize influencers to get them talking about their products. We use influencers primarily to get them to share pictures and videos of them using products in action on their 4x4s. We've had some incredible contributions which is fantastic for social proof.
  3D Modeling. I employed a 3D modeler to do some creative shots showing the benefits of our products (i.e. a 3D model of how our fabrics are constructed). The results varied from great to poor.
• Development of Some Custom Inventory Projection Tools: Stock outages have always been one of the Achilles heel of my brands as my strategy involves a high number of SKUs. Subsequently, I've developed some custom forecasting tools using Amazon's MWS API which have been big game changers in re-ordering inventory accurately and on time.
• Authority blog continues to grow: After launching at the end of 2018, my authority blog is continuing to get exponential growth. It's getting around 2000 organic visitors a month which isn't amazing but this is still free traffic which not only helps to promote my product brand but also helps to generate diversified affiliate income.
  
  It's now generating $600-$1000/month in affiliate income which is pure profit. This is relatively small compared to the $200,000/month revenue that the product brand is bringing in, but it helps support the product brand sales in non-measurable ways, this revenue will continue to grow with minimal work, and content management and creation is a great entry level job for employees to begin at.
• Lots of Additional Funding: Many ecommerce companies have benefited significantly from COVID and I've been one of them, specifically in terms of government funding. I've gotten 6 figures of either interest-free or low-interest loans from the government of Canada.

Losses

• April revenues down 50%. April was a terrible month with the extensive Amazon delays. Revenue was down 50% in April.
• PPC costs rising. Like most people, our PPC costs are continuing to rise. After COVID hit, I made the impetus to trim our PPC costs and our ACoS has been going down.
  Overall sales from PPC have been relatively stable, generally between around 30-40% of sales. I'd love to see these numbers in the upper twenties and hopefully this should come naturally as products start to have more history behind them.
  
• Net profit margins are only about 10%. This is the net margin on my tax returns – the only truly comparable metric IMO. Duties are the major culprit here. Without the additional 25% duties we would be closer to 15-17% net margins. Without higher margins, it makes it difficult to invest in some other expansion plans I have (which involve hiring and leases, see below).

Goals for 2021

For the one or two people in the universe who have followed this series, they'll recall that in year one I was unsure if this was a brand that I would look to hold on to indefinitely or look to sell a few years down the road. I'm now pretty strongly in the boat of ‘hold and don't sell'.

More specific and short term goals for the next year include:

• Get revenues up to $300,000 per month: This will include the launching of at least two fairly unique new products I'm spending a generous amount of time and money developing.
• Potential physical location: I'm continuing to play with the idea of launching a physical location for both a show room and installation facility. This probably doesn't make a ton of sense from a business perspective but would fulfill a deep seated personal desire to have a physical footprint of the brand.

Conclusion

After three years, my newest brand is now doing roughly the same revenue my previous company was doing. When I sold that company it was sold for approximately a 3x earnings multiple. If you're a believer in market efficiencies, here's further proof that the market makes prices accurately. In summary, if you're debating selling a business for financial reasons, my opinion is that selling for a 3x multiple is never a great financial decision. The truth is though, the decision to sell a business is normally more for personal reasons than financial reasons.

How has your 2020 been so far? Are you up for the year or down? Let me know in the comments section below.