Drive and Convert

Announcer:
You're listening to Drive and Convert, a podcast about helping online brands to build a better e-commerce growth engine, with Jon MacDonald and Ryan Garrow.

Jon:
So Ryan, you and I have lots of conversations, and I know that you are in the middle of building a house, of course you have your online businesses, multiple online businesses. I mean, if I understood right, you even became a wine distributor, just so you could have good wine to drink and to supply your friends. I'm not going to lie-

Ryan:
That's true. I mean, who shouldn't have one of those. I mean, it buys me friends.

Jon:
Well, I was just going to say I've benefit and I don't have to open my own, because I know you. In the middle of all of that, of course you have four kids between the ages of four and eight, which I'm not going to pass judgment on. I have my own, but one is plenty for me.

Ryan:
I really love my wife.

Jon:
Yeah.

Ryan:
[crosstalk 00:00:58].

Jon:
We'll see if she still loves you by the time everybody is older. But I thought it would really be great today to talk about building an online business, because you've been sharing a bunch of your learnings going through this process and how building a house in the middle of all of this chaos of your life, if you will allow me to say that?

Ryan:
Mm-hmm (affirmative).

Jon:
And how that relates to building online businesses. I want to hear in your words, just what you think it takes to build an online business. And maybe we can look at this through the lens of building a house and using that as an analogy, I'm sure we'll have several analogies today, but I think business owners, they all start with these visions of building this McMansion or whatever you want to call it. It's like, "Hey, this huge castle I'm going to build." Right? They hit frustrations and roadblocks along the way, and anyone who's ever even renovated a kitchen or a bathroom has encountered the same types of challenges, right? Going back to this home building aspect. I want to hear from you today about your experience building online businesses and how people should be thinking about that.

Ryan:
Building almost anything is a painful process, I think, especially when there's not somebody that's done the exact same thing before, on the exact same piece of property, in the exact same type of industry, so there's a real lack of not necessarily examples, but just what exactly do you do here, here and here? That happens both in the house building and in the online process. It's even worse when you decide to do it in the middle of a pandemic, and costs [crosstalk 00:02:31].

Jon:
For both building a house and a business, I suppose.

Ryan:
Exactly. Nothing is normal right now. Someday I hope we get to say, "Yeah, this is normal," who knows when that happens? But I guess the similarities between building a house and building a business go pretty deep, especially if you start at the very beginning, when it's just the idea, the fun part. At my core, I am a dreamer. I come up with the most amazing business ideas all the time, just don't ask my wife, she's my kite string, She's my shotgun to my skeet. Most of my dreams never make it out of the first couple of minutes of conversation with my wife, but that's good. I mean, somebody like me definitely has to have that.

Jon:
I just had this vision of your ideas flying through the sky and her just shooting them down one by one.

Ryan:
Oh man. That was very painful at the beginning of our marriage, when she didn't know how big of a dreamer I was, like, "Oh, we should do this. We should..." "What are you thinking?" So my ideas died as soon as they were launched and there was some frustrations there. But every business has to start with an idea, just like building a house. You've got to have the idea to go with, and then you've got to have something to build it on. You've got land before you have to build a house, you can't just build a house without somewhere to put it. In the online world you've basically got to have something to sell or some type of reason to exist. What are you going to put there? Not necessarily even the idea of what you're building, but just are you going to sell shoes? Are you going to sell socks? Are going to sell hats? What is it going to be and how you are going to source that?
But I think one of the biggest keys to success in online business comes before you even start doing anything, and I think it also happens in the building a house world. Where before we even started anything, I didn't have a loan, we just said, "Hey, we'd like to build a house. Let's see if we can even do this financially." It was, let's talk to some builders. Let's talk to some architects. Let's talk to some really smart people that have done this many, many times before, can look at and understand our finances and where we're trying to build on the land, and say, "Does this even make sense?"
I think with online businesses it's so easy to get a Squarespace or a Shopify site up without any web development skills whatsoever. I mean, if I can put one up, it's easy for a lot of people, you just do it with no thought around it, like, "Oh, I'm just going to put it up. I'm going to be in business and yeah, I'm going to tell my friends I have an online business and I'm in e-commerce, it's going to be great." And there's even apps in Shopify that'll be like, "We will let you drop ship if any possible thing on Alibaba by clicking a button," and you're automatically selling pink shoes and you're like, "All right, great." And it's going to be difficult to say the least. I've talked to a lot of these businesses.

Jon:
Now I'm going to find you some pink shoes, by the way.

Ryan:
Yeah, I think I might have some. I do have two daughters, so I guarantee there's pink shoes in my house. But if I had not talked to that architect and builders, and interviewed multiple builders, interviewed multiple architects before we found the partners we wanted to do this with, I wouldn't be even close to where I'm at now, as far as building a house. And I think in an online business, one of my first recommendations would be, you need to find somebody that's done this before, that has some experience in doing this before you go off and try to do it. Or if you're a brick and mortar and you want to go start an online store for your business, find another brick and mortar store that's done that, because that is going to save you a lot of pain and suffering. Maybe you have to pay them, maybe you have to give them a piece of the business, but it is going to pay back multitudes on saving yourself some of the issues and struggles, because you wouldn't... We've actually thought about GC-ing ourself.

Jon:
There's a lot of communities out there for e-commerce people who are starting up online and peer groups. I mean I'm part of two peer groups that have been instrumental to our success here, mainly because I've used them to learn from other people's mistakes and not repeat the mistakes that people ahead of me have made. That just accelerates and makes it so much easier. It turns a huge hole into a speed bump, at most, right? You're able to just plow forward, get over it, and know how to go around it if you need to, based on what other people have done. So I can definitely understand that. We have the land, right? That's the idea.
And my father was actually a soil scientist when I was younger, before computers and he got into all of that, but one thing he used to do is go around and find abandoned landmines in Ohio that people had built houses on. All of a sudden the house was falling into the ground and they're like, "What's going on? We don't know why our house is sinking." And it's like, "Yeah, because you built on an abandoned landmine that was filled with water. And then all of a sudden it just collapsed in on itself."

Ryan:
Oh my gosh.

Jon:
It's interesting, it's kind of like that. If you don't do your research and look underneath the soil of what you're building in, you can't have a good foundation and that's going to eventually come to bite you later. And you need to be thinking about margins of fulfillment. I can't tell you the number of business owners that come to us and they're like, "It's just not converting, but we have to charge $100 for shipping because our product is so heavy." It's like, "Well, you might have decided to choose a different product because fulfilling that is so expensive for shipping," right? Either that, or build it into your pricing and hope that that's competitive, but it's a challenge and people don't think about all these things ahead of time.

Ryan:
Oh yeah. I mean, we had to pay for a lot of those surveys to come out. One guy... I didn't know this was going to happen. We get up in the morning, some old guy, like 80 years old, drives in a beat up car... We're living on our property at this time, because we've knocked our house down to rebuild a new one, so we're still in our old house, this guy, 6:37 in the morning in the summer, drives his car by our house, into our back yard, parks and sits there all day. And I'm like, "This is weird." I mean, he was there maybe an hour before I'm like, "Why is there a guy back there? I know we're doing construction stuff, but I didn't get any notice." I walked out there, he had to pump water into one area of the property and then sit there for six hours and just watch what happens to a hole he dug, and I'm paying for this. I was like, "What am I paying for? This guy's watching dirt and water flow."
But it was an important piece to make sure that, as it rains, that they knew where the water was flowing so they didn't build the house in the wrong spot, so research is important. But yeah, if you build a house on land, you might have to figure that out. There'll be an old guy in a car.

Jon:
Well, okay. I love that, first of all, I want that retiree job. If we're talking about, you have the land, you have the dirt, you have the idea, you've done the research. Now would you consider the architect or the builder, I would consider those separate, perhaps. Is the architect somebody who's done it before, can help you chart the plan, is that your friend or peer groups? Is that what you would consider that?

Ryan:
Yeah, I mean, I would think that is. If we look at, for example, I don't do any business without partners, because I know that number one, my time's limited, but I also know I'm not good at a lot of aspects of business, right? I could do it, but I'm not passionate about it, so I should have somebody that probably is, so I can spend my time marketing. But I think it's probably a friend that can advise, but even better would be, have a partner that has a skillset that you don't. A lot of businesses I see that are very successful have people that are very... If they're not a partner, they're very... Like employee one, that is that person that just is really good at something you're not.
I have this one person that works for me in all the businesses I've been involved in, she handles all of our finances and bookkeeping. She does all of our, the tedious, like... To me tedious, to her, she actually enjoys a lot of that process. But without her, no business I'm involved in runs because she handles so many things that I am terrible at and she's just passionate about. So she's not a partner, but she's somebody that I bring into every business because I just have to have that, I know that about myself. So yeah, you need somebody to do that. The builder can be somebody that's maybe building a website, but it's actually creating some of the structure and framework around it. And orchestrating as a GC, that is also probably you as the business owner doing a lot of that, but I would have somebody that's done that.
I want to meet with you once a month and it's worth 500 bucks for an hour of your time, for me just to sit down and say, "This is what I'm going through. Do you have a CEO group?" Like I know you do. I've been in those and they're phenomenal, especially when you don't compete and it's just like, "Hey, I know you've had headaches in HR, I'm going through this big one now." Or, "With salaries going crazy with employees, how are you matching? How are you handling this or this?" Or, "Hey, Oregon passed a crazy law, how do we handle that in Oregon?" There's just having those people at your disposal somehow, some way, I think is going to be necessary if you really plan for this business to grow and be a sustainable income-producing entity for the long run.

Announcer:
You're listening to Drive and Convert, the podcast focused on e-commerce growth. Your hosts are Jon MacDonald, founder of The Good, a conversion rate optimization agency that works with e-commerce brands to help convert more of their visitors into buyers, and Ryan Garrow of Logical Position, a digital marketing agency offering pay per click management, search engine optimization and website design services, to brands of all sizes. If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you.

Jon:
What would you think about in terms of financing then? Obviously you need some resources to start this, you need to buy inventory. Well, you're going to have to pay for something like Shopify. Ideally you have a resource that can help you build a little bit, right? You've got to drive traffic, there's some money to spend there. That's like having a financing or a loan for the house, so tell me more about that, what would you... Because I'm of the mindset, as an entrepreneur, that I don't need a lot to start a business, I will make it happen without a lot. But starting a e-com business is a little different than a consulting type business, right, where you're selling your time or you're thinking. You have to have goods to sell, right? Now maybe you could pre-sell, you could do launch pre-orders and build up some revenue maybe that way, but Kickstarter, is that a great example of that, right?

Ryan:
Yep.

Jon:
But what's your thought on this? What kind of resources do you feel like you need?

Ryan:
I think you need at least a line of credit available to you and your business. That's perfect world. Obviously you can start up businesses without it, you can drop ship things. There's a lot of ways to solve that finance problem, but just know that there is something you need to get products to begin shipping. If people are going to send you money to buy a product in e-commerce, ideally you're collecting that money before you even ship the product because it's coming, and then you ship. But for businesses that I think...
I think drop shipping is going to become a smaller and smaller piece of the overall e-commerce landscape. I think three, four years ago, you could do out of decent drop shipping, but it became too easy and the barrier to entry was there, that there's no advantage. And then the customer service and reviews on drop ship products, you don't control enough of that process that I just don't think, if it's possible long term to make that a piece of, "Yeah, I want to build this business and it's always going to be a drop ship thing. I never want to hold inventory."

Jon:
No, I think the margins have gone away on that. They were already razor thin, but now there's just no margins. And consumers can go to Alibaba or whatever and get the stuff themselves now, if they want one or two of those, right? So I don't know that that's a great business model. For going that though, you need to have some resources, is there a dollar amount that you... I guess that really would depend on the product, right?

Ryan:
It would. For me, if I'm going to go into an e-commerce business, I need to have some ability to be a brand. Whether I'm going to become a retailer brand that says I am the best in this particular category, or I am the brand that sells through retailers, I think long term you have to have that goal, you're going to be one of those two things. Either I'm going to shoot for the Nordstrom and I'm going to be that for what I know really well or what I'm passionate about, or I'm going to be the company that sells to multiple Nordstroms, so I can be on Amazon, so I can be on Walmart, all these other places that are important in e-commerce, that I think don't a lot of times go into that initial thinking. I think that comes back to the plan.
If you're going to do that, that's where it does take money. You've got to have production, you've got to source that production, and that does take money. Some people have to fly to China to find the factory to do that. There are lots of ways you can do temporary in one area where it's more expensive. Like if you're going to produce down the street with US labor to prove a model, and then soon you're going to be able to produce in Vietnam or China because of cost savings there. There's a lot of things to think through on that. I've bootstrapped my eCommerce businesses, where I was basically the line of credit, my partners and I, and we didn't take a loan. Joyful Dirt just did take a loan. Amazon decided they were willing to give us money, we're like, "Yeah, we could use that to buy a machine. Let's do it, take it, build business credit." We had to build up revenue to get access to that.

Jon:
And I was going to say, and you essentially, that was later in the picture, right? I mean, you've been doing this for a year plus, so yeah.

Ryan:
Yep. I think most people are going to self-fund, would be my guess.

Jon:
Would you consider that kind of... Okay, so you have the loan, what's the foundation then? Is that the brand? Because I could see the brand being what you build up from, right?

Ryan:
Yeah. I look at the foundation as almost what are the systems you're going to build your business on? Are you going to be Shopify? Are you going to be BigCommerce? Who are you going to use for fulfillment? Are you going to do that yourself? What are the actual pieces within the business that you're going to scale on top of? Because there's going to be multiple things. I might say I'm going to start with ShipBob and Shopify, I'm going to get my products there. The brand itself is more the idea for me, but then once you have foundation, then you're managing all of these subs and you'll have, hopefully a business partner and yourself, that are helping oversee all of this with some expertise as they're building this business of yours.
And who knows when the business will be totally built, you're probably never done. You might start by building it single wide, and then you're going to be build that into a McMansion, then you're going to build that into a castle. Those foundational pieces can change and move, but you at least have to decide, all right, this is what I'm comfortable with. I know this, I understand why Shopify charges this, this and this. How their fulfillment works within their system. What I'm going to be paying for shipping based on the product. Do test shipping. Test multiple shipping types. Shipping is one of the craziest, most frustrating things in all of eCommerce. If that was my subcontractor, it would be the pool guy, because the pool guy is the worst subcontractor in the world, at least as of right now in my process. If you want to be a pool contractor, come to Oregon because there's a lot of demand in...

Jon:
There's a lot of demand and not a lot of season to do it...

Ryan:
There isn't.

Jon:
... unfortunately.

Ryan:
But shipping... If you haven't built an eCommerce business or you haven't even looked deep into the details of shipping, you probably need to, knowing that where you're shipping from is going to have different rates all over the country. If you ship from Oregon to Miami, that's the worst on the planet. Nobody takes things down to Miami very cheaply, but the same package will ship at a different rate to the same location for FedEx, UPS and USPS, so you have to understand which package is going to save you the most money. Especially if you're giving away free shipping, which I advocate for almost every e-com business, giving free shipping.
And you'll have to see dimensional weight can change. If you're shipping wholesale versus direct to consumer. If you ship to homes, there's penalties from FedEx and UPS to get home delivery, USPS doesn't charge those. If you're B2B, then FedEx might be cheaper. Going to Hawaii, FedEx is terrible, USPS is good. It's just the learnings in shipping alone could be a podcast.

Jon:
Okay, so we've got the idea, the dirt, the land. We've got the architect and builder, which is the friend and peers. We've got the financing done, right? You talked a little bit about foundation and what's needed there. What comes next?

Ryan:
Next comes all the headaches and the problems. Like, well you've got these subcontractors, you're going to get it out there, you've got to start spending money, that's because you got to drive traffic. Just putting a website up is not going to work. I don't know why a lot of people think that it does. It still confounds me, like, "I've had a website for three years and I have exactly zero traffic."

Jon:
Yeah, same thing with the retail location, right?

Ryan:
Like okay.

Jon:
I mean you might get some foot at traffic, maybe, but you just can't count on it.

Ryan:
Yeah. Well at least in a retail you can be like, "If I go right next to PF Chang's, I know I'm going to get traffic between the hours of 4:00 and 8:00, just because people are waiting in line there and they're going to see my store, and at least it's awareness." Doesn't work that way on a website unless you have friends that can send traffic there, you have influencers. But you have to think through, why are people going come to your business and do something? How are you going to get them there the first time? Do you have a plan to get them back a second time? That blows most business owners' minds? Like, "What do you mean? I sold the thing." Like, "Yeah you did, but did you sell them a second thing?"
I just talked to a guy yesterday, he has 50,000 people in his email database and he doesn't email them. I'm like, "Why not?" "Well, I just couldn't get it to work." "What were you using?" "Well, my dad's owned this business for 40 years and we used iContact and we just couldn't get it..." I'm like, "Oh my gosh. Yes, you need to be doing that."

Jon:
Let me introduce you to my friend Klaviyo.

Ryan:
Yeah, exactly, the heart. Even Mailchimp, I would say is better than what you're doing now. You're not doing anything.

Jon:
Well, let's not go too far, but yes.

Ryan:
Traffic... Yeah, we're not going to go that far. But yes, it's people working for you or systems working for you, which are all these people coming to your house to do certain things during the day, and you're overseeing all of them as your business. Once that's in motion, it's the overages and the cuts that you have to make, and the pivots and the things that don't go the way you expect them. Because I don't think there's been a home build in history that went to the way it was supposed to, because people are involved. Just like in online businesses, there are people buying things, there's going to be customer service issues. The postal service is going to lose the package and you've got to figure out where it is, and do you send another one? Is it just stuck?
I had one package that was stuck in Atlanta and scanned five times a day and didn't move. I was like, "Well, somebody is physically scanning this product." And the lady that had it was like, "You need to fix this with the postal service." I'm like, "I'm just going to send you another one, but I don't know who I could call." Like, "Hey, you've got my $16 plant food stuck somewhere in Atlanta, being scanned by somebody every day."

Jon:
You know it's on somebody's desk, that's just messing with you. Every time they walk by it, they're just like, "Yeah, I'll scan that," every time.

Ryan:
Yeah. It's like, somebody's probably listening. If you work for the postal service in Atlanta, just stop scanning it because it's driving me crazy. It's been there for two weeks, not moving, but scanned.

Jon:
That's amazing. Maybe it's just stuck on a conveyor belt and it just keeps going around.

Ryan:
Or the sticker, the package is gone but the sticker's just like [inaudible 00:21:37].

Jon:
I love that.

Ryan:
Damn, somebody get that sticker off there. But in seriousness, problems will happen and I think that's where you go back to the architect and the builder that are helping you, they've seen that before. Our builder, I get so frustrated sometimes because they tell me things I don't want to hear, but I trust them. I know they've built really good houses, I did a lot of interviewing, so I know that they're leading me down the right way no matter how frustrated I get. Yes, the pool guy's over 30 grand. Yes, he's not going to be on time. Yes, the pool cover is somewhere in the wrong country. Yeah, okay, that happens.

Jon:
It's on that conveyor belt that's going around.

Ryan:
Yeah, pool covers too. Okay. But yeah, it's also you do live within a budget when you're building a business and there's things you want to do that you can't do, and that's painful. My wife has always wanted to build a house and so we came up with this... She thought it was going to be just the greatest, most of amazing thing, to be able to build a house. She saw these people doing it on Instagram and it looked like such a great thing. They're a perfect family, never had any problems or arguments in their life. And then we got into it, so her expectations were out of line, and turns out you have to make cuts. We are not billionaires, so yes when we build a house, we do have to decide to not do certain things, like yes, we can't get those cabinets. Yes, we can't get those windows.
We wanted a certain hardwood floor, we can't get that hardwood floor, either it wasn't in stock or it just was too much money. That happens in eCommerce businesses too. You go in, you start and you see what happens, and once you're selling something, you realize, "Oh crap, there's a bunch of people in New York buying my product, and my shipping costs are way higher than I expected. This doesn't work on my margins. I can't spend money to drive traffic, therefore if I turn my spending off, I get no traffic and we have problems." So know that it's going to need to be pivoted, you're going to have to constantly go back and look at the plans and say, "Okay, this can't happen the way we wanted to, so how do we adjust this or this?" Those conversations are never fun, especially for dreamers that really wanted to do big things.
But it's important, and I think again, having the right people in place, and if you have that expectation that it's not going to go well. And great, we're still going to be moving forward, we're still going to be growing and building a business that is cool, that is solving a problem, that is helping people. It's okay when you see these problems and hiccups, because you expected them. Our builder, I will say, should've set better expectations with frustrations, but [crosstalk 00:23:52]...

Jon:
Well that's why we're here, setting expectations appropriately for everybody listening, right?

Ryan:
Yes.

Jon:
I think what we've learned today is everyone complains about building a house or renovating their house, right? And there's good reason, but if you go into it with your eyes wide open, then you'll be in a much better position with expectations. And an online business is very, very similar to that in that if you don't start by doing your research and having the old guy in the truck come out and dig a hole, and see if it fills with water. All the way through setting the right expectations around funding and what it's going to take there, to having the right people around you, be it the architect and builders, and peers, to the subcontractors and all the different people you're going to have to work with to do it right, and get stuff off your plate.
And then lastly, you're always going to be cash constrained or at least feel that way, and you're not alone, and you need to find ways around it. To me, that's the fun of business, right? I mean, that's why I do this. It's fun to me to figure out problems all the time, I enjoy that. And if you don't enjoy that, then don't start an eCommerce store, because you are going to be solving problems left and right, be it a sticker stuck on a USPS conveyor belt, or, hey, it's going to be a million different things, so...

Ryan:
It is. I mean, that's why I love e-com. I mean, all day, I solve problems. And yeah, someone pissed me off, but at the end of the day, I look back and like, "Yeah, that was fun." If there weren't problem, I would get bored. And I would say in that process, you have to be able to find joy in it. You got to celebrate some milestones. You celebrate when you hit a million bucks, celebrate when you hit a hundred... Celebrate, when you get 10 grand, you're in that process and set milestones that you can celebrate in that.
Like my wife and I, we'll walk over... Like yesterday we had taped sheet rock, whoo, that was exciting. We saw taped sheet rock. Hey we have to find joy because there is frustration that's going to come in there, so make sure you do have the celebrations and you do have those lines in saying like, "All right, when this happens, we do go over there and have a glass of champagne. Not going to be the nice champagne because we're not done yet, but it'll be a glass of champagne because we want to enjoy some of that process."

Jon:
The challenge is when you're done, you're not going to be able to afford that nice champagne with [crosstalk 00:26:11].

Ryan:
That's true.

Jon:
But that's neither here nor there.

Ryan:
Overages are... It's an interesting time to buy a house.

Jon:
Give me a call Ryan, I'll hook you up, how's that?

Ryan:
Yeah. [inaudible 00:26:16] I can get the cheap champagne a little cheaper.

Jon:
Yeah. I was just going to say, I'll order the nice champagne from you at a discount and then give it back to you as a house warming gift, how's that? All right. Thank you Ryan, this has been insightful as always, and I appreciate you humoring me on this idea.

Ryan:
Yeah. Thank you Jon. I loved talking about it.

Announcer:
Thanks for listening to Drive and Convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert.com.