Today I want to talk about how we are able to take a 1.9 million dollar per month e-commerce brand and increase profits by 10 times in a matter of just a month or two.
First I want to show you over here in Shopify what this brand looks like. This is a brand we’ve been scaling since the beginning of about 2019, so right at two years right now. I’m looking at December, this is December 1st through 31st and it’s comparing it to the month before which is why it says November right there.
On Shopify we did about 1.9 million dollars in sales now we just started selling this brand on amazon also. It did about 70 grand 67 grand i believe in sales on amazon in the same month. We were just barely shy, about nine thousand dollars shy of the two million dollar mark for the month.
Now this brand if i jump over here to this report, this is basically showing from the beginning of 2019 which is when i got involved with this and became a co-owner, and then all the way until the end of last year.
If you look back at the beginning of January we did about 17 grand a month in sales and then we started scaling this thing. A few months later we’re at 100 grand a month in sales. Fast forward to the end of that year about 570 thousand dollars in sales.
Fast forward another six months or so, it’s at about 1.2 million dollars and so forth. We kept scaling it and then last month we did about almost 2 million dollars in sales. Now how we did this is a subject for another video, but I’ll talk more about that at the end.
What I want to talk about now is how did we increase profits? Because our goal with this business from the beginning has been to grow sales and the customer base as fast as possible without losing money. That’s because our goal has been to sell it at about two years, so literally right now we’re starting to talk with an investment bank about selling this business.
For us we knew it was going to be based on how fast we grew revenue and a multiple of revenue is the valuation that we were shooting for. However the market changed, Covid happened, you had some big blow-ups of companies that people put a lot of money into like WeWork. The appetite for businesses that weren’t producing a lot of profit changed a little bit.
We’re still trying to grow revenue as quickly as possible but about six months ago the investors we’ve been talking to basically said that, hey you know things have changed a little bit. It’s like you need to be showing about a 10x bottom line profit after everything’s considered.
Product costs, expenses, salaries everything about 10x bottom line. Problem was first six months of the year we were just trying to grow sales as fast as possible without losing money. Without having to put our own money in, without having to put anybody else’s money in.
The profit for the first six months bottom line was only about one percent, which may sound crazy, but that was the goal because we wanted to grow sales as quickly as possible.
We had to make a shift and so we’ve been able to since then produce a consistent bottom line net profit of about 10 percent. We were able to increase it by about 10 times and that only took about a month or two. Now how the heck did we do this because we haven’t really slowed down sales a lot, how are we able to increase profits so much?
The way we did it is a few different things so I’m going to share five main things that we did.
First, reduce discounting so we were offering coupon codes all over the place and so we basically took those down quite a bit. Rather than offering a 40 or 30 percent discount, would maybe offer a 15 or 20 percent. That helped a lot. We increased or decreased discounting a ton.
Second, we slowed down shipping which may sound crazy. You may think that it may upset a lot of customers, but we have a big subscription base that’s about 30% of our revenue. They buy this product on subscription and so they don’t really know when the product shipped out. It’s not like they’re placing an order that day and they’re expecting it a few days later. That’s like their first time buying from us.
Instead they’ve been on the subscription thing for a while. They just know around the same time every month they get the product, and so we were actually able to talk with our suppliers. We found out they were shipping everything out expedited two-day shipping which was costing us a ton of money and so we talked with them and we slowed it down by a few days.
That saved us a lot of money that increased profit a ton actually slowing down that shipping a little bit, but we haven’t received any blow back from customers whatsoever, since most of them don’t even know that it happened.
Third, we increased the minimum order quantity on different coupons and free shipping offers. Rather than you know, you see in a lot of stores if you go to a store maybe it’s fifty dollars, seventy five dollars, hundred dollars to either use a coupon or to get free shipping.
That’s what we started doing because in the past we would let people use a coupon or get free shipping when they only ordered like 20 bucks worth of stuff. The problem is is the shipping cost still costs us a lot of money no matter how much they order.
But, the more they order the less shipping costs cost us per dollar they spend in revenue, because you know if they only order $20 bucks worth of stuff, maybe the shipping cost has eight dollars. If they order sixty dollars worth of stuff, maybe the shipping cost us is $12 it’s not a big increase, but we’re making way more money.
It’s way more profitable for us if they order a bunch of stuff at once even if over the time they order the same amount, and so we increase the minimum order quantity on a lot of the promotions.
Fourth, we increase the price on upsell products. When you buy products on our store you have to go through the checkout, and you’ll see that we offer different complimentary products. On some of those we started split testing using Zipify with some different price points. We found out that we were able to bump up price a little bit on those and still produce the same lift in conversion rate and average order value, so we increased the price on some upsell products.
Fifth, we switched to a new affiliate system. We were using affiliate lead Shopify and then we switched over to Everflow and it’s a little more complicated system. Long story short, we were able to reduce affiliate fraud a lot. A lot of people doing weird link clicking stuff that Everflows way better at kind of rooting out.
Also we started monitoring which of our affiliates were running ads for our own brand name in Google search and Bing search, and so we started telling those people. It’s against almost everyone’s affiliate policies to do that because it doesn’t do you any good because it’s your own brand name. We started basically kicking those people out and telling them they couldn’t do that. That also helped a lot because we weren’t paying affiliate commissions on sales we would have gotten anyways so these five things made a massive improvement.
We also did some other stuff but this would be a much longer video if I went through all that, but these are some of the five main things we did to increase profit from one percent to about 10 percent. Now you might be wondering how the heck did we scale this brand in the first place, and what is the brand, what are the products? All that sort of stuff, well I can’t go into all that right now.
We have some other videos here on the channel you can check out, but what I would also like you to do is consider joining us. We have an upcoming three day live event. it’s a virtual event January 27th through 29th. We call it SellerCon, so this year it’s virtual because of everything going on in the world but it’s going to be an amazing three-day experience.
I’m going to go through how we built this brand, how we scaled, and what the products are, how all that stuff works. I’m also going to go into way more detail about how we’re able to increase profitability and how you can do that in almost any business you run. It’s a three-day event, we’re going to be talking a lot.
We’ve got a lot of speakers that are coming that are talking about how to find products to sell, how to sell on amazon, me and some other people are talking about how to scale on Shopify. We’ve got two people talking about funding options, everything you need to start or and or grow an e-commerce business you’re going to find at SellerCon.
Matt Clark is the Chairman and Co-Founder of Amazing.com, a serial entrepreneur, and investor. He’s been featured on Forbes, CNBC, and Entrepreneur.com.