Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart.
Joining me is an entrepreneur who’s heard me say that so many times. He’s a Mixergy fan who said what would happen if he took everything he knew about online marketing and applied it towards selling something real, something tangible, something physical that you can actually get in the mail and wear. And that product was a bra that lights up. And he’s expanded so much since then.
I invited him to talk about how he built his business, how big they’ve gotten, how he did it and which marketing techniques he applied. His name is Nick Kneuper. He is the cofounder of Electric Styles, which is an apparel company that has electroluminescent wiring in its clothes. You’re nodding. I did pretty well with the word, right? Electroluminescent wiring.
Nick: Nailed it, man.
Andrew: That’s wiring that lights up, right?
Andrew: And this interview is sponsored by HostGator. Later on I’ll tell you why you should go to them if you need a website hosted. And Toptal–if you need a developer, you’ve got to check out Toptal.com. Nick, welcome.
Nick: Thank you. Good to be here. Thanks for having me.
Andrew: I hear this whole thing that got you started was the sense that school was going to set you back financially and put you into deep debt. How much debt were you going to go into because of school?
Nick: I was in my second semester of sophomore year, so just under two years in and I was closing in around $45,000 to $50,000 in debt, not including the interest that was already starting to accumulate. That was a big wakeup call to me, a number that big. I just didn’t want that to stick with me why whole life.
So, I started figuring out, “What am I going to do to chop at this while I stay in school?” It was through that necessity to start making money that I founded my first company with a couple of business partners, Drip Feed Blasts, a link-building software.
Andrew: You know what? This debt is insane. You can’t do anything to get rid of it. You can pause it a few times, but not enough times to really build a business for yourself and you can really destroy yourself financially before you even get started in life.
The reason I’m so charged up about this is I did talk last week to an entrepreneur in the Mixergy audience who is so deep in debt he has to be in a job he hates and then he still has to work excessive hours on it and it’s not a job that’s especially mentally stimulating. He doesn’t want that. He wants to build his business on the side. It is murder for him. I felt so bad. I hate to admit this, but I will. I sent him groceries because I just felt bad that the guy couldn’t even afford that. All his money had to go to his debt and some student debt.
Nick: I had a guy send me a pizza from Dominos on a Saturday night because I had money in my PayPal account and I couldn’t draw it down to my bank account to eat.
Andrew: Why not?
Nick: Well, it was on the weekend and it wouldn’t have hit my bank account until Monday. He sent me out a pizza to do some link building work for you. Been there–from the receiving side, it’s much appreciated.
Andrew: So, you know what? I’m looking here at an old comment on Mixergy from you. You’ve been a fan for a while. It’s one of the smartest comments that have been on the site. It had to do with this post that I did where I said I’m going to have someone come on to talk about link building.
A conversation sprung up between Brian Casel, who also built a successful business, Restaurant Engine, which he ended up selling recently, and you and your feedback was, “Google Panda didn’t impact link building strategies. The Google Penguin update did,” and you go on from there. Actually, I don’t even know if that’s true. What I like is the clarity you’re adding to this. Is that actually true, that Panda didn’t impact link building strategies?
Nick: I would have to . . . Panda was very content-oriented. That was back in like 2010. There was link things involved in Google’s update. But the big thing with Panda was focusing and different kinds of metrics. Google was already working on the link side of metrics. Penguin is where they really came in and started hitting the links that hard.
Andrew: Okay. I realized I didn’t even like fact check that. I was just impressed with all the details in there.
Nick: When did I post that?
Andrew: You posted this–this specific post was June 17th, 2012.
Nick: June 17th, 2012. Okay. So, I had just gotten out of Drip Feed Blasts. I was just making sure I wasn’t a biased commentator. If you’re selling links and you’re talking about stuff . . .
Andrew: Your first step though was not selling links and doing SEO and doing all this online marketing. Your first step, as I understand it, was writing articles.
Nick: Yeah. I actually started writing articles on Digital Point, like $5 for 500 word articles for beer money when I was in high school. I had gotten to Digital Point. When I was 15, I actually flipped a website, DiscussWii.com. This was when Nintendo announced the name of their new gaming console. So, me and this guy I had met online, we found this website available, DiscussWii, register a forum, use a free $50 AdWords credit, run traffic to it, grow the forum, flip it for $600.
I was like, “Oh wow, the internet is for more than videogames. You can make money doing this.” So, I found my way to Digital Point, started writing articles. And then on Digital Point I met my business partner at Drip Feed Blasts, Josh Storz, and he got me into the link building side of things.
Andrew: You know, I went to see if Digital Point was still up. It is still up. It’s a forum for people who do all kinds of online businesses, right?
Nick: Yeah. They’re owners had some shady stuff go down with cookie stuffing and eBay, back in the day. I don’t know how well they’re doing.
Andrew: They’re still up and running and people are in there talking. I just lost track of them over the years. So, you started learning about SEO. What got you fired up about SEO? I don’t imagine somebody coming out of school is that hot for search engine optimization.
Nick: For me it was just really exciting to understand how the internet worked, how the internet played. It was like someone peeled the layer back and I was able to look inside at how search engines actually worked. It really excited me just to be able to see how you could follow the rules, make these changes and them boom, it makes massive impacts on people’s business.
Andrew: Do you remember one thing you did that had massive impact?
Nick: Back in the day when we were building links, of course. We were running some not so kosher links that Google wasn’t a fan of, but they were effective.
Andrew: Like what?
Nick: We were running forum profiling with this Russian software. We had a farm of this Russian software just churning out links. That was super effective.
Andrew: How did that work? I don’t know that.
Nick: Yeah. So, basically if you sign up to a forum, you know how you get a little signature link? So, this piece of software would sign up to a forum. It wouldn’t post on it. It would sign up to the forum and drop someone’s URL in the signature link. Now, when you do that one time, that’s not going to have a big impact on SEO. When you do that 1,000 forums and you point that to a website . . .
Andrew: I see. What would it say in the message to generate the sig file underneath it?
Nick: So, sometimes we would just drop the URL and then sometimes we would keyword in the URL so that it passed that.
Andrew: And it was nothing but the URL or an anchor text in the URL in the comment? That’s it?
Nick: Later on we started playing around with allow people to put text around the link. It just worked with the link at the time. I actually think that we had a big impact on Google looking into and shutting that down. This software existed for a really long time, but it was in Russian. It wasn’t easy to use. Josh bought me a copy and he’s like, “Hey, Nick, just play around with this.”
One day I find this link and it’s like, “Scheduler.” I’m like, “What is that?” We found it had an ability to actually schedule it. So, Josh would just feed commands to it and we just built this whole automated farm. So, the end user, they never had to mess with the software. They just came to our website and they said, “What are you trying to rank for? What’s your URL? Pay us $99 a month.”
Andrew: How didn’t you get forum owners to delete your comments?
Nick: Oh, they did. I’m sure they did. But we just had scrapers that would find forums all over the place. It was a really good experience. I learned a lot about business. I learned a lot about software, front-facing, but when you build your company on something that’s so misaligned with Google, you’re building on quicksand.
Andrew: Was that the whole company, that piece of software or did you have anything else?
Nick: I dropped out of college when that blew up. We went from nothing to $100,000 a month in six months. It’s four of us. We have no idea what to do with the money. It’s like 95 percent profit margins.
Andrew: $100,000 a month in recurring revenue.
Nick: Recurring revenue. So, I paid off my student loans, I bought a used car. It was a wild ride.
Andrew: What’s the funnest thing you bought with it?
Nick: The funnest thing? That’s a really good question. I bought this really nice Hugo Boss coat that I still have, like four years. It was super expensive. This was dumb. I thought I was going to be this money maker my whole life. In hindsight, I dropped way too much on a coat, but that was new money. That was before I really appreciated it because that money went away before I came full circle.
Andrew: The website is still up. If I go to DripFeedLinks.co, that’s your business, right?
Nick: That’s a competitor, actually.
Andrew: Oh, really? Somebody else took your name?
Nick: We were Drip Feed Blasts.
Andrew: I see. They’re ranking for Drip Feed . . . I see. I typed “Drip Feed Blasts” at the top and they ranked higher than you.
Nick: Yeah. I can tell you they’re not making $100,000 a month. That type of link building is long gone.
Andrew: What’s the deal with this DripFeedBlasts.Weebly.com?
Nick: I don’t know. I came out of the business and Josh kept running it for another six months or so. I’m not sure if he’s still running it right now.
Andrew: Okay. So then what happened if you weren’t doing $100,000?
Nick: Google made some changes and the links all of a sudden stopped working so well. We knew it was coming and we tried to pivot into making different links and offering different services. We didn’t know what we were doing. We had so much money and we started building things that like we just thought were cool and shiny.
Andrew: For example?
Nick: We were just focused on the UI. We were trying to build this whole new awesome UI. If you look at Wayback Machine, the original UI for Drip Feed Blasts is terrible. So, we dump all this money into UI and we forget what matters–are the links actually working? So, we stopped. That was a depressing roller-coaster ride down.
Every month you’re shedding like $10k a month in revenue and you just can’t stop the bleeding. So, eventually I had to leave but I paid off my student loans. I was back to zero, debt free. I was able to move to California and started trying to pursue some new startups while doing some freelance marketing consulting on the side.
Andrew: What kind of freelance marketing were you able to do?
Nick: So, I started in the SEO realm. I ended up getting a client and he was selling pest control online. I know a weird amount of pest control facts just from working with these guys so much. But he loved my SEO work that he gave me a shot to take over their Google AdWords account.
So, then I just started playing around with Google AdWords. It’s similar to SEO. There are some similar concepts, but now you’re trying to drive sales. Now there’s money on the table. It was so exciting to me. Props to that guy for giving me a shot at it. After that, I kind of just really plowed into the SEM side of things and just kept growing.
Andrew: Did you start building an SEM business?
Nick: I was doing consulting for small businesses. I was never able to drive like people via SEM myself. I just got referrals, word of mouth kind of people. I was doing webinars online teaching people about SEO and then saying, “Hey, if you don’t want to do it, I’ll do it for you.”
Andrew: I see. What was that company? Is that Bold Formula?
Nick: Bold Formula was actually another failed software startup. That was in the SEO realm. Basically what I tried to do was help people diagnose on-page SEO problems through a report. It was cool but I built it a lot for me and not so much for what people would actually want and need and use. That was a really big lesson for me. You need to build stuff for the customers, not just because it’s a shiny new toy.
Andrew: What’s one thing you look back on and say, “I definitely shouldn’t have done that and I wouldn’t have if I thought about the customer more?”
Nick: With Bold Formula?
Nick: We built this like mapping software that could show you how your website visually linked together. And it was cool, but we spent like months on it trying to make it cool and no one gave a shit.
Andrew: I would have thought that would help also. It was kind of cool.
Nick: Maybe we just didn’t find the right customers.
Andrew: But you know, I can’t see what I would use it for.
Andrew: All right.
Nick: That’s the problem.
Andrew: And then you had this guy. Did he already have the business idea in 2010 before you?
Nick: Yes. This was 2013 or 2012. This was the end of 2012 when I met my partners.
Andrew: I see. But he had the idea back in 2010?
Nick: Oh, sorry, Drip Feed Blasts?
Andrew: No, I’m talking about Electric Styles.
Nick: Yeah, sorry. Bernardo had the idea back in 2012.
Nick: Yeah, you’re right. No, 2010 was when he made the first light-up bra.
Andrew: So, where does he come up with the idea of a light-up bra?
Nick: So, he’s a Navy guy, so it my other partner Don. He had just gotten out of the Navy and was going to a music festival called Electric Forest. It’s up in the northeast. He saw this guy running around the festival just playing with this wire and it was lighting up and going all over the place. He stopped him and he’s like, “What is that?” And this guy is like, “It’s electroluminescent wire.” It just stuck in his head and he went home, he Googled it, found some, bought some and he started playing around with it making coats lined with it, making bras lined with it.
I think it was more like him having fun with it until his girlfriend wore a light-up bra to a club and everybody went insane. He goes, “This is actually something people want.” And that’s when he flipped the switch and turned it into a business. So he was literally hand sewing light-up bras and selling them on Etsy, one bra at a time, like total bootstrap. This guy saw the vision before.
Andrew: I’m on his LinkedIn page. I don’t see anything in here that would show that this guy is a sewer. I guess they’re called seamstress.
Nick: Yeah. It’s a funny story. He learned how to sew in the Navy because you have to put patches on your uniform. If you wanted the sewers in the Navy to do it, you’d have to give it to them like two weeks or a month in advance. And he’s a little bit of a procrastinator. So, the night before he needs the new thing, so he had to teach himself how to sew.
Andrew: Yeah. He was in the Navy five years, five months according to LinkedIn and then immediately after the next thing on his LinkedIn profile is Electric Styles.
Nick: Yeah. He did electronics in the Navy. So, that helped him the electronics behind EL wire works.
Andrew: Okay. So, he had that idea. He started the business. And then you guys connected?
Nick: Yeah. He started the business. Don, our other business partner, came out of the Navy. They pulled some money together, went out to San Diego to just make a go of it. And I actually met Don at a party. We were just having fun and he’s like, “What do you do?” And he’s like, “I’m a marketer.” He’s like, “No shit, we need one of those.” I’m like, “What do you do?” He goes, “I sell light-up bras.” I go, “What?” He goes, “Yeah, light-up bras.” He shows me a video on YouTube video of light-up bras blinking to the beat of the music. “Okay, man, I have free time. I’m freelance marketing right now. I’m going to come to the office and check it out.”
Sure enough, I show to their office on Monday. They had 300 light-up bras that they had just gotten manufactured in China and they’re lining their apartment. I’m opening their cabinets where there should be Cheerios–light-up bras. Wherever they could fit a light-up bra in their small two-bedroom apartment there was a light-up bra.
Andrew: So, They already started the business. I see that you’re considered a cofounder.
Andrew: What was the ownership structure then?
Nick: So, Bernardo started the company. He gave Don equity. And then when I showed up, we looked over the numbers. I saw potential on it. I was like, “Hey, let’s give this a run.” I said, “I’ll work for a month. And then after a month, I’ll make you my offer. Take it or leave it and you can take all the work just as goodwill if we don’t want to go forward.”
Andrew: But you were going to work for a month for free?
Nick: A month for free to prove my worth.
Nick: And it worked. I’m here.
Andrew: All right. So, how much of the company did you end up with?
Nick: So, I got 23 percent. At the time I had 30 percent. We received investment, so our equity has been diluted. I had 30 percent. Don had 30 percent and Bernardo had around 40.
Andrew: I see. You guys got funding. I hope we’ll get some time to spend on that. I see your revenues. I want to talk about what your revenues are. But I wouldn’t have seen it. If I just saw your website, didn’t know it was yours, didn’t know the business behind it, I would not have known that this was such a big business.
I’m on your website, ElectricStyles.com. I see light-up shoes. You guys have definitely expanded beyond it. I see a guy with a hoodie and where the zipper would be, it’s lit. I see glasses and so on. To me it just seems like a small, interesting business that wouldn’t go beyond $100,000. What did you see at the time? You were obviously right.
Nick: Well, at the time, I didn’t see it nearly as big as Bernardo. Bernardo was saying, “This is going to be a million-dollar company.” I was like, “There’s no way we’re going to make $1 million.”
Andrew: And he underestimated it. It’s worth more than that. We’ll get into that.
Nick: But I think you really need that kind of almost like delusional passion in order to do something great because at the time, none of our friends, none of our family thought it was remotely legitimate. They’re like, “Come on, Nick. You’re selling light-up bras? Have fun with that for six months then get back to something serious.”
A couple of different things happened. One was the festival/EDM scene really exploded over the past five years. So, just timing-wise, we kind of took off with that momentum. I think we’ve just done a really good job of scaling, marketing well and just making something that really want. It really opened me to the fact that there are so many niches out there, undiscovered ones. If you just saw this, you would never think we’re on track to do $3 million this year, $10 million next year.
Andrew: I never would have seen it, especially considering where you got started, where you were selling. We’ll talk about all that. I have to first take a moment here and talk about something else, my sponsor, which is Toptal.
I’m actually on ElectricStyles.com right now and I always look at everybody’s source code to see what’s the site built on. The freaking site is built on Shopify. Now, why am I bringing up Shopify on a Toptal ad? Years ago, I think when these guys started their business, I was doing ads for Shopify and I remember at the time people said to me, “Shopify? Why wouldn’t you just host your own site? Why would you want Shopify to host it? Why not build your own site? Why not use this software or that software?” But a few people said, “I’m going to try Shopify.” They saw how powerful it was. It built these incredible stores and Shopify took off. Today, even Amazon is sending their store owners to Shopify.
Nick: I saw that.
Andrew: Right? Isn’t that crazy? Shopify is built into Twitter and all these other freaking platforms. So, that’s what I told you about three years ago. What I’m telling you about now is Toptal. I know when it comes to hiring developers, you have tons of different ways. Everyone’s got some clever way of hiring a developer. I’m not putting any of them down. They have their place. But I’m telling you there is a new way that is so freaking amazing that Andreessen Horowitz invested in it, which is stunning, within like that they invested in it.
The reason is that when you’re looking for a developer, you want the top person. The difference between the top person and the guy who’s just going to figure it out is tremendous. We’re not talking about the top person being twice as good as the tenth person. We’re talking about hundreds of times better at thinking, at producing, at creating. If you want the top person, that’s going to be harder to find. What if you need the top person tomorrow? Literally, I mean you need them tomorrow? What if you need them next week to get started and you just have maybe part-time work available. You don’t have full-time so you can’t hire a headhunter.
Well, what smart companies are doing today–and I’m talking about like Airbnb, to that level–they are going to Toptal. They are telling Toptal what their corporate culture is. Frankly, if you don’t think of yourself as a corporation because you’re a smaller company, your LLC culture, your individual culture as an entrepreneur, whatever it is, you tell them that. You tell them what software you’re working on. You tell them how you interact with a developer. What do you use? Do you use Slack? Do you use something else?
They will then go find a developer who programs in your language, who does the kind of work you want done for your business, who can fit with you culturally and frankly who’s not an asshole–I think that’s, frankly, part of their tagline. They introduce to them. If you’re happy with that developer, you can hire her. You can hire him. You can get started often within 48 hours and the work is good. If it’s not good, they actually guarantee it’s satisfaction guaranteed. I have never seen anything like this.
Just like Shopify–I remember I asked Toby, the founder of Shopify, “Why are you advertising on Mixergy? This audience can code their own sites.” He said, “I’m advertising Shopify on Mixergy,” he told me years ago, “Because the Mixergy audience are influencers. Their friends come to them saying, ‘Here’s my problem. What do I need to do?'” And that’s why he was willing to spend more money than he probably was getting directly from our audience. He knew that our audience would then refer friends and so on.
The same thing is happening with Toptal. If you go to Toptal.com/Mixergy, you will see that they want the Mixergy audience to see the power of Toptal so much, they are offering 80 free Toptal developer hours. That means you need an extra person, an extra two people, whatever, they will give you extra hours for free.
All you have to do it go to Toptal.com/Mixergy and one of the other things you’ll see on there is you have a no-risk trial period. So, if you’re not happy, say, “Hey, guys, I’m not happy.” I can’t imagine you not being happy. I want to know about it, frankly, if you’re not happy. Sorry?
Nick: Usually people that guarantee that, you’re going to be happy.
Andrew: You’re definitely going to be happy. Look at the people that are associated to it–Ideo. Ideo does incredible work. They’re not going to some punk on a website hoping that the punk won’t run away with their code. They take this stuff seriously. So, you had some questions about Toptal before we started. I said hold on to it until the interview.
Nick: Yeah. This is great. Actually, I see a huge need for it. I don’t do much in software right now. But for someone like me, I don’t know the questions to ask a developer to vet one versus the other. And I don’t want to spend the time how to vet one versus the other.
Andrew: Freaking smart point, Nick. I was at dinner–the Y Combinator founder had dinner at our house. Her cofounder is there on the couch talking to the other Y Combinator cofounders about what questions he should ask in his developer interviews. One of the other founders said, “I will sit in on you with these,” because he was facing some challenging questions. “I’ll sit it in with you and help you ask the right questions.” And the questions are important. If you don’t know the right questions, you’re not going to get the right answers.
Andrew: All right. I’ll close this out by saying go to Toptal.com/Mixergy. If you want, I’ll personal introduce you to my people there, my connections, like you need a connect, but fine, I’ll give it to you: Andrew@Mixergy.com. I will introduce to them. That’s how strongly I believe in them. Go sign up, build something great and come back here and do an interview about it.
Nick: All right. So, I’m going to keep that in my playbook.
Andrew: You’re going to love it. How did you find a manufacturer in China who was going to create bras with lights in them?
Nick: Bernardo, the person Bernardo found was another two guys in China trying to start their own business.
Andrew: So, he just found people who were trying to sell it, not some manufacturers who would take on his order and he said, “I will take your stuff and sell it here?”
Nick: Well, no, he came up with the bras. Basically he found two guys in China that were trying to start in the manufacturing business. He found people in the same levels where they weren’t like, “You need 1,000.” He did a lot of research, found them. We’ve been working with those guys for three years and grown with them. It’s really exciting to see.
Andrew: So, you get 200 bras. Is that what it was in the first order?
Nick: It was like 300, I think.
Andrew: 300. It’s time for you to sell it. You’ve got to tell people. Before you signed up for Shopify, what platform did you use to sell the bras?
Nick: So, I came in and I knew that Shopify was the way to go. But I was new. The business partners, they wanted to try 1ShoppingCart and I said, “Fine, I’ll build it in 1ShoppingCart.” It was the worst website I’ve ever built in my life. Then I signed up for a free Shopify trial. We rebuilt the website, side-by-sided it and we went to Shopify.
Andrew: Of course. 1ShoppingCart had such a lead for a long time. I don’t know what happened.
Nick: They just didn’t make the software easy to use and then the interface for the end consumer clean. And both of those things are hugely important for ecommerce.
Andrew: You couldn’t even get your own URL on 1ShoppingCart for a long time. I feel like some of these shopping cart guys from the previous generation of the internet must have gotten so filthy rich. They must have had this recurring revenue come in and it’s too much work to redo the whole business and try to compete with the new guys and they said, “Let’s milk it. Life is too good.” I picture them all snorting coke with hookers and sitting in their Lamborghinis and forgetting there’s innovation happening and they can jump in there and do it.
Nick: Well, there’s a book called “Innovator’s Dilemma” where they talk about a company that’s built themselves up is hesitant to innovate because they think they’re going to cannibalize what they’ve built and that’s what ends up killing them.
Andrew: You know what? I’ll say this. I don’t know the founder of 1ShoppingCart from Adam, but if he is doing coke with hookers, I would like to be invited to that party.
Nick: Me too.
Andrew: I drink whiskey because I’m more of a whiskey guy. But that seems like a good life for me. I will do an interview with him. I will even do coke if I have to while doing the interview. I will do it. I won’t mess with the hookers. Maybe not the coke because I need to be sober for my interviews.
Nick: For sure. You’ll just yell at the interviewee the whole time.
Andrew: You know what I should say because this guy probably has a whole lot of money–I don’t know that’s true actually that he’s doing coke with hookers. He might be doing coke with non-hookers. I don’t know.
Nick: He may be gay. You never know.
Andrew: I have no idea what he’s up to. I’m so freaking fascinated. I hope that I just got under his skin with that that he has to shoot me an email out of frustration so I could meet him.
Nick: Well played.
Andrew: I would love to see that. Before that, actually, you were on Etsy, weren’t you?
Nick: Yeah. So, Bernardo started it on Etsy, which is once again even a more simplified way to sell online. With Shopify, it’s easy to get the website up and built, but you still have to know how to send traffic to it and still need to know how to handle all these other parts of the business, whereas Etsy is really, really dumbed down. It’s like, “Here’s a listing. Throw it up. We’ll run traffic at it for you. We’ll take a cut.”
Andrew: And you don’t even need to get your–yeah, you don’t need traffic or anything. You guys are still selling on Etsy.
Nick: Yeah. We are.
Andrew: So, you start creating a Shopify store for him. He likes the Shopify store. You guys are now on track. How do you get people to come into this store?
Nick: So, it was a mixture of a couple different things. One is there were people at the time searching or light-up bras. The first thing I did was made sure that we built the website properly so that we would rank number on for light-up bras, started running AdWords so that we were top AdWords and then when PLAs came around–product listing ads, those are the visual clickable ads.
Andrew: This is all the marketing stuff that you learned except it’s complete white hat.
Nick: You don’t have to black hat it if you have a good company. Black hat is for people who have an interior product or an inferior company and they need to cheat to win. If you have a great product, the SEO is easy. So, we did AdWords. We started advertising on Facebook.
Andrew: Let’s go one at a time. The very first thing that you did–it’s okay if we get it out of order here because I know memories aren’t perfect–what’s one of the first things that you did?
Nick: One of the first things that I did was create our AdWords account and create a light-up bra ad, went to eh website. We had a light-up bra collection page. So, I wrote like a 300-word article on light-up bras. You need content in order for Google to want to rank you.
Andrew: Even for search engine marketing ads, for paid ads?
Nick: Just for SEO.
Andrew: Oh, I see. So, you started SEO first.
Nick: Well, I did them both at the same time because it was just one product. So, it was easy to do. So, I created an ad for light-up bras and then I went to our light-up bra collection page and I wrote some copy so that Google would index that copy and be like, “Oh wow, this is a good website for light-up bras. Let’s rank them number one.
And then I really got on the horn and I just started calling any rave, festival website out there and I was like, “Do you want to sell light-up bras? Do you want to sell light-up bras?” At the time, every light-up bra sale counted. We weren’t looking to make $1,000 a day. We actually had something on our whiteboard. It was six light-up bras a day. That’s how many we had to sell to make $100,000.
Andrew: That was the original goal?
Nick: That was the original goal.
Andrew: You guys still rank for light-up bra.
Andrew: You’re the top organic search result for it.
Nick: So, one of the nice things is if you’re in a market that doesn’t have much competition and people haven’t been around for years doing it, it’s easier. I think there are one or two three people selling light-up bras at the time. So, it was really easy to just get ourselves up there and ranking high. Once again, we’re competing against people that don’t really have that marketing experience. Just by us knowing these couple of tips and tricks, we’re able to edge them out.
Andrew: You know what it sounds like? I don’t know if you’ve ever seen a sword movie and thought to yourself, “If I could just bring weapons of today into that time, I’d be god. They’re all with swords. If I could just bring one machine gun–I don’t even need enough bullets for everybody, just one.” And that’s what I think you did. It’s like you went back in time into an industry that had no understanding of search engine optimization, search engine marketing and you brought a bazooka.
Nick: And it’s so true because I feel like marketers are so concentrated on these certain niches, certain software as a service businesses or just lead gen. There are so many niches where everyone is super concentrated and there are so many people out there selling a good product in a niche with no competition that just needs a marketer to come in and blow it up.
Andrew: I see you guys are still buying ads on Google search results for light-up bra and so is Target. But to give you a sense of how you still are bringing a bazooka to a knife fight, Target’s link to light-up bra just takes you to–I said, “Do they really have light-up bras?”–it just takes you to a page on their site for bras and light bulbs.
Nick: So, that’s actually funny that you point that out because a lot of big companies do that. Basically they just have so much inventory that that bottom 80 percent of products, they don’t have the resources to make ads for each one of them, so they just use this ad kind of like generator. So, you get funny things like that all the time. It’s hilarious. They were doing that two years ago. They’re still doing.
Andrew: I can’t believe they can still afford those ads over there.
Nick: That’s scale for you. There’s always a way you can scale.
Andrew: So, you had that work out for you. The manufacturer was a brand new manufacturer. Any issues with them?
Nick: No. Not at all. Not any big issues. Certain things happen from time to time. From a quality standpoint, they never had issues. At one point in time they had issues when we had to start labeling things. When you scale, you need to start scanning products in when you get them and everything like that.
Nick: Why do you need to do that?
Nick: For inventory tracking. Once you hit a certain size, inventory tracking is very important.
Andrew: Oh, I see, you mean internally so that you know how many bras you have.
Nick: Also, if you want to see on Amazon, which is a big channel for ecommerce, you need to have tags that they can scan in to their warehouses.
Andrew: I see. So, I’m guessing that’s not something you do. That’s not your department, so to speak.
Nick: No. We try to outsource as much of that lower level labor to China and just keep our operation very lean and high-end.
Andrew: And do you then just give the manufacturer Amazon’s requirements and say, “Figure it out?
Andrew: You give the Chinese Amazon’s crazy–Amazon does not know how to communicate, I think, touch concepts to sellers.
Nick: The Chinese are good, man. Americans better watch out. The one thing I think we have on them is marketing and customer support. Those things will be learned after a while.
Andrew: Let me tell you–Americans are not going to watch out. Americans are going to watch Netflix and the Chinese are going to continue to do really well.
Nick: One thing that we have on them is they have so many holidays. They have a month-long holiday in March and they have like five day holidays all throughout the year. That’s another advantage we have on them.
Andrew: Oh, I see.
Nick: So, the other big marketing thing that we did was Facebook. At the time, Facebook had just opened their ad platform to the public. So, we were getting $0.10 clicks, dirt cheap clicks. You can’t get them anywhere that cheap online these days. We were just firing $0.10 clicks.
Andrew: How did you figure out $0.10 clicks back in the day? We’re talking back in the day like two, three years ago. How did you figure it out?
Nick: Well, it was really a multitude of a couple of things. They had so much available inventory that if you were targeting things pretty narrow and they were getting high CTRs, high click-through rates, it was symmetry with Facebook and they were giving those clicks away for dirt cheap.
There also weren’t as many advertisers on there driving up the bid. We were targeting people who liked music festivals or certain musicians or stuff like that. I think that inventory really wasn’t being used at all. So, we were able to get these dirt cheap clicks. Not anymore, but we definitely built a part of our company on Facebook’s cheap clicks.
Andrew: Here’s something else I don’t see when I go to Target’s website for light-up bras but I do on yours. There is a modal pop–are they called modal pop? A modal email request box, right?
Nick: Yeah. We just started adding that earlier this year.
Andrew: It’s pretty well don’t. It says something like, “Get electric via email,” that sort of thing. It’s sort of playing off the electric email name. What other on-site marketing do you do?
Nick: That’s our big one right now. We do retargeting, but I wouldn’t really consider that on-site marketing. We do related product things where if someone’s looking at one product we’ll be like, “Hey, check this out.”
Andrew: Who does that for you? I guess at your size, you can do it manually, can’t you?
Nick: Yeah. We do it manually inside Shopify. Once again, great system. So, they just have an easy way for you to build related tags. So then if someone goes to light-up bras, we’ll show them other light-up bras but sometimes we’ll show them light-up fur boa, which is like a fur scarf or a light-up hat.
Andrew: Videos on the page–any of idea of how well they do, videos where you show the product?
Nick: We have views on YouTube. So, we can see how many times they’ve been viewed. For us, I thought it was important because we were dealing with the product that isn’t just assumed. Like, you get a jar of peanut butter. You know what you’re getting. When you get a light-up bra, there are questions. How does it light up? Where does the battery pack go?
So, early on in our company we realized that video was a great format for us to be able to educate people, “Hey, here’s where the battery goes. Here are the different modes.” These days, look at Snapchat. People want to absorb video. They don’t want to read. The more video tutorials you have showing you how your product works, the better.
Andrew: There’s a guy in our audience, for some reason I’m blanking on his name who does that for big companies.
Nick: Wistia, maybe?
Andrew: No, an individual, a guy who actually shoots videos for big companies. That’s a business where if you need your shoes, for example, shot beautifully and not just shot like you would on your own with your iPhone, he does it.
Nick: And that’s great. We’re starting to transition to those things now as we’re getting bigger. You really kind of have to start working with specialists and allowing yourself and your team to be a generalist.
Andrew: Damn, I can’t find it right now. All right. It’s going to kill me when I find it afterwards. Well, it doesn’t matter. What else? What does work for you? Well, you guys do A/B testing, right?
Nick: Yeah. We do some split testing. I mean, for us the big thing that we did was we just fueled every dollar into growth. There were very few things that we did that I would say were just rocket science news, right? Really, we set our margins right. We knew how to market. And online these days, you have to do all types of marketing for your business.
You can’t just market on Facebook. You know what? If you go on Facebook and you market light-up bras and you educate the whole audience on light-up bras and then they go to Google and they type in light-up bras and you’re nowhere to be found, well, your competitors are going to be really happy. Thanks for spending all that money to make us money. So, we built this kind of marketing network where we were covered all over the place, Facebook, AdWords, SEO, remarketing. If you do those four, you’re good to go.
Andrew: How do you know if it’s working? How can you track a sale that comes in on Facebook and then ends up Google?
Nick: So, you can track that all through Google Analytics. They have a great dashboard that will show you, “This is how much traffic I got from my paid Facebook ads. This is how much money I made. This is how much I got form AdWords.”
Andrew: You’ve set it up in a way that you can actually tell when somebody comes in from Facebook, hits, leads, comes to Google and then comes back to your site that way.
Nick: That’s a little tougher part of marketing right now, where they’re trying to attribute all of the different touch points. For me, I don’t like going that deep. The data gets so confusing. I like to rely a little bit more intuition, which is this–if you’re advertising on Facebook and you’re showing somebody for the first time a product that they’re not actively searching for, you’re not going to convert so well.
So, you can’t just try to make Facebook super profitable. You have to understand that Facebook is an awareness and education thing. It’s getting people informed about your product. Marketing is more an art than just a straight science. You have to know, “Okay, I’m targeting my right demo. The Facebook side isn’t profitable but my overall business isn’t massively profitable. The AdWords is profitable.” You kind of have to every once in a while step away from the data. It can really make you just dive too deep into things that don’t matter.
Andrew: I get that. And you actually told our pre-interviewer that one of the things you had to do in the beginning was educate your customer.
Andrew: And tell them what light-up bras are, why they should care about it, what they could do with it. How did you do that?
Nick: It was through videos. It was through good content. We did a lot of YouTube advertising to show off our products. It was a lot of on-page content, on-page video content and the big thing for us was getting the initial few products out. When you have a great product, the word of mouth is going to be your biggest driver of viral growth. So, you need to get those products out. Those first 100 bras you sell are more important than the next 1,000 because those 100 are going to start that momentum for you.
Andrew: How do you get people to actually remember that it’s your product that they just saw?
Nick: That’s really tough, actually. I think that takes time. You really have to build your brand over time and make it associated with that style of thing. When we first started advertising light-up bras, I think you’re 100 percent right. I think they remembered light-up bras and they didn’t necessarily remember Electric Styles. That’s taken like three years for us to build that not people in our niche, they associate light-up clothing with Electric Styles. That’s a very powerful effect we have now, but I don’t think that’s something you can just get right away.
Andrew: I see you guys used ShareASale. That’s like an affiliate program, right?
Nick: Yeah. I’m kind of up in the air on that. Most of the people on ShareASale at least that I’ve dealt with, they’re coupon websites. So, they’ll sign up and then they’ll have like Electric Styles coupons. So, the customer clicks through. They don’t get a coupon and they come back to our site. So, I have our commission really low on those guys because I don’t want to give a person that’s getting a fake coupon much of a commission.
Andrew: I see eBay is still a source of customers for you?
Nick: We actually got banned from eBay.
Andrew: You did?
Nick: It was the weirdest thing ever. EBay about a year and a half ago made this transition where they were trying to improve the quality of their sellers and we had like two open cases, cases that have been resolved, but the customer has to close the case. So, they’re like, “No. You’re gone. Bye.” We’re just like, “What? Are you kidding me?”
We’re on Amazon. Amazon loves us. Amazon’s whooping your ass in ecommerce these days. Maybe you should take a note from them. They like us as a customer. So, it wasn’t that big of a sales channel for us, so we just chopped it up. Now we have vendors that sell for us on eBay.
Andrew: Yeah. I see that. I see your hoodie is still in there. I see a couple of other things in there.
Nick: We’re fine with that. We don’t have to deal with eBay and we sell to them.
Andrew: Resellers–I guess they’re considered wholesalers on your site? You have a link on your site for wholesalers?
Andrew: Okay. When did you guys get into that?
Nick: We’ve had that available for the past three years, but we never really made much of an effort until recently. We went to a tradeshow in Vegas called Magic and showed off our clothing there and just got so much interest, so many people handing us business cards. So, Bernardo has now taken wholesale upon his shoulders and he’s crushing it right now.
Andrew: What’s he doing to get more wholesalers or wholesale customers?
Nick: It’s all inbound. He can’t keep up with our inbound.
Andrew: Just from going to Magic?
Nick: From going to Magic and people finding us on our website. It’s such a cool different product that I think a lot of these small mom and pop shops like it because it differentiates themselves from everyone else. I think, though, that wholesale is something–you have to choose one or the other when you start out.
Wholesale and retail, they’re very different. If you’re trying to comingle inventory–your whole operation is different if you’re customer front-facing or if you’re trying to deal with big clients. So, I think it was really smart that we waited for three years until we had the team and had the resources to actually allow wholesale to grow.
Andrew: The reason is you need to bundle up lots of different sizes for wholesalers, is that right?
Nick: Exactly. There are big orders. We actually early on in our business, we outsourced all of our inventory to a third-party inventory center.
Andrew: You wanted them to be almost like drop shippers. You bought from the manufacturer, sent over to the shipper, the shipper would supply your customer whenever you made a sale.
Andrew: Who did you use?
Nick: We use Amazon.
Nick: So, they’re expensive. There are way cheaper ones out there. But for us, it was just a scale thing. We didn’t want to be a warehouse. We didn’t want to spend all this time and energy doing warehouses when there are companies out there that are great at it. So, we outsourced that and I think it’s really allowed us to scale.
Andrew: Actually, Shopify does integration with them, right?
Nick: Yes. So, it makes it really clean and really easy. I think it’s the way to go. It’s an exciting time for people to go into ecommerce and go into product because there’s so much software out there and there are so many resources that you really don’t have to do things that suck when it comes to dealing with a physical product. You can outsource the fulfillment.
Andrew: What else is out there that we wouldn’t have known about?
Nick: There’s some really good inventory management and sales reporting software. So, Stitch Labs is a very big one that we’ve just started to use. The big thing is there, once you hit a certain level of scale, you have so many products, so many SKUs, they’re all selling at different levels. Different colors are selling at different levels.
If you try to guess your inventory, “This is how much I need,” it’s a nightmare. Things start falling through the cracks. You forget to reorder something. So, Stitch Labs has been a huge help for us in terms of making it easier for us to manage our inventory.
Andrew: And for the transcribers, that’s Stitch Labs, not six, the number. Also, again, from Ovie in our audience, he suggested that if you ever listen to a Mixergy interview and you want to write down a note, you can just do it by Siri. Just hold down a button if you’re on an iPhone and say, “Take a note–StitchLabs.com, check it out when I get home.”
Nick: That’s smart.
Andrew: It’s just right there as a note or you can do what I do, StitchLabs.com, check out. There’s space between Stitch and Labs, but that’s fine for me. You can do it again. You can say, “Remind me at 6:00 p.m. tonight to check out Stitch Labs.” Boom. It’s set. I can’t even delete it. It’s ready to go. I don’t have to activate it. I can remove if it’s wrong and I will remove it because I don’t need it. I’m here in front of it.
So, if you’re listening to this or any other Mixergy interview, you have an easy way to take notes. I think Android can do it as well. I don’t know how Android does it. It always bothered me that with Android–you know what? I really wanted to love Android. The thing that bothers me is I’m a runner and I listen to podcasts while I run and I like to take notes just by holding down the button on the headset and telling Siri what I want to do. It’s often like when I get to work, remind me to look this up.
Nick: That’s awesome. I’m switching over to iPhone. I’ve been an Android guy for a long time. I was a video gamer. So, I always hated Apple products. But it’s time to make the switch.
Andrew: Those little things helped me. There are lots of things that I loved about Android. But for running at the time it was the best way to take notes. Since we’re taking a break, let me tell everyone about my hosting company, my favorite hosting company sponsor, it’s HostGator.com.
If you need a hosting solution, let me tell you why you should go to HostGator. Do you have any business with HostGator, Nick?
Nick: I’ve used them for domains a few times. I think I have a couple of domains on there.
Andrew: Interesting. How many domains do you own?
Nick: I don’t even want to know. I have a lot of product-related domain names from back when I was doing SEO. For example, LightUpHoodies.com.
Andrew: Do you have actually have that?
Nick: Yeah. I actually do have LightUpHoodies.com–with great aspiration to make something and they sat there for years.
Andrew: I see. If you were going to make something today and you were out of the lit clothes business and I said to you, “Listen, Nick, I’m going to hand you an account on this hosting company and I’m going to let you install whatever you want, one-click install, you could do WordPress, you could do whatever you need.” What would you do? Is there a business you would launch?
Nick: I would do some sort of probably content-affiliated marketing lead gen with all those domains. Buy some content, throw it up on there into that WordPress and start driving some traffic at it, do what I’m good at.
Andrew: And you would be buying the content?
Andrew: Where would you be buying the content?
Nick: If I’m not that interested in the subject.
Andrew: No, where would you buy it?
Nick: I don’t know. I would go to an internet marketing forum, find an 18-year old version of myself hustling for some money.
Andrew: What forum is that?
Nick: My favorite forum WickedFire really took a dive lately. I’d probably start there.
Andrew: Okay. You just say, “I need someone to write content for me about whatever the topic of your site is.” They write it for you, hopefully at $5 per $500 words like how you did it?
Nick: I bet you there’s a software as a service out there, like a platform for content writers. I’m sure there’s something out there.
Andrew: I know there’s Contently.
Andrew: I forget how to pronounce his name. I know I have a disagreement with them with how they should be pronouncing their name.
Nick: Obviously it’s a problem.
Andrew: I know it’s Shane Snow. His name is burned into my head. Contently–but I think he pronounces it Contently. They do it. But they’re much more expensive. You want something that’s a lot cheaper so you can get some quick content up there and then run affiliate ads on the pages.
Nick: Yeah. That’s what I would do with my domains sitting around. I wouldn’t do that to like start a new business. I’d probably stick to product.
Andrew: You still like–yeah, of course you still like product sells. I should say also that HostGator will allow you to sell products on your site. You could do WooCommerce to start selling. WooCommerce integrates with many of the tools that we talked about like Stitch Labs, right?
Nick: Yeah. I’ve heard good things about WooCommerce too.
Andrew: And they allow you to sell more than physical products. So wait, when you bought your domains with HostGator, did you actually build out a site on any of them?
Nick: I think that they were running a coupon where you get like $1 a .com domain.
Andrew: Well, I’m going to give you guys more than $1 off. I’m going to give you several dollars off. All you have to do is go to HostGator.com/Mixergy. They’re going to give you 30 percent off. That means that their starting price is less than $5 a month. They’re going to allow you to host websites with unmetered disk space and bandwidth, unlimited email addresses, 24/7, 365 tech support.
They’re going to give you templates. So, you don’t even have to worry about design. They’re going to make it easy for you to install whatever platform you want to use. Actually the one that I really like, as you know, is WordPress and they have that easy to install WordPress solution. But you can use others also. They’ve got shopping cart software. They’ve got chat software. You can install membership software, whatever you want. You can get it started. They have 45-day money back guarantee.
So, start your idea today, build it up. If you’re not happy with HostGator, you can always go to somebody else. But my guess is within 45 days you’ll see how amazing they are just like so many people who I’ve interviewed here on Mixergy. I don’t even know why they’re sponsoring Mixergy. Everybody’s already using them. Every time I ask an interviewee, they know them.
Nick: I should use your 30 percent off to get some more domains that are going to sit there.
Andrew: Right. I wonder why they’re buying ads. Frankly, you know about HostGator. All you’re getting is a 30 percent discount. Maybe that’s what’s getting more people to buy.
Nick: It’s the brand play.
Andrew: I do know that I have the very first podcaster endorsement deal with them and with Toptal where they’re paying me to be able to use my likeness on ads because Mixergy is so freaking popular.
Nick: You’ve got such a pretty face.
Andrew: Isn’t that great?
Nick: You’re going to sell some domains.
Andrew: I don’t even have to do the ad. I just have to give them a photo. It’s not even a photo that I went to a photo shoot for. I should go to a photo shoot now that I’m a spokesperson.
Nick: You ought to get some action shots.
Andrew: It’s basically like me, I think, holding up a fist and the fist is to distract from my face because I didn’t bother to do anything.
Nick: It’s so that people can bump it on their screen like, “What’s up, Andrew? Fist bump.”
Andrew: They’re paying for it and I really appreciate it. HostGator.com/Mixergy. Really, these are good people and I urge you to check them out and show me what you built with them. Let’s see where we are in the story. It seems like so far everything is going great, but it’s not because you had a few issues. Let’s start with the customer issues. You had problems with some of your product.
Andrew: You remember this?
Nick: Yeah. So, we had an issue with one of our products. Once again, when you’re dealing with electronics, things can go wrong. With anything things can go wrong. Well, we got 1,000 light-up hoodies in. All of a sudden, we’re selling them. Business as usual. We start getting emails, “My light-up hoodie is broken. My light-up hoodie is broken.” Eventually I realized this is like 15 to 20 percent of light-up hoodies that are breaking.
Bernardo immediately flew to China and got the issue sorted out. Now our break rate is back down. But at the time, we had this real issue, which is we have customers that are upset. They’ve gotten a product they were excited about and it broke. That’s really a crossroads. You go two ways as a business. One you can be penny smart and dollar stupid and be like, “Okay, well, sorry, electronics break. I’ll give you half off your next one.”
We took the other route because we’re in this for the long run. We two-dayed them a new light-up hoodie. We even had people that we two-dayed them a light-up hoodie and that one broke. We two-dayed them another light-up hoodie. We lost money on that, but it’s way more important that you come out on the other side with your reputation and with happy customers. Those are the people that are going to make you into a million-dollar company.
Andrew: What was the problem with the light-up hoodies?
Nick: So, there’s a part where the electroluminescent wire, it has to get soldered to a little strip that gets plugged in. They were soldering it really bad. So, it would break right there. So, Bernardo had to show them this new way to solder.
Andrew: Bernardo has to teach the manufacturers how to solder?
Andrew: How did Bernardo know how to solder?
Nick: The Navy.
Andrew: How do solder clothes.
Nick: He was soldering electronics for fighter jets. If you’re soldering for fighter jets, you know how to solder because those things can’t fall out of the sky.
Andrew: I see. So, he’s teaching them how to solder. How does he know how to explain it to them in Chinese? I guess you take a translator with you.
Nick: The great thing is a lot of these Alibaba front-facing manufacturers and a lot of educated China in general, they know English. There’s a little bit lost in translation. But when you’re red-faced and you’re pointing like this and you’re like, “This is how you do it,” they’ll learn really quickly.
Andrew: I think every single product ecommerce site that I’ve done an interview with, if they had to manufacture it themselves, they’ve had to go to China several times to straighten things out. It’s a challenge. How did you even find the right people? I know that he did a bunch of research. But is there a place where we can find people if we’re looking for good manufacturers?
Nick: It really depends on your scale. If you’re really big, you can go to the Chinese–there’s like an office in Los Angeles where you can go and they’ll send you to reputable manufacturers.
Andrew: Who has an office in Los Angeles?
Nick: China does. They have a foreign trade office in Los Angeles where you can go and you can be like, “Hey, I need to get this done.” And they’ll be like, “Okay, here are the reputable manufacturers.” But a lot of times, that’s a certain level of scale. A lot of times it doesn’t work if you’re in a nice area.
It really boils down to doing your due diligence and then relying on other people that are going to China all the time and relying on their networks. A college buddy of mine is in China all the time and he helped us find one of our suppliers that was having performance issues, he helped us find another one. Really, you’ve just got to do your due diligence.
Andrew: Is there a forum or something that you guys are a part of so you can chat about this and get help?
Nick: No, man, it’s really disconnected. There’s Alibaba where you can find manufacturers. But there’s not going to be a forum of people to help each other out. It’s really underground networking.
Andrew: I’ve had good luck with Alibaba for products that are already built, not for something that I imagine and already need.
Nick: They’re very good at duplicating and not so much innovating. So, when you’re innovating, you really need to make sure you have a good factory and you really need to take your time and make sure they make samples and everything is really clear. You have to say everything twice. You really have to do your due diligence. If you miss one thing before you go into production, you can have a massive issue that could cripple your business. So, you’ve really got to front load your due diligence when it comes to manufacturing.
Andrew: I feel like someone should do a Mixergy for fix products that are manufactured for sale in the US on a small scale.
Nick: Yeah. I think that would be really interesting. Who’s doing–Etsy is now opening up a program for Etsy sellers to find manufacturers in China. So, I think that people are seeing there’s a real need for that, for people to take an idea, take a concept, take something they’ve built here and take it to manufacturing a larger scale. There’s definitely a need there.
Andrew: What I’ve found works is entrepreneurs in my audience will hear someone talk about their experience. They might ask me for an introduction to talk to that person or reach out to them directly. Gauri Nanda, the very first, I think, entrepreneur that I interviewed about how she manufactured a product, her product was Clocky, this alarm clock that would make noise and would roll off your nightstand so you couldn’t turn it off.
Nick: It’s called Clocky? One of my friends needs one of those. So, I’ll have to pick that up.
Andrew: She did that. She had to go to China. She said in the interview you need to talk to someone who’s been there and who’s manufactured. To her credit, I’ve introduced several entrepreneurs to her and she’s helped them out. I got to help her out this week too. She was working on a new project now. It’s nice to be able to pay it forward.
Andrew: I’d like some better system than that, than me being in the middle. I feel like there should be something. I guess Etsy is working on it. My bet is there’s an opportunity for someone to create something else too, more of a matchmaking service. If you can find the right programmer online, you should be able to find the right manufacturer just as easily.
Nick: What I would say is that it would probably be a version of Alibaba built by an American company. Alibaba was built by the Chinese to outsource things. But if you go on there, it’s super hard to vet who’s reputable, who’s not. I think it needs to be an American front-facing company that is allowing Chinese manufacturers to come in. We’ll probably build that process a little bit better where you can vet people out.
Nick: Alibaba’s chat doesn’t work half the time. I’m like you’re a billion-dollar company and you can’t get your chat to work.
Andrew: Interesting. I’ve never tried chatting with them. I sometimes can’t even get a response on Alibaba. But if you need something manufactured in bulk and cheap and delivered here in like a month and you’re okay with that, Alibaba is fantastic for it.
Nick: Yeah. But as you said, existing products.
Andrew: Like I needed these kind of meditation beads and I needed them delivered by the thousands for Mixergy fans for an experiment that we did, a meditation project.
Nick: Oh, that’s really cool.
Andrew: Alibaba is terrific for that.
Nick: Yeah. 30 years ago, you would have just called someone who would have middle-manned you.
Andrew: Right, or gone to a store and begged them to introduce you to somebody who then would–so, you fixed that problem. Another issue that you told our producer that you had is inventory issues.
Nick: Yeah. So, that’s what I was kind of alluding to. When we hit a certain scale–at one point in time, we were dealing with three products, super easy to reorder. We’re staring at those numbers every day. But at a certain point, you have so many products in. You have them in different warehouse. They’re all selling at different amounts and you have to come up with a way to re-order things properly.
I actually tried to in-house a developer solution that kind of clunkily worked for the past eight months and then I just had to abandon it. Now I’m back to doing it with Excel spreadsheets. It’s tough, but it’s one of the most important things. If you forget–if you under-order your top product, hey, there goes your Christmas bonus. If you over-order it, your Christmas bonus is sitting in inventory for a year.
Andrew: How can you figure out how much to order? What’s your process?
Nick: So, I built an algorithm. Basically, we would look at past 30 days of sales. So, you see how much you’ve sold over the past 30 days. Let’s say you’ve sold 100 units over the past 30 days. Let’s see you want to keep stock over the past 90 days. You want to keep 300 units.
Andrew: Is it just that simple?
Nick: Well, you need 300 units to sell for the next 90 days. Now you need to look at, “How much inventory do I have now?” So, let’s say you have 100 in stock. Okay, well, now you need 200. You need to order 200 for 90 days to cover it. What that doesn’t factor in is that doesn’t factor in products that are accelerating in growth and products that are deaccelerating in growth.
So, I had an engineering friend of mine model this kind of curve where he could look over the past 90 days of sales and see a product curving up. So, then we would order more. Here’s the problem, though. There’s also seasonality. We have products that sell really great for Halloween, don’t sell really well after that. I over-ordered one of our products because it sold great for Halloween and I ordered like October 15th and we still have the inventory to this day a year later.
Andrew: Waiting for the next . . .?
Nick: Waiting for the next Halloween. We’re going to sell out this Halloween. Don’t worry. I will not over-order that again.
Andrew: And there’s even–you might know about Halloween, but you wouldn’t know about this festival season, you said?
Andrew: If you’re new to this business, how are you going to know that it’s festival season?
Nick: That’s the thing. A lot of it takes experience. You have to know when these products are going to sell well and when they’re not going to sell well. That’s why you have to constantly stay on top of your inventory. You can’t just guess like, “Oh, this product is going to grow 5x.” You kind of have to be like, “Hopefully it does. Let me bring in this much.” The two ways you can cripple your company when you’re dealing with a physical product, if you run out of inventory, you’re missing sales, right?
That’s lost money. If you have too much inventory, that’s just dead capital. It’s just sitting there collecting dust. That’s money that you’re getting charged warehouse, monthly fees on and it’s just sitting there. You’re never going to get right in the middle. But it’s something that you really need to work on. Stitch Labs is working on it, but there’s still a need–for all you software guys out there–there’s a still a need for small business inventory control management, I’m telling you. There’s so much money in that because it’s so necessary to succeed.
Andrew: How do you improve your process based on experience? For example, I don’t schedule interviews with people the week of Thanksgiving, even though on Monday, people will say they could show up or Tuesday. I know last-minute something is going to happen and they’re going to flake out and it’s not worth scheduling. That knowledge is just in my head after having done it after a few years and seeing that people flake.
For some things, I can actually go back and inform the system. If I see that people last minute don’t show up if we book interviews with them two months in advance, I just go back into my software for booking and I say a day before the interview, send them an email reminder, an hour before, send them another reminder. You must have gotten those emails.
Nick: They were great. The webinar on the video–the window is that way because of you.
Andrew: Yeah. The one where we show you how to look good on camera.
Nick: That’s great. Well done.
Andrew: It’s because we had a problem where people would love to show off their backdrops. They had these beautiful windows behind them with lots of light, off an ocean and so on. They would sit with the windows behind them and the webcam would actually start to darken up to compensate for all the light that is coming in. We went back to our system and we said, “Tell everyone before an interview not to have a lot of light behind them.” When you learn something like festival season, how do you put that back into the algorithm so your company gets better next year?
Nick: Well, that’s actually really interesting that you bring it up. For me, I have a really good memory. So, personally I know. I do the re-ordering. So, I know when to order things for the right amount. But one of the things that I’m really not struggling with but learning how to do is when you have a team, when it’s not just you, how do you educate your team and make sure that they’re doing things right?
So, that’s something that I’m working on. The big thing for me is building that feedback loop. As you grow, you start to get blind spots because you don’t realize something is going to go wrong. We just had a fraud ring take us for $3,000.
Andrew: They were using stolen credit cards and it was just slipping through. I didn’t setup the system properly for people that were shipping to check our fraud warnings. So, that one was one me, but that’s a perfect example. Now that that happened, it’s like okay, this is in the book.
When you’re doing fulfillment, before you ship anything you check our fraud software and you make sure nothing is getting flagged. If anything’s getting flagged, you pass it over to me and I’ll verify or deny it’s fraud and then go forward. And so, that’s a $3,000 lesson right there on building the right processes not just when you learn a mistake, but when you’re training someone new, you need to have that documentation.
Andrew: What do you document in?
Nick: Google Docs.
Andrew: Is it really a Google Doc with this in it or is it something that you really need to do that you don’t get to do.
Nick: It’s in Google Docs and it’s pretty weak right now. I really do need to work on it. We’re just starting to grow. We’ve doubled our team this year. So, this is a very really thing for us to learn, passing that knowledge on properly. We have a mentor that’s really helping us build what he’s called process documents.
So, you build out process documents for everything in your business. It doesn’t even matter if you train this one person right. What about two years from now when she moves out of her role or he moves out of his role and you need to train that next person, you’re probably not even training them at that point. So, you need to make sure those process documents are in place.
Andrew: Who’s teaching you how to do that?
Nick: One of my mentors, Zach Balle. He’s an advisor to our company. He does this great company called Hug It Forward. And our other advisor, Aaron, does this nonprofit startup company.
Andrew: Hug It Forward, meaning they mentor you; you need to mentor the next person?
Nick: No. That’s just the company that he’s known for. Hug It Forward, they build schools out of plastic bottles in Guatemala.
Andrew: Oh wow.
Nick: He’s a really great guy. Actually, the biggest thing I learned from these guys is if you’re an entrepreneur and you’re growing your business, you need to have mentors. These are people that are not in the day to day. They don’t have emotion. They’re just there to help you out. They’re that backdrop that’s going to stop you from making really dumb decisions and help you make some really good decisions. They’re not always going to be right, but you need someone to talk to.
Andrew: Who’s Brian, who helped you guys out by funding you and bringing you into his office?
Nick: Yeah. So, Brian Lim, we met him in 2013. We went up for a wholesale deal. We all had long hair, long San Diego surfer hair. We show up in shorts and t-shirts. We walk in and we show him our products. It started out just to be a wholesale deal. He actually asked us this question that really hit me, “What do you guys need?”
I feel like when you’re in a conversation, a lot of times you want to front, like, “We’re good, man. We’re killing it. We’ve got this.” But for whatever reason, we decided to be honest and vulnerable and we said, “We need money.” At the time, we were all doing it part-time. We weren’t in college or working. We’re like, “We need an investment to be able to do this full-time.” He just said, “Let’s talk.” Literally two weeks later, boom, invested $200,000 into us. That was this part of the curve right there.
Andrew: Just for $200,000?
Andrew: That’s huge. You’re basically talking about hockey stick growth.
Nick: We had made $200,000 to date.
Andrew: And he gave you all that at once? What did you guys invest it in?
Nick: Inventory and then actually expanding internationally. We took our business to Europe and we took our business to Canada. Canada did not pay off. I actually have to fly to Toronto, rent a U-Haul and drive a bunch of inventory across the border and ship it to our warehouse, but Europe did work out. That was the bet that really paid off for us.
Andrew: You’re going to do it by yourself?
Nick: I’ll bring a buddy, probably.
Andrew: Yeah. I see. Brian Lim was on “Shark Tank.” He had a successful company there. He was running a rave glove company.
Nick: Yeah. Brian is like off the wall.
Andrew: Light-up gloves.
Nick: Successful and genius. Yeah. He does the gloving side of things through EmazingLights. And then him and his fiancé created iHeartRaves, which is more just overall apparel superstore for people who are into festivals and raves. They’re on track to do $10 million to $15 million.
Andrew: Who knew that this was such a big business?
Nick: Dude, there is a game to it. It was great for him to pick us up, such a strategic partnership. He’s literally two years ahead of where we are. So, he’s just giving us advice from all the mistakes and lessons that he’s learned and the things that have gone well. We wouldn’t be here if we hadn’t met Brian.
Andrew: Wow. All right. Congratulations. You keep saying, “We wanted to build a million-dollar company. If we want to build a million-dollar company, then we need to do this. We wanted to build a million-dollar company, so we did that,” etc. It seems like for a while though, that was your mantra. Even though you’ve exceeded that, you still say, “Build a million-dollar company.
Nick: Well now multi-million.
Andrew: Multi-million-dollar company. So, where are you guys now? I forget. You said it earlier.
Nick: This year we’ll end up around $3 million, $3.5 million.
Andrew: Net profits in that, are they over $250,000 after you take salaries and everything?
Nick: Oh yeah. We’re at 10, 15 percent profit margins.
Andrew: Net or gross?
Andrew: Net. Wow. Unreal. So, how big can you make this?
Nick: I think the sky is the limit. I think that we have some really good ideas and really good visions to kind of take this into every day clothing, every day wear. I think we’re selling to a new generation of people that want to be different. So, it’s really exciting. I don’t really know where we’re going to be.
I’m always the conservative guy. Bernardo will tell you we’ll probably be a billion-dollar company in five years. I say we’ll probably be doing $50 million a year. But either way, I think we’re all on the same page. We’re going to some sort of degree of success. It’s exciting. Now, our friends and our family are our biggest fans. Two years ago, they were like, “What are you guys doing?”
Andrew: I get it. But you know what? TapouT did clothes for mixed martial arts. Who would have thought that clothes–we’re not talking about clothes that make you better at performing mixed martial arts. They’re not going to help you kick butt. They’re going to help identify you as someone who likes mixed martial arts. They did $200 million in sales. I had the founder to do an interview about how he built up this company, hundreds of millions of dollars of annual sales.
Nick: Thank you for bringing that up. Now when someone asks how we’re going to turn Electric Styles into that big of a company, I’m going to pretty much point to that. There are plenty of niche companies that are cool and they’re able to expand. I think the big thing in order to get to those levels, though–and this has been a struggle from us and our team–you have to stop chasing every dollar.
If you really want to take it to the next level, there’s a point in time where you have to be able to say no to making a couple of thousand dollars. That’s been hard for us because we’ll come up with a new product idea and we’re like, “Oh man, yeah, this will make a couple of thousand bucks.” But you don’t think about the time and effort that goes into making that a reality. A lot of times it doesn’t justify that couple of thousand dollars.
Andrew: I wonder how you can tell whether you should do something or not. I saw ties on your site. How do you know? Are ties worth adding or are they just not going to fit with your audience?
Nick: Ties–the original ties have done great for us. I still think lifetime they’re top three of our products. It actually got on “The Today Show” in 2013.
Andrew: So, how do you know that? My favorite story of how an entrepreneur figured out what to create and where to sell it was the founder of Starbucks, Howard Schultz trying to figure out, “Where do we put Starbucks stores?” and I think he said, “Where do we get the most people asking to buy us by mail order. That’s where we should go place our stores,” in the beginning. Did you have anything like that?
Nick: We definitely get people like asking if we can make a certain thing that lights up. We get that kind of data. But for us, I think it’s a balance of needing to try new things because that’s how you create and that’s how you innovate and then like is this actually going to make us any money. I think the thing is and it doesn’t work, but you have to be willing to kill it when it doesn’t. You can’t let it just sit there. If you bring in something that sucks, be like okay, we’ll sell out of it. We won’t bring it in anymore.
Andrew: Speaking of kill it, I actually want to correct myself. It looks like TapouT, according to CNN, they were doing $200 million in sales, but I’m looking at my transcript from my interview with Dan Caldwell, the cofounder of the company, I asked him at the height what was your revenue and he said $100 million.
Nick: . . .Organized to be able to pull that up so quickly.
Andrew: I’m constantly checking, “Did I get this right? Did I get it wrong?” It’s a balancing act with interviews. I want to just be in the moment and have a conversation and not sweat the details of it, but at the same time, I know if I say $200 million is what he did and you say it to someone else, it’s not your reputation on the line. I’ve sent you out in the world with bad data.
Nick: I’m going to get some un-friends after I post that.
Andrew: All right. Well, congratulations on your success. I’m so proud to see how far you’ve come. You blew my mind with the possibility and now I’m much more open to niche products.
Nick: You can’t knock it until you really give it a go. The world is massive and there are so many people that are looking for so many different things. Once again, I think all of us, we’re so concentrated on, “How do I build the next Facebook? How do I build the next Snapchat?” And it’s like, that’s a lottery. Go buy a lottery ticket if that’s what you’re looking for.
Instead, look around for good ideas. If you’re a marketer, you don’t have to come up with the idea. Go to Etsy. You’re going to find a ton of people with really cool ideas. Partner up with them and you can make a multi-million dollar business.
Andrew: That’s a great place to leave it. The website is ElectricStyles.com. My sponsors for this interview are HostGator.com/Mixergy and Toptal.com/Mixergy. Nick, so good to have you on here.
Nick: Definitely, Andrew. Thank you for having me.
Andrew: If you guys like this interview and you want more, please subscribe to this podcast in whatever podcast player you’d like. I now have actually turned and started to like the podcast player that’s built into the iPhone. I used to hate it. It had all kinds of bugs. And it’s still not the best. But what it has, Nick, that’s amazing is Siri integration.
Andrew: So, that’s the problem actually with Apple’s stuff. Their music player isn’t better than Spotify, but it has Siri integration, so I can say, “Play Beastie Boys – License to Ill.” Boom. I’ve got it in my car. I don’t have to worry about it.
Nick: I like the song, man.
Andrew: Yeah. If I feel like listening to it, I can do all the lyrics to “Paul Revere.” If I need that, I can just say, “Play Paul Revere by Beastie Boys,” boom, I’ve got it. The same thing with podcasts. If you subscribe to podcasts in the podcasts in the podcast player that comes with your iPhone, you can say, “Play Mixergy,” boom, it will play Mixergy or, “Play Andrew Warner’s podcast.” I wonder if that will work.
Nick: When I get my iPhone I’ll try it out.
Andrew: Right. All right. Thank you for doing it. Thank you all for subscribing and listening and being here in the Mixergy audience. Nick used to listen and today he is here doing an interview. I hope somebody who’s listening to me right now is building a company based on even just one idea that you got from Nick, maybe just let the ideas shower you, understand that your mind will be influenced by it and when you build a successful company, come back and do what Nick did, hug it forward, play it forward, share it with the future.
Thanks, Nick. Thank you all for being a part of Mixergy. Bye, everyone.