The Tough Lessons I Learned After Buying An Ecommerce Business

$3,500
revenue/mo
1
Founders
1
Employees
product
HUSKYBEARD
from Queen Creek, AZ
started November 2016
$3,500
revenue/mo
1
Founders
1
Employees
540K
alexa rank
11.5K
followers
101
followers

Hello! Who are you and what business did you start?

My name is Ray Moyers and I purchased Huskybeard 1 year ago, on June 15, 2018. Huskybeard manufactures all natural beard care products using only the highest quality ingredients sourced in the USA. All of our products are handmade in small batches to ensure the highest quality and longest shelf life.

We mainly sell beard oils, beard balms, beard combs and beard brushes to bearded men. We have also found some success selling to women that want to introduce the bearded man in their life to the benefits of maintaining a healthy beard. We’ve had many women tell us that our products are the first beard products they’ve found that they like the smell of.

I have had men that have used dozens of other products, and men that have used one product forever and refuse to use anything else, switch to Huskybeard because my products are “the best they’ve ever used.”

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Huskybeard has made an average of $3500.00 per month since I purchased it a year ago. This is a huge accomplishment when you consider the situation the company was in when I purchased it. I’ll get into that part of the story later in the interview.

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What's your backstory and what inspired you to acquire this new business?

I am a serial entrepreneur. I’ve owned many companies. I’ve also had a myriad of full-time jobs with entrepreneurship as my side hustle. I’ve been looking for quite a while for an ecommerce business that I could purchase and grow to provide passive income for my family.

At the time, I was working full time as the VP of Marketing for a shade sail company. I have 15 years of experience in web design, SEO, SEM, and online marketing.

My top tip for anyone looking to purchase a business is to make sure you do your due diligence and hyper-analyze everything before making a decision.

I needed to supplement my income to be able to provide for my wife and 6 kids so I started looking for an ecommerce business that fit the following criteria:

  • It had to be an established business with sales history that had increased over time.
  • It had to be in a niche I was interested in.
  • The niche had to be a growing niche.
  • It had to have a website that was good, but not optimized yet.
  • It had to be generating enough income to justify the initial investment.
  • It had to have a solid social presence.

My plan was to purchase the existing business, redesign and optimize the heck out of the website (because that’s what I am already good at) and manage the day-to-day operations while the business grew.

I found Huskybeard on the Shopify Exchange Market and it seemed like it checked all of the boxes for what I was looking for. Huskybeard had a solid sales history, a loyal customer base, the website was good but needed to be optimized, and the beard care niche was blowing up. It was a perfect fit.

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I purchased Huskybeard for $50,000.00. This seemed like a great bargain considering the $120,000.00 revenue the business claimed to have made over the previous 12-month timeframe.

Take us through the process of acquiring the business and taking it over.

Acquiring a business through the Shopify Exchange is pretty simple and straightforward. After looking through the listing, if you like what you see, you simply click on the button to make an offer and the process begins. If the seller accepts your offer, the sale goes into escrow at escrow.com you have a 10 day due diligence period where you communicate with the seller and make sure you’re comfortable with the deal. If you’re comfortable, the buyer pays escrow.com directly and holds the funds until the owner delivers the product (in this case, the product was Huskybeard.com, all social accounts, and all existing inventory). Once the buyer confirms they have received everything, escrow.com is notified and the funds are released to the seller.

Huskybeard already had a solid offering of 10 oil scents, a few brushes, and one wildly popular folding comb when I purchased it. I was led to believe that the owner manufactured the oils himself. Come to find out, he was using a fulfillment company to manufacture and ship his products.

The good news is, this manufacturer makes everything by hand in small batches and does a FANTASTIC job. They are incredible. They are the secret sauce behind my oils and balms. The formulas they use to manufacture my products are unique and amazing. 7 of the original oils were formulas that the original owner created.

I have found that the only way to succeed in this market is to work hard, have a great product, and the absolute best customer service.

The other 3 were formulas provided by my manufacturer and fulfillment partners. Over the past year, I also purchased Black Tie Beard, a much smaller beard company with unique oil scents, and added their 5 scents to my product line bringing the total to 15 oils.

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Another popular product on Huskybeard.com is the folding comb. Within days of purchasing Huskybeard, I quickly found out that the folding comb, that was by far the best selling product that Huskybeard offered, and that was solely responsible for the $12,000.00/month average revenue the previous owner claimed, was a piece of junk that fell apart after a few days of use.

The comb was sourced from a cheap supplier in China and was severely lacking in quality. Every customer that purchased the original folding comb asked for a refund or exchange. I immediately removed the comb from my website and refused to sell it ever again.

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The backlash from the sales of the sandalwood folding comb was insane. I spent the first few months as owner working all day, every day, trying to take care of thousands of upset customers. I was replacing and offering refunds on a product that I never received any revenue from. This was the most difficult challenge I had ever had to deal with.

After about 6 months of hard work and a laser focus on customer service, complaints and requests for refunds on the comb subsided and I was able to catch my breath. I found a supplier in the Netherlands that makes a folding comb that is much higher quality, but costs 10 times as much to procure.

I am committed to only offering high-quality products at Huskybeard, so the extra cost is worth it. The new comb is expensive, but it has received dozens of 5-star reviews. Customers that have purchased multiple folding combs in the past state that the new comb is the best they’ve ever used. The new comb can be found on my site here, and will be in stock for as long as Huskybeard is in business.

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How have you improved the business since acquisition?

As soon as I purchased the business, I got to work redesigning the site and optimizing it for organic traffic.

This was easy for me since I have an extensive background of over 15 years doing web design and optimization. I like clean design that offers the customer a pain-free shopping experience. To start, I redesigned the homepage. The original homepage design consisted of a large header that took up at least ⅓ of the page above the fold, a simple text slogan, and then product after product until the bottom of the page.

Old site:

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I dumped the header and added a call to action for new products. I kept the text area below the call to action, but changed the text to be keyword specific and more relevant to the brand image I wanted to create. Next, I added category callouts for each of my main product categories. I added a section for Instagram content that updates automatically with fresh content from my IG. Finally, I ended the page with a contact section so that customers don’t have to search for a way to contact me. This immediately helped with resolving the poor customer service Huskybeard had been known for. Customers could now see that I wanted to hear from them, and I wanted to help them have the best experience on my site. I also changed the color scheme of the site. There’s a well known design rule that the old site was breaking. The rule is “NEVER USE RED BUTTONS.” Our brains have been conditioned that red means stop. When you have a red button on your site, customers subconsciously think “Stop, don’t click that button.” This is the opposite of what you want the customer to do, especially if it’s a “buy” button.

New site:

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I optimized all of the on page content for keywords and removed content that wasn’t “evergreen.” I fixed all of the broken links on the site and created 301/302 redirects for inbound links that were broken. I started working on adding content where there was thin content and pouring through the code in the back end to make sure everything looked good and there weren’t any black hat techniques being used. Finally, I added a plugin to make my site AMP compliant.

Site traffic started to grow immediately and by the end of the year, monthly visits to Huskybeard.com were almost 3 times as high as they were before.

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I financed the purchase of the business with credit cards that offered 0% for an extended period of time. I don’t recommend doing this unless you have no other means to raise capital. If you do have to use a credit card, make sure it has an interest rate of 0% and pay it off before the 0% promotional interest period ends.

I was planning on the business paying off the credit cards I used for the purchase. With the sales history data the previous owner provided, this should have been extremely easy. If Huskybeard could maintain an average monthly revenue of $12,000.00, like the previous owner claimed, the initial investment would have been paid off in less than a year.

Unfortunately, Huskybeard only averages about $3500/month in revenue.

Since launch, what has worked to attract and retain customers?

Over the last year, I’ve discovered some unfortunate truths regarding advertising in the niche that I’m in.

One of the problems with my niche is it’s over-saturated. There are close to 2000 beard care companies in the market today. That’s twice the number that existed when I purchased Huskybeard. It is extremely difficult to establish yourself as a leader in the market when everyone thinks they can just make their own beard care products and make it big. This over-saturation causes a surplus of products and options and, subsequently, drives prices down so low that there are razor thin margins on product revenue.

Small margins is the second problem. I tried Facebook/Instagram ads, Reddit ads, Google ads, Quora ads, retargeting, I paid social marketing companies like Springbot and Adroll. Though I was able to bring in additional sales, the customer acquisition cost was far too high. When you sell a product that has a 50% profit margin, and you pay 50%, or more, of the retail price of the product to acquire 1 customer through marketing, you have a zero, or even negative, profit. It’s simple math. If I can sell a product for $10 and it costs me $5 to manufacture and ship the item and $5 to acquire the customer, I profit $0.

After purchasing Huskybeard, and spending a lot of time diving into past marketing data, I found the previous owner had the same problem. That made me feel validated that it wasn’t something I was doing wrong!

The data showed that Huskybeard spent $43,000 on Facebook ads and brought in $71,000 in sales before I acquired the company. This looks like a great ROAS (return on ad spend).

However, on closer inspection, I found that the $43,000 ad spend brought in 2,797 sales at a cost of $15.59 PER WEBSITE PURCHASE. When you’re selling an item that retails for $12.99 to $19.99, and the COGS (cost of goods sold) is roughly 50%, and you spend $15.59 per sale on advertising, you’re losing money.

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What a huge disappointment this was! It was devastating to find out that, even though the business brought in $120,000 in revenue the previous year, it cost more than $120,000 to manufacture products and acquire customers. Huskybeard was operating in the red and that had to change, quickly.

I learned that I couldn’t spend any money on advertising. My margins were too small and CAC was much too high.

What does work though is good old fashioned hard work, providing the highest quality products and the most outstanding customer service in the industry. Rather than get discouraged, I put my head down and got to work. I dedicated myself to making sure every customer was ecstatic and more than pleased with their experience shopping at Huskybeard. Not only did this create loyal, repeat customers, but I found that my customers started to refer their friends and family to Huskybeard as well.

I have also found success in setting up a quality email communication and marketing campaign. My favorite tool to use for this is Klaviyo. It’s a bit pricey but it gives me the ability to market to my existing customer base and communicate effectively with them. I run campaigns a few times a month that generate around $1000.00 in revenue from existing, repeat customers.

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How are you doing today and what does the future look like?

Today, Huskybeard is profitable. It generates enough revenue to cover my manufacturing and shipping costs and to pay for the monthly debt liability I created when I purchased the business. Unfortunately, there is no extra money to spend on growing the business, let alone paying myself and supporting my family.

I lost my full-time job a few months ago in April of 2019 and was optimistic that if I put all of my time and effort into growing Huskybeard it would grow quickly and be enough to support my family. I was wrong. A week after I lost my job, in spite of all of the work I put in, sales stopped. I struggled for a month to increase sales and didn’t have any success. If something doesn’t change quickly, I’ll have to go back to work fulltime and make Huskybeard my side hustle again.

Huskybeard continues to stay at the same level it has since I purchased it. It generates $2500.00 to $4000.00 per month online. I currently get about 17,000 visitors per month and all sales are through my online store. I attempted to get my products listed on Amazon but there are strict regulations and an approval process for products in the “Health and Beauty” category. I haven’t invested the time in getting my products approved on Amazon.

I have approached local business (barbershops, salons) and have found some success getting Huskybeard products into a few B&M locations. I also have my product for sale in 4 Buffalo Trim barbershops in New York.

This month, I will be launching a new product: Beard Creams. I am hoping this will entice some dormant customers to come back and make a purchase. I also hope to capture a new segment of the market that haven’t purchased from Huskybeard because they prefer creams over balms and oils.

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I am also planning to launch a new oil, balm, and cream scent each month from now on. I am hoping that my customers will be excited and look forward to trying the new scents each month and that this will generate some additional revenue.

Through starting the business, have you learned anything particularly helpful or advantageous?

It’s difficult to look back and recognize and face your mistakes. I feel like I was taken advantage of in the purchase of the business and that the previous owner’s claims of making $120,000 in less than a year were misleading. Yes, Huskybeard made $120,000 but it was not profitable. The mistake I made was not doing enough due diligence to discover this before the acquisition. Had I looked into the marketing ad spend and CAC prior to the purchase, I would have at least known what I was getting into.

Fortunately, I made the decision early on to stop wasting money on advertising. One piece of advice the previous owner gave me was to put more money into advertising. He said that Huskybeard’s sales were only limited by the amount I spent on Facebook Ads and that that was the key to making more money. If I wanted to make more money, all I had to do was spend more on Facebook Ads. Luckily, I had the good sense to ignore that advise and stop the bleeding.

I have found that the only way to succeed in this market is to work hard, have a great product, and the absolute best customer service. I know that the only reason I’m still in business today is because I work as hard as I can at making my customers happy. There’s nothing that benefits my company more than providing amazing customer service.

What platform/tools do you use for your business?

Huskybeard runs on Shopify.

I use stamped.io to request reviews from customers. Reviews are invaluable and help convert window shoppers. Stamped is a great app because it automates the review request process.

I use smile.io for my rewards program. Smile is a rewards app that gives customers points for purchases and other actions on my site. It integrates with stamped and gives rewards for different types of reviews on my site and social media. Customers can use their rewards points to make purchases on my site.

I use Klaviyo for email marketing. It gives me the ability to automate email flows and send emails based on set timeframes and customer actions. I have flows set up for purchases, abandoned carts, engagement, returning customers, etc. I can also set up 1-off campaigns for sales and special events.

I use Recharge for my recurring subscriptions on my site. Customers can subscribe to get the product of their choice sent to them on a regular schedule. Recharge has tons of options and works fantastic if you have a product that you want customers to subscribe to.

I just started using ShoutOut for my affiliate and ambassador program. The app is great. It automates everything involved in running an affiliate or ambassador network.

Finally, I use Shipstation to automate my shipping and fulfillment process. I can’t recommend Shipstation enough. I used a few shipping apps before settling on Shipstation and have been super happy with my shipping process ever since.

Advice for other entrepreneurs who want to get started or are just starting out?

My top tip for anyone looking to purchase a business is to make sure you do your due diligence and hyper-analyze everything before making a decision.

Make sure you know the numbers and don’t take the business owner’s word on anything. They’re trying to sell their business so they’re going to make it look as enticing as possible.

Don’t take anything at face value and uncover the hidden truths behind the facade.

Are you looking to hire for certain positions right now?

Huskybeard can’t afford to pay me, let alone any other employees right now. However, we are always looking for ambassadors to promote our brand. We pay our ambassadors a percentage of any sales they make. If you’re interested, please sign up here: Ambassador Program

We are also looking for anyone that would like to create content, reviews, blog posts, video reviews, etc. to promote our brand. We do set aside a small budget each month to send out free product to individuals that would like to review and promote our products. Contact us on our site or through Instagram @huskybeard if you’re interested. We also welcome link exchange requests and guest posts on our site.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!

-  
Ray Moyers,   Founder of HUSKYBEARD

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