The E-commerce Leader

[00:00:00] Michael: The reality with a lot of partnerships that I’ve been part of. I think it’s a lot harder to be a good business partner and to not micromanage each other and to not make all the decisions together, which is incredibly inefficient sometimes.
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[00:01:11] Jason: Hot Take conversation might be brief today, but we’ve got one topic that I think is going to be fun. And that is what’s the single biggest thing you can do when you’re starting out to really scale up quickly and effectively. Now, Michael, you might have some thoughts and ideas on this. I do as well. So I’m happy to lead off with my first big suggestion for how best to scale up.
[00:01:31] But you want to go first. Fielder’s choice your
[00:01:34] Michael: choice, please go ahead. That sounds good. Let’s hear your thoughts. So it’s an interesting topic. I think it’s, yeah, much needed discussion actually. So I’m glad you chose it so far away, man. Let’s hear your thoughts.
[00:01:45] Jason: Yeah. So the thing that I think is crucial when you’re starting out is to figure out how to add a team member and figuring out how to add a team member gives you a cascading sort of ripple of positive benefits that impact your business. And I know when you’re just starting out, you’re like, I don’t make any money yet.
[00:02:05] I don’t have anything organized yet. I don’t have really, my details sorted out yet, but for all of those reasons, Quickly adding a team member to your e-commerce operation. We’ll give you the clarity. You need to sort out three or four or five, really key things. And so for me, my way of thinking, adding a team member is absolutely the first and biggest leverage point.
[00:02:31] That you can add into your business, early, and as soon as you do it, you’ll be tapping into other people’s time and other people’s skill skillsets, and really figuring out how. On your business and design it rather than just working in your business as a technician. So that’s my hot take for the number one thing you can do to scale up, Michael, I’d love your point of view on it.
[00:02:56] Tell me if I’m wrong. Tell me if I’m right. Tell me if you’ve got other ideas for how best to, to scale up quickly at the beginning, which is, I have to say the first year of, e-commerce, whether you’re doing retail arbitrage or some other business, What do you think?
[00:03:08] Michael: I think like a lot of things, it depends.
[00:03:10] It’s interesting that you go to people as the very first thing. I certainly think at a certain stage is your business. People are the biggest constraint to growth. I guess if you look at scaling. So what stops scaling, is three constraints, cash time and including other people’s time. Of course, and energy, I guess in time you can include.
[00:03:29] Effective you are at getting a result in a certain time. So somebody who spent in their life, Photoshopping, beautiful images for e-commerce pictures is going to do it 10 times faster than you or I might do for example. So it’s included for me. It’s interesting that you go to people first.
[00:03:41] I would say before you add people, you need to be able to afford that extra overhead. If you’re adding a permanent team member, or even if you’re adding a direct cost of some client, you need to build to afford that. So for me, cash is the first constraint to overcome really. And, The phrase that Springs to mind, always in this scenarios, growth sucks cash from the scaling up by Verne Harnish, the word scannings in the title.
[00:04:00] So it’s obviously relevant. And I think so sources of cash and cashflow are really important. So I think if you’re really in the first year, to be honest, you may want to radically rejig your business before you get stuck in a rut. As you said in the podcast a while ago, Jason, that be careful, which right.
[00:04:15] Your cheese you’ll be in it a long time. So if you have set things up. With a business that is very capital intensive working capital intensive example. What I used to, really focus on and still have the most experiencing importing private label products from China. Then I think you need to rethink and in scratch and think about setting up a business where the cashflow is in your favor.
[00:04:34] If you can get paid in advance. So negative cashflow cycle, in other words, why drop shipping? If you can make that business model work, then that’s amazing for scalability. I’ve got a client, who’s an example of that. He’s got a Shopify business who scaled to about 300,000 pounds, about half a million dollars in his first year of business.
[00:04:50] Because of that cashflow characteristic. I think so interestingly, more than one way to skin a cat.
[00:04:57] Jason: Yeah, I totally agree with that. The question is, do you have the cash flow in your business to afford something? Whether it’s more product or to ideally pay yourself or to, do some advertising, do some AMS if you’re on Amazon, or to, to do something.
[00:05:13] Here’s my thing, though. If you have in your mind that you want to add a team member, to your point, it could be a contractor, VA somebody from Fiverr or Upwork. Any online jobs pH in any level of contract services, it puts the demand on you to create cash, to pay them. And that is a fantastic leverage point.
[00:05:33] So you say to yourself at the very beginning, my business has to pay someone $400 a month. Therefore, my, this has to earn. The unit of $400 a month. I love that line of thinking and the impetus that, that creates in your business to do something effective. Other than just having a bit of money that you would then put into maybe more product or maybe feel like, I’ll just keep that.
[00:06:00] And I don’t know what will happen and magically, it goes out the door through some other random expense. So I take it completely. But I do think that from my way of thinking this idea of adding a team. Is, is critical. And I’ll just say one other bit, and then I’d love your point on this as well.
[00:06:16] Your point of view, the team member doesn’t necessarily have to be paid. You could just add it. You could literally create a team. You could have a partner and the partner could be adding all of their time and energy to help you scale the business in exchange for some future 50, 50 split or something like that.
[00:06:31] And that piece of it’s another option and a business partner can be a huge. Blessing. It can also be a huge burden. You want to think that through carefully, but that, that level of adding a person is also something that could be appropriate as well. So any thoughts on partnerships as a part of that?
[00:06:50] Michael: Yeah. It’s a very good point. I guess what you’re doing though, is you’re adding the time, the constraints I’m putting out time or mental energy or skills, all of which are constraints as well. If you bring a person with the right skills in, they own a piece of the business, then you don’t.
[00:07:02] To pay them cash. The only thing I would say is equity is in the term it’s in the short term, not a cash problem, but in the long-term the most expensive form of funding. So giving away half of your company or whatever you think it is, is a very big cost that people enter into, I think probably fairly too lightly.
[00:07:18] Not because it’s the wrong decision that way. Sometimes it can be amazing if you’ve got the right partner, as you say, but because they don’t think about the long-term ramifications of it. One halfway house, which may be of some comfort to people. And I would be much, much quicker to enter this kind of arrangement would be something like this.
[00:07:32] I had a guest recently, Josh Dietrich who’s recently sold a business or just in the process of finalizing an eight figure sale of the Amazon series. Private label, custom product business, and one constraint. He was. Wasn’t in the first year of business, it was early stages. So maybe 3, 4, 5 years in, that he was just not getting enough products out of the door.
[00:07:50] And because he needed somebody who was focused on product development. And that was launching, I don’t know a handful of products a quarter, and he got his brother. Came along to Las Vegas conference on, on Amazon and was really blown away by the whole business model. And so his brothers saw stuff and basically in return for some percentage of the profits that were made on the products.
[00:08:10] So that was quite a risk for his brother to, to, make that effort in a term for that very uncertain cash that works out very well. Josh and his business partners took on the brother, as an employee, not as a partner, I believe, although there may have been elements of that later, but next step was to pay him as a full-time member of staff.
[00:08:25] So then the risk reverted more back to Josh and his team that this brother became an overhead to the business and that’s had to generate more. Income and profit than he, was cost. And that worked out very well. So that’s an interesting stepping stone. There’s nothing that stops you after that, then looking at equity options.
[00:08:39] So I thought that was a very interesting story. Not often heard of an arrangement like that. It requires a lot of mutual trust, but that sort of thing. It doesn’t mean giving up equity and it’s less of a kind of hardwired arrangement. Meaning if it doesn’t work, everyone can walk away from it and move on to the options.
[00:08:54] So I thought that was very interesting.
[00:08:56] Jason: Yeah, that’s really creative. And, I think your family being woven into your businesses at two edge sword, but it definitely can add, the source of free, additional help at the beginning. And if you have a family member you work with effectively, You really couldn’t click with, I think that’s a fantastic idea.
[00:09:12] Obviously we started a online together, my wife and I did in 2007. I was really her supporter helper marketer, and she was a technical focus person. And, I think there’s huge value and benefit there. And even with, one of your children or your spouse, or, a brother or sister who’s willing to help you, it makes you do all the things I mentioned.
[00:09:34] It makes you say. How do I have my system sorted out? How, how do I, do you know, FAQ’s or process steps that someone else can take on and how do I integrate other people’s time into this business in a way that makes it a successful? I think that’s, I think that’s valuable.
[00:09:52] I would say also, as it relates to equity in a formal partnership, you have to ask yourself, the question is the. Potential outcome
[00:10:08] and the potential risk. Yes. And some people have said trends, a hope diamond is better than a, a full ownership of nothing or a chunk of coal. I think it was Warren Buffett who said something along those lines. Is adding a partner going to be a creative or additive to your business more than it takes away into tracks.
[00:10:29] And the logic there is that we all know stories of businesses that have. Gone to scale seven figures, eight figures, nine figures, billion dollar companies. And you look back at the founders and if there were three founders or five founders or six founders together, it didn’t matter because there’s so much money in that kind of business at that kind of scale that everyone wins.
[00:10:55] If it’s structured well, and everyone’s a good partner and everyone, does their part. And I think that’s the risk reward calculus. There is, could we get to seven or eight figures? And if we did then would my partial ownership of a business be. Better than being a hundred percent owner of a $200,000 a year e-commerce business.
[00:11:17] So that’s the thinking, I think, as it relates to the question of partnership.
[00:11:21] Michael: So yeah, the whole thing is a way of getting temporarily getting around the. And time equation. In other words, I’ve got enough cash to employ somebody full-time or, engage them part-time, he’s expensive labor and I haven’t got enough time to scale this business and I take your point.
[00:11:37] And you’re right. 20% of something amazing is much better than a hundred percent of something rubbish and you’re absolutely bang on without no, no arguments here. The only thing I would say is if it’s in the first year and if you’re being specific about that magical the first year and a half, I think it’s very hard to tell if somebody is going to be that diamond, that’s going to make your business blow up or not.
[00:11:55] I would very strongly advise them. It’s very different for you being married to cinema for years, If I may say, so have strong faith, which would probably give me, I don’t have faith, but I’m very happy to do business with people with faith because they have a moral and ethical framework. They, you understand, so you had very strong reasons to believe that you could trust each other.
[00:12:12] And that’s quite a common thing of, husband and wife. For good reasons. Again, it can cut two ways, but I would say other than that, I would ease my way into it. I would work my way through different arrangements. Profit share can be very, a good sort of stepping stone, I think, just to choose, unusual, but very logical way of doing it with his brother.
[00:12:30] It was very good. The other thing I would say is that the risk with the partnership is actually. To your point about SLPs and things. This is interesting where this conversation’s going, by the way, this is a quite a free flow. I like it because this is the sort of reality that you have to wrestle with.
[00:12:46] Isn’t it? So strategic decisions, the reality with a lot of partnerships that I’ve been part of. And that’s probably because I don’t know how to do it well. But nevertheless, I think it’s a lot harder to be a good business partner and to not micromanage each other and to not make all the decisions together, which is incredibly inefficient sometimes.
[00:13:05] Relative to being a good boss, which is obviously not an easy art either, and I’m not claiming I’m great at that, but at least it’s easier to say you do this job. I do this job. We pay you, you deliver X it’s a clearer situation. I think so. Yeah. I think partnerships can be incredibly successful to your point.
[00:13:20] Absolutely. I just think there’s a real art to getting it right. And I think it’s a lot harder than it looks from the outside. That’s all I would say.
[00:13:26] Jason: No, totally. A hundred percent agree. Both things are. It’s hard to be a partner. It’s also hard to be a boss. And I just read through, or actually listened on audio book to 80 20 by Richard Kotch.
[00:13:38] I had only ever heard of 80, 20 by Perry Marshall, which is a different 80 20 book. But the original, I guess you could say 80, 20 by Richard Kotch. Genius. And he taught it’s all about, this idea of using this Parado principle 80 20 in terms of leverage and focus. And I love his emphasis on, the power of other people’s time and energy and effort and that kind of thing.
[00:14:01] And to your point, he does stress the fact that. Having a team, being a team leader, it is a maximum opportunity for leverage, but it also a challenging skill to learn. And that’s the thing to lean into. And in your first year in business, you’re trying to solve for so many challenges.
[00:14:19] You’re trying to figure out how to sell on a marketplace or on your own website. If you’re using Shopify. To, to like that, you’re trying to figure out your product and whether the product is priced right and packaged, dried, and is working right. You’re trying to figure out the customer and how to attract them, how to engage with them and retain them.
[00:14:35] Will they be interested in, you and your brand for the long term beyond the, just the one.
[00:14:43] You’re an idiot brand-building and on top learning about leveraging other people’s time through partnership or through employment, can feel like a huge set of challenges, but this is the great game of business, isn’t it? And for those who can figure it out and do it, the, to the Victor goes to the spoils and, but I think, one step at a time, and if you’re at a point where you’ve got a few of the other things for you, You’ve got maybe the product sorted, the platform sorted out and you understand what the customer is doing there with your product in terms of frequency purchase and their willingness to buy.
[00:15:15] Then the next question in my mind is, yeah, let’s jump into figuring out how to have a leverage of time, in your business. Okay. Let’s wrap it up, man. Any final thoughts?
[00:15:24] Michael: Yeah. I think what you just said is absolutely right. You are trying to solve for so many things. So the point you just made, I would like to emphasize that, and maybe we have a slightly different sort of take on this because you’re very heavily, weighted towards digital products with your own personal experience.
[00:15:38] I’ve been very much in the physical products. But, I would say I’d want to get the channel, the products, pricing, packaging, customer, social media, brand, building. To a fair point that is reasonably proven before I add anyone else to it. And I think for me, the biggest barrier to scaling on Amazon is actually cash.
[00:15:51] Not people up to quite a high revenue. Maybe that’s off Amazon, not really true because there are so many jobs to do and it’s a more manual labor and you’re building things more from scratch and yeah, you own more of it. So it’s better overall, but, so that’s interesting. I think you’re right though. I think at certain point and probably what I do see why, where I absolutely agree with you is that.
[00:16:12] I see Amazon business owners that really leaves the question of trying to hire people and learn that skillset, even by doing it part-time and doing it badly the first time just to get out of their system, they leave that point too late. And I agree with you that actually for a lot of people, I don’t think they’re in their first bit year of business.
[00:16:26] I think they’re probably in the first 3, 4, 5 years, maybe their first million. That’s a great inflection point at which you probably need to get people on board. I totally agree with that. Okay.
[00:16:35] Jason: We’ve got it. My number one. Tip to scale a business up at the beginning is people your number one tip is cash or infusion of capital orange
[00:16:49] Michael: engineering.
[00:16:49] It’s such that the cash flow characteristic doesn’t require it. Infusion of capital there’s yeah. Cash on cash flow. Two sides of the same coin. Absolutely. Yeah. I love
[00:16:56] Jason: it, man. All right. As always, we’ve come to some good consensus here and thank you everybody for hanging out with us today on the call.
[00:17:03] And, or in our live broadcast into the Omni rocket pro user community. Thanks for your support of the show. We’re climbing on the charts, man, on the Callin app itself. If you haven’t checked that app out, then feel free to hit it up and look for the e-commerce leader. Collin show we’re in the top 10 in education.
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[00:17:47] Really appreciate your support for the show. And if you want to reach out to either of us, you can reach out to Kyle hammer and [email protected]. Michael BZ. You are on amazing fba.com. Is that your best? A website of choice for fall.
[00:18:02] Michael: Yes, indeed. Very wants to come and get in touch. And by the way, I’ve, I actually managed to find the rating button on my Spotify app the other day.
[00:18:08] It’s remarkably simple. So if you just look folks, if you’re wanting to give us a bit of love, then just look under the show episode or title of the show, and you’ll see a little button marked rating with a star on it. So just hit that and to give us your and Betsy rating as well.
[00:18:22] Jason: Thanks everybody. Appreciate it.
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