E225: Do You Have to be Passionate About What You Sell? The Ups and Downs of Running an Ecommerce Business

I used to say that passion is not that big a deal when it comes to choosing a niche for an ecommerce business.

Over the years as our business evolved and we faced the inevitable challenges that came with growth, I'm starting to think that passion might not be overrated after all.

My good friend and our guest today, Joe Cochran of ComfortTac, certainly agrees.

Joe dipped his toes in ecommerce when he began helping his father run Northline Express, an ecommerce business that specializes in fireplaces and chimneys.

The company was eventually sold and Joe built his second company, ComfortTac, selling concealed carry holsters. Joe was passionate about this product and while he avoided the mistakes he and his father used to make, being lean in his finances–even renting out the bedrooms of his house to funnel cash into his new business–he was was not immune to the difficulties that came with it.

But he knew his product well, and with this knowledge he was able to minimize the impact of a major manufacturer error that threatened to put him out of business. His passion for the product was one of the major reasons that kept him from throwing in the towel.

In this episode, you'll learn

• How ego-fueled mistakes led to the decline of his father's business
• Why hiring consultants is almost always a very risky and costly mistake
• What Joe would have done differently with his father's business
• The value of being frugal and keeping your personal finances in order
• Manufacturer mistakes will almost always happen at some point and you need to be prepared for it

Thanks for listening! Until the next one, happy selling.

Full Audio Transcript

Intro: This is Mike and welcome to episode number 225 of the EcomCrew Podcast, so glad to have you guys along with us today. Today I have an old friend of mine, one of the OGs in my orbit in e-commerce Joe Cochran on the show. Joe is someone that was in an original mastermind with me way back in the early days, someone that I looked up to and aspired to be like from day one in e-commerce and he's been on a heck of a journey himself, and we have a pretty candid conversation about that.

And one of the things that I think makes the EcomCrew Podcast different from a lot of the other noise out there and people pounding their chests and talking about how easy e-commerce is and how easy business can be in general. And it's true to a certain respect. I mean, everyone's wired differently. I mean, for me, I wouldn't trade it any other way. This is what I love doing. I couldn't imagine working for someone else in a nine to five type environment. But there's a joke about you become an entrepreneur so you don't have to work eight hours so you can work 16 and that's also true as well.

And Joe has been on this up and down roller coaster ride. He's at the top of the peak right now. And I hope he stays there for quite a while. But the idea here is to look at business at a big scale, talk about how it's not always up. There's some downs and learn from some of these mistakes that serial entrepreneurs like myself continue to make over and over again, because we're just wired in a weird way. Now, I did mention to Joe here as we started this interview that we're supposed to go over some free plus shipping offers and things like that. We just ran out of time, we didn't get to it on this episode.

So, I'm going to have Joe back on pretty quickly here and we're going to shift gears and have another whole topic. It won't be part two; it'll be a completely different episode going over some free plus shipping stuff with him, top of funnel lead magnet type stuff and also the Canton Fair, which is coming up. So, definitely excited to get Joe back on and talk about that stuff. I think he's a great guest. He's a great person. I've met his wife as well, she's a sweetheart and he's the kind of guy that I wish I could spend more time with on a regular basis. So, I hope you guys enjoy this interview and we'll talk to you on the other side of this intro.

Mike: Hey Joe, welcome to the EcomCrew Podcast man.

Joe: How's the going?

Mike: Oh, it's going great. It's so good to have you on here. You're like one of the OGs in my world of e-commerce. So it's always great catching up with you. We actually first met each other through a mastermind that Andrew Youderian set up in the early days of Ecommerce Fuel. And it was you me, Rick, and Josh I think, was there another person on this in that group?

Joe: No, I think that was it.

Mike: Yeah, and it was just — for me it was awesome because I was just getting started, you guys were so helpful to me, and man I was just like always looking up to you and the things that you were doing, especially with email, you're the one that really got me into email marketing. But it's interesting; we'll talk about some of the things that just kind of transpired, how some of the stuff in that business unraveled. But I appreciate your candor, we talked about this before, you came on being willing to talk about some of the hard things that have happened.

One of the things that I think makes EcomCrew different about all the other podcasts out there, most podcaster talking about sunshine and roses and it's the easiest way to make money and it is. It's a great business if you can get everything dialed in, like the way that we've been lucky to be able to do, but there's a lot of speed bumps in between and we're going to talk about a lot of that today. And just so everybody knows, at the end we're going to talk about free plus shipping offers and top of funnel ideas for your new brand because this is kind of a clause I under the hood but not really, but as you are EcomCrew Premium member, we wanted to get you on and just put the history.

So, we're going to do a combination of Under the Hood and top of funnel ideas for your brand. So, if you're not interested in e-commerce hardships, fast forward till a little bit and we'll get into the fun marketing stuff later. But let's get started with Northline. That was the business that I first met you through. I'll talk a little bit of background there. It was something that you and your dad ran that was really successful for a while but then start tapering off I guess.

Joe: Yeah, so right around 2002, my dad started his own online business. I joined about 2004; it was kind of starting to take off. He contacted me and said, hey, I think there's an opportunity here, I’d like to have you come on board and help me build the site. I had zero computer skills; I mean I was finger point typing.

Mike: That's funny, you were like a computer and you’ll fight back there.

Joe: Yeah, I couldn't type, everything was a struggle but I was really good at sales and just had a kind of a sales background and he knew that I'd be able to help out with all kinds of stuff. So, I ended up coming on board, really started out working in customer service answering the phones, and just helping customers. We were in the fireplace and house niche and I had been installing fireplaces for years before this. So, that's kind of where he saw that there was going to be value in having me on board, and he actually brought my girlfriend on board at the time who's now my wife.

So yeah, we were living in North Carolina. He made that call. We moved up to Michigan which is where I'm originally from and where his business was and started working on this new venture. It was very exciting. This is back in the days of 10 cent clicks on Google. And I think in 2006, our site was converting at 8%.

Mike: Oh my god.

Joe: We were buying clicks for 10 cents or five cents and we were converting at 8% and it seemed like the sky was the limit. So of course we did what any business owner would do is we started to scale the business and of course, with scaling, we started to scale our expenses. So we went from working literally in an upstairs bedroom in his house and out of like 2,000 square foot pole barn garage that we had built for a warehouse to a 25,000 square foot facility that we built brand new because we had to build one brand new, we could release some brand new.

And we went from a couple of employees to next thing I knew we were at 35 plus with outsourcers and we had a call center and a development team and probably about 1.5 million tied up in inventory to fill that big warehouse. And it was still going pretty well and then kind of 2008 hit, and while the economy went down, our business actually grew because we were selling alternative fuel, alternative heat sources and things like that. So, I think 2008, 2009, 2010 was our biggest years revenue wise, I think in 2010, we did about 15 million in revenue. But around there, we started to feel the pinch.

And then by 2011, 2012, we were kind of getting squeezed from all angles. Amazon got into our space. We had a lot of competitors come on board that we're doing the same thing. We were majority a drop ship business. So, we had about 10,000 SKUs and we were drop shipping 95% of those and warehousing and fulfilling the other 5% that were our best Movers. And that was kind of our business model is we would test things to drop shipping and if it went well, we would bring it in. And then we would scale up our inventory and fulfill it ourselves because we usually do a better job than the supplier.

And so, by 2013, the business had started to really pull back. We were struggling to hit breakeven. So here we are doing eight figures but we're struggling to make a profit. And my dad was burned out and I was burned out and stressed out, and on top of that personally I scaled my life the same way we scaled the business. So, as we had success…

Mike: The American Dream, right?

Joe: That's right. The more success we had, the more I spent. I built a new house, I had new cars, I had a Harley, that was happening. But as soon as things started to restrict and my dad had to kind of sit down with me and have that talk that hey, we're the owners, we're going to have to take pay cuts here to really keep this thing going and come up with a plan to turn it around which we attempted to do. But pretty quickly, that wasn't working and we were going to have to take more pay cuts and I found myself in a position where my lifestyle was now exceeding my income, and the business outlook didn't look as promising as it as it had in the future.

And I would say up until that point, the conversation between my dad and I was always that he would retire and I would take over the business through a buyout and the profits from the business would pay for his retirement essentially through that buyout, and then I would take over ownership at some point. But it's hard to do when you're not making any money, right?

Mike: Yeah. So his retirement plan kind of went to crap in all this.

Joe: Yeah, exactly. And so not only that, but he was still on that message. Like, that was still his dream, and his kind of legacy was that he wanted me to take over the business. But I started feeling like, I don't want the responsibility of your retirement on my shoulders with a business that's already struggling and we've already tried to turn it around and we haven't been successful. So, after a lot of talks and a lot of conversations I said, Dad, look, I think the smartest way forward here is for you to sell the business to somebody else. Let that be your retirement. And you've essentially given me free education in e-commerce, and I'll go out and do my own thing.

And he was pretty reluctant. But he eventually agreed that that's probably the smart thing to do. And so that's kind of probably brings us up to about 2013. I think it would have been later.

Mike: Later than that, because, I mean, we knew each other by the time you were going through that.

Joe: Yeah, well, I had already been working on my side business when we met each other, I just didn't say anything to anybody about it. It was small and it wasn't really doing much. But yeah, but like 2013, 2014, I decided to start my own brand. At the time I called it Dressedtocarry.com, and it was a holster business selling concealed carry gun holsters. I was into it just because I grew up in Michigan with guns shooting, had concealed carry pretty much since I was 21. And it was just something I had a passion for.

Mike: Versus the fireplaces.

Joe: Yeah versus fireplaces and patio furniture which I didn't really care about. And you don't have to pick something that you're passionate about to sell it. I know you've talked about that before. You're not a passionate color guy, like you’re not coloring all the time. And I don't think you have to, but I knew that I needed to in that moment because I knew that this was going to be a bootstrap and I was going to be the content creator, I was going to be the designer, I was going to be the everything, and I knew I better have an interest in it because I'm going to have to put some serious time into this if I'm going to be successful.

Mike: Yeah, and I got to be honest, like I've talked a little bit about this more recent episodes, but I've definitely come around on that. I've looked at other things I've done in my life that I had a personal interest and passion in, the poker business being one of them. Getting in e-commerce, I wanted to get into something that I had a passion in but I couldn't really think of something at the time that made sense. So, I think I convinced myself that I was passionate about building great products and some of the other things about it which I am, like I definitely am passionate about the other stuff.

But the reality is, is that over time, as the allure of the business kind of wears off, and the reality sets in of the real hard work and the days that you don't really want to be in the office, those are way worse. They're amplified when you're working on something that you just don't really have an interest in, versus something that you're really personally connected with. I think it makes it easier and it's something I think more and more about all the time.

I also think it helps with content and relating to your customers and building a better mousetrap and all these different things that I think are really important to differentiate yourself in e-commerce these days. So the stuff I'm going to be working on in the future is definitely going to be more of a passion project like things that I have more interest in just because of the long haul stuff that I didn't think about in the earlier days.

Joe: Yeah, I 100% agree. And so yeah, that's what really drove me to choose that niche is it was just something that I was interested in. And so, when I started my side business Dressedtocarry.com, I really just followed the drop ship model because I didn't have any cash. I was actually in a position where I wasn't sure what we were going to do to move forward. I knew we couldn't stay where we lived and continue spending like we were. So, we were kind of in a tough spot in around 2014. My wife and I kind of sat down and had a talk about finances and I said, look, we've built this beautiful house and we've got all these nice things, but we're not going to be able to sustain this if things don't turn around in the business, and it doesn't look like it's going to with Northline and we need to come up with a plan to get out of this.

And after a long talk, we decided to basically sell everything we owned and moved to North Carolina because there was a job market there. We had some friends there and we loved the state. So, within about three months of making that decision, we put everything up for sale and we literally had a garage sale where I think we made like 10 grand.

Mike: Nice.

Joe: Because we sold everything, the Harley was gone, the new cars were gone. I mean, we just sold everything and loaded up a truck and moved to Raleigh, North Carolina. I negotiated a work from home arrangement with my dad at the time. So, he let me work remote which was really interesting to do to run that size of a company from a remote area after you've already been in the office all the time. And I continued working there for about another year, and that's when you and I met is really I think when I was in North Carolina already.

Mike: No, I think I met you before. I thought I met you before you moved but maybe when you first got in that mastermind, I think you were you were in Michigan. I kind of remember distinctly you moving to North Carolina.

Joe: Yeah you might be right. It's kind of a blur.

Mike: Yeah, I understand that like it's my life support too, I get it. But I do remember that particular — I was listening and you got to be proud of me, I was listening at some point.

Joe: Yeah, I moved I think two or three times since then. But yeah, so when we got to North Carolina, my wife got a job outside of the family business which was great. That gave us a little more security and a plan B, we still didn't have Northline sold, so I was still working there and still kind of working on my side hustle as well. But my ultimate goal with the holster business was to develop my own product and create a private label. I felt like that was the way to go. I had seen what happens in drop shipping.

I didn't have a solution for it at the time, personally, and I just thought it was kind of a dying business model. I know there's a lot of people that still do it successfully. I was just kind of fed up with it and I thought the opportunity was in private labeling. But I still had this small problem which is that I didn't have any money. And so, we downsized to be able to kind of afford her living but we still didn't have extra cash left over, and my drop ship business had maybe, I think I built up about five grand over a year and a half or so of running that business in the business account. So, it wasn't like hugely successful and we just didn't really know how we were going to get started with a private label on how to afford that first order.

And so, it came to another sit down with the wife, and I had a brilliant idea that was we were going to rent out spare rooms in our house that we were renting to offset our income, to offset our expenses. And that would maybe give us the money to get out of debt and possibly give us some money finally to start this private label. She hated the idea.

Mike: Yeah, women don't like to share bathrooms, man, that's usually a conversation killer.

Joe: Yeah, I didn't love the idea. We were in our 30s, who wants a roommate when you've been married for years, and just it wasn't easy. But again, she reluctantly agreed and we moved forward with it. We rented out two of the rooms in our house, which almost covered our entire rent. So, we were essentially living rent free, which gave us the cash to pay off our debt. And within about a year, we were in a position where we had saved some money, we had paid off most of our debt, and we were in a better position to be able to invest the money in the business.

And so, that's when I decided to kind of develop my first product. I had already had some ideas of a product I wanted to design for a holster, and I went through all the steps that you guys teach. I mean, I used Alibaba to find a supplier, sent them a prototype that I had made with literally like sewing something together by hand. It was ridiculous. What I sent when I sent them was absolutely ridiculous. There's no way this is going to come back good. But the first prototype was actually really nice. And by like the third iteration, we had a product that I felt was good enough to put out on the market. And I think that first order was around $6,000, which was super scary. And I only had about 3,000 to spend, so I had to put the rest on the credit card.

Mike: Oh, gosh, [crosstalk 00:20:43] pay it off, right.

Joe: Yeah. And bless my wife. She's been nothing but supportive to the whole thing. And actually, I was the one holding back holding back, and she's finally like, if you think it's going to work, just do it. I'm sick of hearing about it. We bought that inventory and it wasn't too far after that when my dad contacted me and said, hey, we've got an offer on Northline. I think it's going to go through; you've probably got six months before the business is sold, and you're out of a job. Here's your heads up, I'm not positive but he said plan on January 1st, 2016, you’re done here, and you'll need to have something in the works.

Mike: Got you. So, before we get into the brand that you created because it's an awesome story as well, take a moment here to reflect back on Northline because here's this business that you started in 2002, had this incredible high, incredible low afterwards, words of wisdom that people that are out there that are on the upward trajectory path — I've been on that path as well on a couple of different businesses, made the exact same mistakes that you guys did that you were just talking about. I don't know what it is about us type of entrepreneurs.

I think there's different classes of entrepreneurs. Some entrepreneurs are very risk averse and they would be taking very calculated moves. The others, I think like you and me, and maybe your dad, the excitement of being in that moment is just infectious and you want to just keep going. It's never good enough. You want to keep on hitting a higher high and a higher high and it gets you in the trouble of getting a 25,000 square foot warehouse and hiring a bunch of employees and those types of things. So, I'm just curious, from your perspective, now that you've had some time to reflect on it, if you could boil it down to a few mistakes, maybe some things you could have done differently to have a different outcome, what would those things be?

Joe: Yeah, I always related to the college athlete who did sign to the NFL or whatever, and thinks the money is never going to end and then blows out on him in the first two months of the season and he's done but he already bought three houses and six cars. Yeah, when things start to take off, it's super exciting and we were an interesting position because we had employees working out of our house. And where we lived, it was pretty rural and we got away with that for quite a while but the county came and said, hey, it looks like you're running a business here. You can't have employees working out of your house that are family members. So, we were kind of stuck where we had to get out of the house.

But why we didn't go just rent a space, I don't know if that was just ego or convenience. There happened to be a lot about a mile away from my dad's house and he thought great, we will buy that and we'll build a building and it'll be close and everything except for it'll be cheap.

Mike: Yeah right.

Joe: And so, yeah. I don't know what drove us to do that in the moment. In hindsight, that was a huge mistake. Not only was it a huge mistake to build a building, but we built a building in the middle of nowhere. We lived in northern Michigan, there was literally nothing around. So, if you go to sell that building down the road, it's not going to be worth maybe half of what you spent on it.

Mike: Got you.

Joe: And so, we weren't thinking clearly. I mean, we just didn't think those things through. We thought it would never end; we're not going to sell this building. If anything, we're going to expand this building which is actually exactly what happened is we built the building in I think 2006, and in 2007 we added on a whole another building the same size. So, we had started with 12,500 square foot, a year later we decided that's not enough, double it, and we just added another 12,000 square foot right to the back of that building. And we had plans to keep extending and going from there.

Mike: Crazy.

Joe: Yeah crazy. And scaling up our staff, I mean just the scaling up your expenses in relation to your revenue and planning for the rainy day which is bound to come. And we can talk about the rainy days I've had with my current brand as well, everything is going great until it's not going great. And then if you don't have cash reserves and you don't have your finances in order, it can come down really fast. I mean, it can crumble in a blink of an eye.

Mike: Yeah, you used the analogy of a sports athlete earlier. I can use another one of maybe trading on margin and stock market and that works great until the market goes down and then you're really screwed.

Joe: Yeah, exactly. So yeah, I mean advice would just be, be frugal. Always be frugal with your spending, watch your ROI and don't get crazy. We spent — one of the things my dad and I both were kicking ourselves over, we spent a ton of money on consultants and agencies thinking they would know better than we did. So for example, we were struggling with managing our Google, we better hire this agency; they're going to do a better job than we can do, they've been doing it. They did a worse job and they lost us money and they actually kind of trashed our ROI. And so, now we're paying for a service that's returning less than what it was when we were doing it ourselves and I can tell you probably three or four other instances where we did that same thing.

Mike: And if you're anything like me, the reality is once you hire that consultant, feeling all good about yourself, you went to thinking about something else for a while, and it probably was longer than you would care to admit before you really realized how bad the ROI was and how much money you wasted before you rectified it.

Joe: Yeah, five or six months. We probably went without really paying close enough attention, and by then it was already a mess. And we had to fire them and of course, they were at fault. But did we just take it back over? No.

Mike: No, the consultant.

Joe: Look for another agency.

Mike: Right yeah.

Joe: And so, we repeated that process like I said several times, not just with that, but we had some SEO struggles after Google algorithm changes that really hurt our rankings. And we were dumping money into consulting agencies that were SEO experts which turned out to mostly be either just pure fraud or just they couldn’t get results. And I still to this day couldn't tell you why that is. I mean, we did eventually work with some people who I think are still good people and worked really hard, but we just weren't able to turn it around. I think it was Magenta. We were on Magenta. And I just think it was something with that platform that we had done wrong, or I don't know what but it just never turned around for us.

Mike: Got you. All right, so you're at the stage now at this point of the of the journey that you've ordered your first holster which by the way, again, just getting involved in something that you have a passion for. I mean, the reason that this thing became successful is because you were able to design something that was different in the marketplace and had functionality that you knew that was important to you which most likely would be important to others out there. So, you place this order for $6,000 let's kind of take it from there what happens from there.

Joe: Yeah, so I placed that order. It was right around the time when Northline was going to be sold. Dad made the call, I had about six months so I knew I had about six months to see if I could get this thing going, listed on Amazon, listed on my own website which was still Dressed to Carry at the time and went on vacation actually.

Mike: Nice.

Joe: To go see my dad in Florida. And I went down to see him. I literally launched the product on a Monday, I think I went on vacation the next week Monday and I was going to be there for two weeks. And by like Wednesday of that trip in the first week, I realized I'm going to run out of stock, like by the time I get this, sales were going well, so by the time I get another order placed and I get things in, I’m probably going to run out of stock, like I need to place an order today.

Mike: Right, but you have no cash to do that right now at that point, right?

Joe: Right. I have no cash. So I call the wife. I say, hey, this is going well, so it's going really well. We don't have the cash. We're going to have to double down on the credit card to do this. What do you think? She's like, well, how much do you think? I said, well, probably like 10,000. She's like, yeah, all right, just do it, do what you got to do. And I'm thankful that I had a big enough credit limit to do it. I might have had to call in and ask for an increase in the credit limit, but did it, placed that order. By Friday of the same week, I realized that my order wasn't big enough. There's no way that's going to cover it. I needed probably to double down again, but now the card is tapped out.

So, I actually just called my supplier and I said, hey, here's the situation, we want to scale this up. We know the market is there, but I need terms and I'll place a bigger order. And I kind of positioned it that way. Like I placed a big order but you guys got to give us terms. And they to my surprise agreed.

Mike: Yeah, that's surprising actually second order that quickly to do that.

Joe: Yeah, so they gave us 30 day terms and what I had negotiated was that I want a 30 day terms but I didn't want to pay until I received the order in full. And that was important to me because we were air freighting the inventory in and so I would get it in pieces. So, I would place an order and I would maybe get three cases a day for two weeks until they filled the order.

Mike: Well, interesting they did it that way. That's weird.

Joe: Yeah. So, it was probably the most expensive way, but it was the fastest way. So that's why they did it that way because I told them that I had to have it.

Mike: Okay. So you were air freighting over in in that manner out of necessity because basically, you get three boxes and that was like two or three days’ worth of stock, so basically right as they were coming off the line, you were having them shipped immediately.

Joe: Exactly.

Mike: Okay, got you.

Joe: So, we did that and I don't know it just worked out. The money was there when it was time to pay the bill. And for the next six months, we were able to scale up our inventory and scale up the sales to the point where I felt like it was going to be a sustainable business and I could probably go at it full time and not have the job as the backup. Although I did interview and I did accept a job right up until my start date and then I backed out at the last minute, but I was so nervous to make that leap to go out on my own. I mean I'd always had a job my whole life; I've been working since I was a young teenager and so to have that like safety net just be gone was super scary.

So also super exciting, but it was that time where once I started to be able to put in eight hours a day, it was more like 12 or 14 because you're excited about your own business.

Mike: That's why you become an entrepreneur, you become an entrepreneur, so you don't have to work eight hours so you can work 12 or 14.

Joe: Right. And hopefully at first three bucks an hour but that's kind of how it worked out because with success comes other challenges like cash flow and inventory, and then now I'm relying on one product, I better develop a second and a third and a fourth. And now you need cash for that. And so, we played that cash game for a year. I continued renting all the rooms of my house that whole time just for that security. And so it was really interesting. I mean, at one point in time, we had moved out of the rental house, we had purchased a house.

I actually bought a house the month before I was going to lose the job at Northline kind of crazy, but we had an idea. We bought a five bedroom house so we could rent out three of them, and it just worked out. We rented out those rooms that paid for our entire mortgage. So that gave us a lot of freedom to kind of take a bigger risk.

Mike: It was also probably the last time for a while that you're going to be able to get approved for a loan.

Joe: That's right. And I knew that, so we strategically kind of purchased it with knowing that that was coming and that that probably wouldn't be a very easy thing for them to sign off.

Mike: Great. Yeah.

Joe: So that worked out and yeah we've kind of been growing and scaling from there and of course we've had some heartache of our own that we can talk about if you want.

Mike: I was just going to say, it wasn't just a straight up ride. That's what I — and it's really wasn't for us either. I mean I try to be as honest about that on our podcast as well, and I think it's important to share other stories like that. And the Northline thing is probably not as relatable to most people listening to this podcast, but I think what you're about to talk about — and forgive me audience, I've known Joe for a while so I know what he's about to say. And this is this is just so typical probably of half the people listening. So, let's I guess get into where it became not a straight up victory lap.

Joe: Yeah, so right around the time that I was starting to feel like that college athlete who just got [crosstalk 00:36:09] the factory decided to deliver a product that was unusable on the biggest order I'd ever placed.

Mike: They stitched it wrong if I remember correctly, right?

Joe: Yeah, they put one inch section of stitching about a half inch over from where it was supposed to be in the holster and no gun would really fit in it. And so, it was completely useless. But luckily, I had negotiated those 30 day terms. And so I got the product, I didn't even expect it when I got it.

Mike: Yeah, my recollection was that you found out about this because people started complaining.

Joe: That’s right, that's right. So I got the product. It was my fourth or fifth or sixth order at the time. I didn't even open the boxes to look at them. I just started sending them to FBA. And yeah, I started getting complaints and started getting bad reviews. And I'm like, what the heck is going on? We've never had these kinds of reviews. I've never had this problem, but I go check and see what's going on, I better check the product. I go and look, lo and behold; the up section was screwed up. I reach out to the factory; they're kind of like bummer.

Mike: Yeah, we'll fix it on the next order is probably what they said.

Joe:  We'll fix it on the next order.

Mike: Yeah, that's always the answer.

Joe: And I said yeah, well okay. So the next order needs to be right now to be the same order that you just produced and I'm not paying for the inventory, I can't, I mean I can't pay for something that is defective. And at first they were out very understanding, yeah, we understand this was our mistake. They did own up to the mistake and accepted that it was their fault. But shortly after, I think when I said I wasn't paying for it; they didn't really realize that I wasn't going to pay for it.

Mike: Right. I just was surprised that they were that understanding. I've never — I think they misunderstood what you were saying probably.

Joe: I think so. It's clear as I said it, I think it was misunderstood. And so that kind of turned into a big back and forth. Meanwhile, they did produce the second order, the replacement order, and they did fulfill that order. So, it was good on them to do that. The reality of the product that they had sent was that there actually were guns that would fit it, they were just going to be smaller compact guns and it didn't fit our marketing.

Mike: But you had been selling it as like a nine millimeter gun holster or whatever, and it wasn't going to fit that anymore. So it's kind of skews of that listing.

Joe: Right, but we were able to sell some. And so we kind of worked it out. I told them look, I'll pay for every unit I've sold and whatever I'm stuck with, we’ll deal with. And so, I ended up stuck with probably a little more than half of the order. I sold the other half and we probably took a beating on a quarter of what we sold as far as bad reviews and returns, but we got through a lot of it. And like I said, they were good enough to produce the replacement order and still live up to the terms and everything of that deal and kind of saved us, but at the same token, they said moving forward you’re not getting terms, so I lost terms.

Mike: Right, that sucks.

Joe: Yeah, so they said, now we're going back to regular pay 50% down and 50% after we ship it because I was at like, I think my terms were like, 20% down and 80%, 30 days after I received it.

Mike: Yeah, those are great terms yeah. So I mean, how long has it been since, do you think you can maybe start slowly getting those terms back again or are you sleeping with the same factory anymore?

Joe: I’m with the same factory and I'm going to China this year, and I'm hoping that an in person visit will kind of turn the relationship back around.

Mike: Yeah, it makes a big difference.

Joe: It's been good. I mean, it's been okay so far, but I think it would help. Also I did secure a second factory to make the same product for me, and I have been splitting my orders partially between those two because of the continued issues because we did have even other issues after the fact. And so their quality was kind of coming into question and I just felt like I’d rather have two factories instead of one. And I don't know still how that's going to play out. I've been doing that for a while now. But yeah it's been okay.

Mike: So, the bad news is because again, I’ve known you for a while, this isn't the end of the bad news, there's been other challenges as well, right?

Joe: Absolutely. So, the reviews that we took from the bad inventory that we sold just destroyed the listing. We went from a four and a half star rating, I think we were at like 4.6 out of five star rating down to like a 4.1 star rating. So, we lost that half a star on the listing. That caused us to lose our ranking which also kind of has a trickle-down effect to everything else and your volume starts to down, everything just kind of started to come down. And then on top of that, we had about 1,000 people knock us off.

Mike: And you're not exaggerating.

Joe: No, I mean it was insane. So, lucky for us, we were first to market. So, while a ton of people knocked us off, we still had great reviews for the most part. And I didn't know how long I was going to take to get back but I had a feeling I could probably get us back to a four and a half star once we fixed it and just corrected those issues that we had. But I didn't know how long it was going to take, and honestly, I think by the end of last year, 2017 really, the end of 2017, I was ready to throw in the towel really. I mean, I was like we had been not only had the rankings fall but we had competitors hacking our listing, we had counterfeiters selling against us on our listing, and so for like four months it was just hell, just running the business was a nightmare. I was right back to the world on your shoulders stress level.

Mike: Playing like a mole all day.

Joe: Yeah, I actually I reached out to you and spoke to you about selling it and you said yeah well it doesn't sound like it's the best time to sell probably, but if you're over it and you just want to get some money off the table, talk to Joe Valley. And so, I did and Joe was great to talk to and he looked at all my numbers, and he just said man, you can sell it but if you do you're not going to get a favorable multiplier right now. Your business is basically showing the last four months was like your first four months. If a good business right now is selling at three times, you'll be lucky to get one and a half times, and that wasn't going to get me very far. So he said, if you think you can turn it around, you should stick with it and run it for the rest of the year, another six months and see how you feel.

Mike: And the good news here is that was a big moment and it did turn around and you've been able to get things on the right direction now.

Joe: That's right. You know, and looking back, one of the funny things is I actually convinced myself at one point that competitors were buying negative reviews or something was going on. In retrospect, I don't know if that ever really happened. I think the product needed to be updated, and we did update the product. And that turned to the reviews around almost immediately once we launched an updated version. And so, again hindsight, it was not beneficial to put all the blame on somebody else.

Mike: Yeah, well that's just human nature and other people do that right. I mean unfortunately yeah.

Joe: Yeah, so it was easier to say, hey, somebody is attacking us, this is unfair, and complain about it than just fix it. And reality was once I fixed it, it pretty well went away. And so, over those six months, we did get the rankings back, we got the reviews back up and yeah we've been kind of able to turn things around. And lo and behold, I'm enjoying running it again too.

Mike: Yeah which is great, I mean it makes me happy to hear this certainly.

Joe: Yeah, running your own business when things aren't going smooth is extremely stressful and it's just easy to sometimes want to give up on it. But I'm glad I had good friends who talked me off the ledge because now we're going strong again. And even if I still decided to sell the business in another six months, it'll be in a way better position to do so.

Mike: Yeah. So there's three main things, I think the moral of the story at the end of the day here that I think it's important for everyone to hear. Number one, you're probably going to have manufacturing challenges at some point. And you need to be prepared for that, mentally really, because it's a tough spot when you get the stuff in and you realize, oh, my God, things are going so well. I just sent in a bunch of inventory that's now in Amazon. People are complaining about it. And you're just like it's this horrible feeling of like between a rock and a hard place.

I've been there and so the way that we've rectified that to make sure the best that we can that doesn't happen is we inspect every single order, no matter how big or small every single time. I do not want something landing on my doorstep or even worse into Amazon and then finding out about the problem. It's wat too late by then. So, I think that that's one thing. But let's just talk about for a minute a couple other concepts here that I think that both of us probably gotten comfortable with now. First of all copycats, this is something that used to just — I would be consumed 100% of my day about someone who copied me.

And the way that I've just kind of changed my philosophy here is that you know it's going to happen no matter what, it's something you have to accept. And I'm never going to sell all the gun holsters on Amazon. So, as long as I can stay in my lane and my sales continue to stay strong relative to what they were in the past and I can continue to grow, I can see the fact that other people are going to sell their gun holsters as well and they may be knock offs of mine or whatever, but I'm in my lane and I'm going to figure out a way to be happy about it and enjoy what I'm doing and not let this other aspect of this business that's frustrating, get me off track and consume too much headspace. I'm curious, like how you've been able to rectify that and maintain a good happy balance.

Joe: Yeah. So, with gun holsters, the patents ran out in about the 50s on almost all patent. So, there's not a lot you could do now. If you go design your own locking mechanism or something, sure, you can patent that. And that's what some of the big brands with deep pockets will do although a lot of people don't like those. They don't want something to lock their gun into the holster; you want to be able to get it out quickly. So, people tend to still want a simple product. And so yeah, I freaked out about it when it first happened.

I probably spent six months worrying in my head of what was going to happen. But my marketing was good. My product was good, and I was there first and that gave me a big leg up. So, even today, I still have almost double the number of reviews as my next closest competitor. And I think that's because I had it to myself for a year. I really had the market to myself for a year.

But the other thing that really has made the difference for me personally is getting my personal finances in order and making sure that my finances in the business are in order. So, if it would have happened earlier, where I didn't have any cash reserves and I was still in debt, it might have been different. But by the time it happened, I had learned my lessons from the previous run and I was living well below my means and I had a six month security fund set aside. Actually, I don't know if you're a Dave Ramsey fan, but I pretty much followed his process of the debt snowball to get out of debt and to pay off my mortgage early and things like that.

And I just got myself into a better financial situation to where, hey, if it happens, it happens. I'm not homeless and having to sell my stuff again tomorrow. That just made a huge difference. I think just having the house in order, having some extra cash in the business so that if a manufacturing issue comes up or something, you get a hiccup, you’re not bare. If Amazon turns off your listing and it takes two months to get back, you're not scrambling to survive.

Mike: Yeah. And I think, probably if you're anything like me, living through — we ended up in this situation for a completely different set of circumstances. We were living abroad, and kind of going from place to place. We live in Costa Rica for a while then we lived in Cayman Islands for a year. We live in Costa Rica three years and Cayman Islands for a year then we moved to Vegas and then lived in an RV. And throughout that time, we were actually pretty financially secure but we couldn't travel with a whole house full of goods. So, we were living a very minimalist lifestyle. And we basically had two suitcases. And if it didn't fit in one of those two suitcases, it wasn't important to us.

And so, I learned it from just from a different angle, but when I started, when I moved back here, and got another house and started accumulating crap, it actually makes me less happy and puts me I — you realize how little you actually really need. And all these things require just putting more pressure, more stressing your life and they're really completely unnecessary. We just get sucked into this consumeristic society because that's just kind of the American way like I was joking about early on in this podcast. So I mean, I guess the end result is you probably have become very comfortable living with less things and probably don't desire to have as much anymore and have a lower goal that's much more attainable and isn't as stressful to just waste your life behind a dust [ph] just to attain some goal to buy a bunch of things you don't need.

Joe: Right, absolutely. And that can really consume you. I think the quote from Fight Club really summed it up as the things you own end up owning you. And if you let that happen, then you can really find yourself pretty miserable with a whole lot of stuff. So, keeping everything reasonable and keeping expenses reasonable and both personally and to the business has been a huge benefit just to being able to sleep well and have less stress and less worry. It doesn't go away but it's definitely better knowing you've got some backup cash inside and things like that.

Mike: Yeah, exactly. Oh, man. This has been an amazing talk, one way longer than I was expecting. We're supposed to get to free plus shipping and top of funnel ideas on this episode, but we're like at the 50th minute mark. So, I'm going to commit to doing a part two with you, but a completely different topic. We will get just an entire episode of free plus shipping and top of funnel is actually what I was most looking forward to talking about because I have a bunch of ideas for you. So, I'm excited to get you back on and we'll get that recorded as soon as possible.

Joe: Cool. Yeah. Maybe we can talk about the Canton Fair too since…

Mike: Absolutely. We'll throw that in on the episode as well.

Joe: Awesome.

Mike: Cool Joe.

All right guys, that's a wrap. It's going to do it for the 225th episode of the EcomCrew Podcast. Listen Joe, I want to thank you again for coming on and doing this. Not a lot of people are willing to share the bad stuff which again, I think is important to be doing in business. We share a lot of all of our wins and successes. It's probably 225 episodes we’ve done on the EcomCrew Podcasts so far, probably 220 of them or something [inaudible 00:53:48] is that. But I think it's important to also talk about the difficult stuff.

And I love how Joe discussed getting a business with family, a business that was on the way up, spending too much money, getting too many expenses, having a warehouse, having to eventually move, really buckled down and go all in on this business and save some money to get the inventory together, getting involved in a niche that he’s passionate about, talking about the downsides of private labeling and how that's kind of come back to backfire manufacturing, but it all works out in the end.

So, a lot of things like I say a lot of times, we want to not only tell you what to do but what also not to do. That's just as important sometimes is to avoid some things. So, hopefully this episode was packed full of that for you guys. And again Joe, thank you so much for coming and kind of bearing everything and sharing all that stuff with us. It really means a lot to me and I'm sure to the community. All right everyone, that's going to do it for this episode. So until the next one, happy selling and we'll talk to you soon.