Josh Hadley 5:32

That’s awesome. But James, I’m excited to dive into maybe some of those levers that you see, you know, when somebody acquires a business, what are the levers they’re able to pull to accelerate growth. But let’s even dive let’s go back even further. I know we’ve had a prior conversation where we talk about how there’s a lot of people that can stumble into seven figure brands, right? You can have a husband and wife team or maybe it’s just, you know, one, one guy and a couple VAs that are helping him and they stumble into a seven figure business. But it’s very rare to stumble into an eight figure business, right? So you’re, you’re actually building a brand and business at that point. So James, tell me about kind of your thought process of somebody that stumbles into a seven figure brand, and wants to grow it to eight figures and beyond? What are the steps that they should be taking? And how do they start scaling things up with maybe an exit down the road, we’ll talk about exit separately, but let’s talk about the levers they can pull now to go to seven, eight, and nine figures beyond.

James Thomson 6:41

Many years ago, when I was at Amazon, we were encouraged by our SVP for all of us to go and set up our own third party seller accounts. And many of us did, in fact, do that I had a third party seller account with my wife and some other folks. And we were reselling different brands. And as fast as I could call companies and say, will you let me wholesale your products, and then sell them on Amazon as fast as I could do that, I could turn around and make some decent money. And I grew my business to do several $100,000 a year, it was very much a part time initiative. But if I’d gone full time, there were definitely enough other brands that I could have called I could have got to a million dollars a year. But at a million dollars a year, you know, I could still operate that business, on my kitchen table, unloading product, repackaging it, sending it into FBA, it was all still very doable. It was a lot of manual work, a lot of Excel spreadsheets, not not necessarily that sophisticated. But it was still very doable. And certainly today, there are many folks that will start their own private label brands. Rather than being resellers. They’ll be private label brands with their own brands. And again, opportunity to be able to grow your business fairly quickly using a lot of these not very sophisticated techniques of your kitchen table and few Excel spreadsheets to get to the point that you’re running a decent sized business, many of the companies I’ve worked with when I was both at Amazon, and then since Amazon as a consultant, at either my own firm or at BuyBox experts. You know, in those situations, these brands are having to think through very sophisticated steps around. Do they have the right catalog selection today? Are they evolving their catalog in order to be able to adjust to competitive forces and capture different types of product gaps that might avail available them to additional products down the road? What are they doing in order to find production efficiencies? So that the products they’re sourcing today? Can they source those products for 5% for 10%, less, in a couple of years from now, as they grow the volumes and are able to have larger minimum order quantities? There are a lot of questions here around Do you diversify into other channels, where today Amazon represents 70 plus percent of the consumer opportunity for online sales today in the United States? Is it worth doing all these other channels. And one of the things I like to talk to my clients about is, it’s not so much if you add, for example, walmart.com or target.com Are any of those channels going to be worth the squeeze as they say, when they’re going to be large enough that’s worth the effort. I like to think about it not just in terms of you need to be where your customers are. But also, even if you only add 5% more with this channel and 5% more of that channel, every time you add another channel. If you’re able to grow 25 30% More through some of these other channels. In many situations, you’re doing enough extra volume fields, other channels, that you can go back to your suppliers and negotiate lower production costs on your products. That’s lower production costs for all of your units, including the ones being sold on Amazon. And so the benefit of diversifying into other channels isn’t just about having your product in lots of places, but actually being able to negotiate down prices, your production prices which benefits your whole overall business See? So I know it’s frustrating to put a lot of effort into other channels and not see a ton of sales or not see anywhere near the amount of sales, given the amount of effort you’re putting into it relative to what you’re doing on Amazon. But as I think through the conversations I have with many different buyers, who are my clients today, who are looking at Brands looking at, can they take on these brands and do new things with them. But when brands have already started the process of testing new channels, and understanding what it takes to be successful in other channels, those are all very good signs for a buyer that the product, in fact, has legs and can move beyond just Amazon. I’m gonna say something a little controversial here. But for a lot of the companies that that I have helped buyers acquire, there’s always this question of, Oh, is there a brand here? And for brands that have historically been on Amazon only? I would question whether these are really brands that Amazon has, as a marketplace is a transactional marketplace. People go and they buy a unit of something. And then when they come back the next time, they may not necessarily have any brand awareness of the products they bought in the past. On the most part, they’re doing unbranded search to find products. And so the opportunity for them to say, I remember that weird brand I bought last time, I think I need another one of those. That’s in fact, not the way that most consumers on Amazon behave. And so when we talk about, oh, I have a brand, and I’m building a brand, and it’s an important brand. And there’s brand awareness, I would challenge whether that’s really the case. On the other hand, if you’re taking a brand, and you’re actually selling it into multiple channels, and you’re starting to essentially own the visibility of that brand, wherever consumers might be, I would argue that you’re moving closer towards actually having some brand equity that you can leverage that in time, may help you diversify into a meaningful DTC site, having a Shopify or big commerce site of your own where you can sell your products. But when all you’re doing is selling on Amazon, and it’s transaction after transaction, it’s not clear to me that there’s necessarily a brand. And it’s not clear to buyers who are acquiring your brand, that there’s really a brand. And keep in mind that some of the sophisticated P and VC companies that are acquiring brands today, they don’t want to just buy a brand that’s going to be sold on Amazon, they want brands so they can sell into other online channels. But eventually, they also want to sell those brands potentially into physical brick and mortar. When you go into physical brick and mortar, the the retailers are going to want to see what kind of sales history you have, what kind of product reviews you have, but also how visible is your product and different types of channels. And if you can show different types of success selling over here and over here and over here, there’s a lot more opportunity for you to show that you’re sophisticated in the ways of distribution, I would argue that being a good distributor of your product is more important than being really good at building out the brand equity of your brand. In time, brand equity will come people will have more experience with your product, consumers and more channels will see your brand. But until we move away from this transactional nature of E commerce, it’s really hard to have a meaningful brand that consumers remember. And keep in mind when they come back to search for a product like yours the next time they go shopping to untangle there. I’ve talked about a variety of different things. But it’s important to recognize most of us today sell widgets. And yes, there’s a UPC and a brand name and a logo on the box. But consumers who are shopping online, most of the time they’re doing unbranded search, they’re not necessarily thinking about, Oh, you’re XYZ brand, I remember that brand. I’m going to look specifically for that brand the next time I go shopping. Now, one of the things that I helped brands with our excuse me, acquiring companies today think through and certainly something for your brands to think about. What what are the low touch ways to build brand equity, or let me put this differently, one of the low touch ways to create some sort of a meaningful experience that the consumer has with your brand, so that they will actually have a higher likelihood of remembering your brand is to think through the open box experience of your brand. The number of products that I buy today on Amazon where I receive something, and yes, there’s branding on the outside of the box. But there’s all this last opportunity for the brand to engage with me to help me understand how the brand fits into my life, how it’s going to solve problems for me, there’s a widget in the box. But there’s all this lost opportunity around cross merchandising. What other types of products do you offer? How does your product get used in not necessarily one way but three or four different ways that think of a typical six sided box, but when you open the box, they’ll open the box there might be the top label. Typically the inside of the box is blank. There’s nothing printed on the inside of the box on the outside of the box. You know there may be a you URL to your website, there may be a link to your YouTube channel. But there’s not a lot of opportunity. Excuse me, there’s not a lot of effective engagement with consumers to tell them your story. What is the story of your brand? And how does it fit into consumers lives? How do you help consumers think through this piece of equipment I can use to solve this problem, or this problem or this problem. And by the way, we have other cousins, there are other types of products that we also make that would also help you fit fit into your life solving this type of problem or this type of problem. Use the open box experience as a way to help consumers understand that you really are a portfolio of products that help consumers simplify their lives in whatever way it is, by the way, everything I’m saying you can do well, within the Amazon Terms of Service, I’m not suggesting that you’re directing people in weird ways to places you can’t direct them. But you need to use all of that as merchandising opportunity to tell your story. Yeah, and viewers understand more about what you do. I remember buying a suitcase once on Amazon, it was a it was a private label brand suitcase. And when I received the box, I realized the box was meant for me to engage with, I could open the box, there was all sorts of stuff printed on the inside that was actually quite interesting and relevant for me to understand how to clean my suitcase, how to store my suitcase, how I could pack it or not pack it effectively. All of these are things where I can learn more about how this product actually is going to make my life simpler. And then when you have a YouTube channel for all sellers that are spending all this time building videos, to help consumers understand the product, you got to tell people, Hey, we have a YouTube channel to help you install this product, set up this product, clean this product store this product, watch our videos to learn more about how to get the most value out of the product. Versus we have a YouTube channel. Okay, that’s great. But again, you’re losing out on that opportunity to tell your story more in depth, and to help consumers get more value out of the product, which is going to reduce return rates, which should hopefully create some level of awareness in your brand. And potentially, consumers are more likely to share information about your brand with their friends and family and say you know, I had a good experience with a brand new next time you need to buy a suitcase, check out this brand, you should check it out, it was actually kind of interesting and so different from what everybody else is doing today, which is I gotta go source a product, go slap my label on it, put it in the box, get it to Amazon and sell as many units of it as I can. That is not a brand. A brand is figuring out how to educate consumers post sale on some of the additional benefits and features of the product that will make their lives better. That to me is much closer to being a real brand than anything else that we see today on Amazon.

Josh Hadley 17:45

Yeah, I love that James so much to unpack with all of that. But you you drop some huge knowledge bombs that get me really excited in, I’ve already got my wheels spinning of different things that we can be doing with our brand. But James, what have you seen as you’ve looked at numerous ecommerce brands at this point? What have you seen, as you know, some good examples of a great unboxing experience? Right? Or just to give? I think the luggage example is a good example. But let’s say somebody doesn’t have their product coming in a box today. You know, maybe, do you have other examples of what you’ve seen working.

James Thomson 18:27

So I had a client a few years back that sold beauty products, and the products didn’t come in a box. But the decision was made that it was actually worth the cost of putting the item in a box. Specifically, because the box, if you design it properly becomes a beautiful piece of merchandising that allows you to tell a much broader story about how this product or this product is part of a larger grouping of products that the brand makes, how that product can make your life better. And so by putting the product in a box, using the inside of the box to tell more story, being able to put more text on the inside to help consumers get more of their questions answered post sale to show them more of the products that might also be interesting for the next level of consumption of the next level of problem that consumers are facing. All of that was you know, yes, there is obviously manufacturing costs putting these items that weren’t otherwise in a box now in a box. But But by doing that you have the opportunity to market your story to market your brand to build your brand to be in a position where consumers start to think about your brand is more than just a bottle of goop. Which unfortunately, there’s an awful lot of bottles of goop that are being sold on Amazon under various brand names. So I’m picking on beauty products for example. But but this is this is one relevant category where a lot of stuff doesn’t come in a box. Yeah. Now many years back when I was when I was dealing with FBA sellers early days in FBA, sellers would take whatever their non boxed item is put in a polybag J have a bunch of marketing materials in that bag as well. And then they would send that into FBA. And then the consumer gets something and it looks like an all leftover Halloween trick or treat bag, which really is not a very good experience from a branding perspective. But you need to think through, in what situations is it actually worth adding a little bit extra production cost, in order to help your product prepare itself to engage with consumers a little bit better. I like products that are in boxes for a couple of reasons. Number one, you’re getting closer to being ready for physical retail. Number two, if you use the packaging effectively for merchandising, as we talked about earlier, that there’s opportunity to tell a lot of other stories to simplify the interaction that the customer first has with the brand. And be in a position where the customer is more likely to get a hate to use the word but some sort of customer delight out of the experience where they they get more value than they anticipated out of the interaction. Here’s the crazy thing. For private label brands that are doing a good job creating content, often the content that they need, they’ve already created. They’re just not using it again, in terms of having a YouTube channel and telling people go watch my installation videos, go watch my how to clean this product video. I’ve already created imagery showing, you know, I saw these five different bottles of goop. Here’s how they interact. And here’s why you would use this one at this point. And this one, this point, probably put that at the bottom of your product description. Well use that content again, put it on your box, tell the story again, and again. And again, I’m not asking you to go and create a whole bunch of new content, you probably already have it. And if you don’t, you should have it anyways to get good online experiences for customers on Amazon. I’m working with with with a client right now that they’re first party brands. And I recognize many, many your listeners may not be first party brands. But in vender Central, there’s opportunity to load more than one video. And when you can load more than one video. Now you can have the one video that shows your product, here’s how it interacts with your life, that’s great. But you can also have a video that says here’s how you install the product. Here’s how you clean the product. Here’s how you store the product, here’s how you know when the product is ready to be replaced. All that kind of additional content, why not provide it to customers right up front, when they’re making that purchase decision, because you’re showing them that you as a brand, are thinking about the long term interaction that customer is going to have with the brand. Versus I just want to sell you a bunch of widgets. So this is all part of if you think about what a brand actually is, a brand is a set of promises that you make to a customer that the customer comes to learn that they can expect that you will regularly deliver on. And so the more promises that you make, and the better job you do at delivering on those promises, the more brand equity you build. Well, when you sell a widget in a box, with no real information about what to do with the widget, even if it’s seemingly apparent to customers, oh, this type of product, I know what I’m supposed to do with it. Yeah, but even if it’s obvious, tell the story again, help customers make sure that they get the most value out of that product. So that they say I remember that product did a really good job of helping me feel comfortable, confident interacting with this product and knowing exactly what to do to get the most value.

Josh Hadley 23:14

Yeah, I love that. And I can’t echo that enough. I think that for a lot of brands, it even goes to like your product copy and your product images that you put together, is it telling a meaningful story and what’s in it for me, right for the end customer, you know, they don’t necessarily care that this particular product is laminated with PE T film. To them. It’s like, I don’t even know what PE T film is right? But what they do know is that, hey, I want this to be durable so that my kids can interact with this product without ripping it or damaging it. Right. And so it’s displaying, you know, how is this product going to serve this customer? Right? And then your overall brand story should be, you know, communicating to how you’re serving that customer. And I love your strategies and your thoughts with how do you showcase additional products to help serve the customers in other areas of their life? I think that is so so important. On that note, James. I mean, we talked a lot about different strategies that people can be implementing to move from seven figures to eight figures and beyond. You talked about production efficiencies, we talked about creating new products, we talked about getting more distribution into new channels, of all of those things. Each of those are fairly large to tackle on their own. You know, if somebody just crossed that seven figure mark, what would be like your actionable advice for them to say, Hey, this is what I would do first, second, third.

James Thomson 24:53

So the first thing I would do we actually haven’t talked about yet. First thing I would do is I would start to delegate tasks to people and clear up your plate. So you can spend more your time thinking about how to go and source better products, how to do more research to find those product gaps in your catalog that you can start to fill, how to start thinking about new channels you might expand into, when I think of the day to day activities of what it takes to run an Amazon business, there’s an awful lot of stuff that quite frankly, we don’t really like doing. You got to check reports, you got to check Seller Central, you got to check your inventory, you probably got to talk to your three PL, if you’ve got one that’s bringing products in from overseas, there’s a lot of activities that need to be looked at. And I didn’t even talk about, oh, you got to file 20 Seller Support tickets today. And all that kind of stuff. PHP saying to yourself, even though I think I can do this better than anybody else in the world, the reality is, there’s only so many hours in the day, you need to go hire a VA, or outsource this to a trusted colleague who it may, of course, you know, it’s going to cost you money. But the money that you spend to have somebody do a lot of these repetitive tasks, or tasks that you don’t really like doing that frees you up to do much higher value added stuff to drive your overall business, if you’ve got more time to be doing new product research and thinking through. Okay, where’s their opportunity for me to potentially expand my product line? Where do I need to start thinking about calling out some of the products in my products, because quite frankly, not all this stuff has turned out to be gold, you’ve got to have time to think through those bigger questions. And the only way to do that is to start outsourcing some of the mundane that comes with running an Amazon business, as you get better at outsourcing that and accepting the fact that yeah, you know, this other person who’s taken on these tasks may not be quite as amazing at doing it as I am. But quite frankly, I don’t need amazing, any competence. And the more you can get competent help to help you with many of these tasks, the more time you free up to work on other types of activities. When my partner or business partner and I were running our Amazon agency, we did everything we put on every hat imaginable to run that business. And as we started to outsource certain tasks and get more comfortable with, listen, we can outsource most of the stuff with high confidence to people, as long as we train them properly, and we’re patient and we get them up and running. All of a sudden, we now have a multiplier effect. And we have a multiplier effect. That’s when the genius of being a business owner starts to really kick in. And yeah, you know, Wouldn’t you love to have five other people who are as strong and intelligent and good looking as you are to be there with you. I don’t need that I need three or four highly competent people in each of their specific areas to help me pursue different responsibilities so that I can go and tackle some of these bigger long term questions. That’s the stuff that really starts to matter. That’s the stuff where I get excited because I realize I can spend time helping think through how to grow my business, versus being in the weeds day to day, making sure that every seller support ticket gets addressed. And every customer inquiry gets responded to quickly. That’s not where I should be spending my time as a business owner. Yeah, it’s good to touch bases and check in every so often on those things. But if you’re doing that all day, all night, trying to make make make ends meet with your business, I would rather have a little bit less margin, but have more time to think about the bigger issues like what products do I need? What channels do I need? Do I need to go and get some outside funding to help accelerate the growth? Those are the big complicated questions that you as a business owner need to be thinking about, if you have any intention on going from being a seven figure to an eight figure seller.

Josh Hadley 28:32

Yeah, James, I echo everything that you talked about there. I think that so many people initially get so worried about like, oh, this person is going to cost X amount of money, or they can’t do it as well as I can. And frankly, it’s just a natural path of any leader that you need to just you need to overcome and you need to get through. And you need to learn how to delegate, if if you truly want to grow your brand, delegating and leading people is just something that you’re going to need to tackle because you’re not going to turn your brand into an eight and nine figure brand, just by yourself alone. And a couple virtual assistants like you are going to need to build out leadership teams and people that can can make other difficult decisions for you in the business as well.

James Thomson 29:22

I mean, many of us have young children. And the reality is you need to work with your children to show them how to do stuff. Because eventually they will grow up and be competent at certain things. It’s exactly the same thing when you hire somebody and say I need you to learn how to do this task. And the reality is unless you get comfortable delegating certain things and saying, Okay, kids, you’re doing the dishes tonight and do the dishes may not be quite as clean as I would like them to be but we’ll get better at this and we’ll get to the point where I can rely on you to do this properly. Fantastic. Now I can go focus on something else. These are these are harsh realities of becoming the operator of a big business. You know, I think Back to the absurd situation with a guy like Steve Jobs when he started Apple many, many years ago. Do you think that at some point he thought he would be packaging up all the iPhones and boxes by himself? Of course not. He had to start delegating things. He had to start building teams that were competent teams that were given the responsibility of doing certain things. Not suggesting that every seven figure sellers are in the process of building the next trillion dollar Apple business. But you need to think about how do I delegate so I can spend more of my time thinking about the big questions of do I need to add completely new product lines? Do I need to get completely new manufacturers or at least find a secondary manufacturing source? What do I do to go through and do very careful cost analysis and figure out how I can remove three 4% of cost out of my manufacturing, so that I potentially can absorb inflationary costs or be in a position where I’ve got more money to invest in growing my business that much faster? Those are big, long term questions that you must make time to do. And the only effective way I see companies being able to do this is you’ve got to hire people and delegate responsibilities.

Josh Hadley 31:07

Yep, I agree. Now, James, let’s transition before I don’t want to run out of time on this, because I feel like this is gonna be very important piece of advice that you’ll share with the audience here. But how should brands be making their brand or their business attractive to investors? You talked about, you know, investors want to be able to come in and know what levers they can pull to accelerate growth. And I’ve also kind of heard, Hey, you don’t want to get into retail yet. Because you want that potential acquirer to say, Oh, wow, look at this opportunity with retail. Or you don’t want to go to all of the channels, because you want other investors to be able to say, Oh, you haven’t got on to Walmart, like, that’s easy. I can do that. And Etsy and target. So dismiss, you know, let’s maybe dismantle some of those myths. But also talk about like, what are investors truly looking for? What are the levers? And what makes it an attractive business? I know, that’s a loaded question. But well,

James Thomson 32:12

a lot of stuff that you can do here. And again, assuming you’ve delegated a task, and you have time to think through what I’m about to say, it’s really important, in my view for every brand owner to have a three year business plan. And that three year business plan says, what where can I be in three years from now? What’s it going to take for me to get there? I didn’t say you actually have what it takes to get there. But what would it take to get there? And I’m not talking about we’re going to the moon I’m talking about? Okay, I have a $2 million, your business if I want to grow it to be a $10 million business? Okay, well, let’s let’s work backwards. We know what my conversion rates are, we know what my inventory levels are, we know what you know, we can estimate what kind of potential market demand there is for products like mine. Okay, so if I’ve got 10 products in my category, do I need to have 50 products? If it’s 50 products? Is it all still in the same category? Or is it other types of products start to think through, and you can just you can either go down, up or top top bottom, you know, either way, just figure out what would need to be the case in order for me to be three, four or five times bigger. And some of it’s going to be simple math, but also sort of it’s going to be if I needed to open up new channels, which channels probably make the most sense, given what I can see on a superficial overview, just looking at some of those other channels. Okay, if I want to sell into physical brick and mortar, maybe I should have a conversation with an agent that could help me sell into those channels. Not that you’re actually going to sell them to those channels. But to figure out, what would it take for your products to be ready to have a conversation with a retail buyer to figure out if in fact your products would be be welcome in those channels. Those are conversations you can have. And it doesn’t take that much work to do that, once you may quickly realize is that the products I already am making with the packaging I’m already using, there are some changes that I could start to make to some of those products that actually make my products more interesting and more ready for retail, or more ready for other types of online channels. And so just working through that exercise of saying what are the minimum criteria, I need to be in these different types of channels, or to expand into some of these other types of categories where there might be different regulatory issues, or different manufacturing issues, start to work through those things, even though you may not actually activate and move forward on any of them. But you can at least start to ask the questions. Talk to fellow colleagues who may have already explored those channels. Talk to experts who know those particular categories or those other types of channels and ask the questions and start to figure out what would it take for you to be three to five times bigger in the next three years. As you start to think that through. You may realize that a lot of those issues that hold you back are going to be going to get me You know, financial, financial access to tomorrow working capital? Well, again, you may not have the working capital that may require an investor to come in, to provide that working capital, either acquiring your business or providing you with some investment capital. But as you go through and you start to figure out, if I want to build a really big cake, what ingredients do I need? Okay, I’m going to need this much of this. And this much of this. Now I know what it’s going to take for me to get to, you know, having a really big cake. Turns out some of the things that you may need, you may find ways to get in the meantime, long before you actually sell your business, you may decide I got to go to my rich uncle and say, can I borrow half a million dollars and give you 20% of my company. Because with that half million dollars, I can do all these exciting things with new product testing, you know, getting larger minimum order quantities, and hence lower costs, I can expand into some new categories, all that stuff is well worth exploring, as part of developing this three year plan. The other thing I do want to say as an aside, because I’m fully guilty of having made this mistake myself, private label brand owners often like to build up their brand with the idea that at some point, they will sell it to somebody, and they will get 100% of the money for selling this business. Look, I built a $10 million brand and somebody paid me a crazy amount of money, I would much rather be the owner of part of a much bigger pie than the full owner of a pie that I built by myself. But quite frankly, never got to be as big as it could have been. And so the idea of taking capital from somebody else, selling off a piece of your business to get more working capital, that shouldn’t be looked at as an evil. In fact, with the right kind of partner with the right kind of terms, it’s something that you should definitely be looking at seriously and saying, Could I accelerate my business considerably? If I had half a million dollars more working capital, a million dollars, we’re working capital, and you don’t have to take it on as debt? Maybe you do, maybe you don’t, but you can also take it on as equity. And those are conversations that are well worth having. And those are long term conversations that again, you can only have if you’ve got time to start thinking about the strategic nature of where your business could be in three years? And what key ingredients are going to need to get yourself there.

Josh Hadley 37:12

Yeah, what are the specific levers that you see investors getting excited about being able to pull right now?

James Thomson 37:20

Right now, right now, brands that are looking to sell their business, at some point in the next 12 to 18 months, you got to have your house in order. And having your house in order is not just oh, I’ve got SOPs, and my accounting is in good shape, and bla bla bla bla bla, it’s also do I have a three year plan that I’ve laid out that says logically, my catalogue could go in this direction, I could add these types of channels, got to start thinking through what it’s going to take, which levers you think are most meaningful to your business, given where they are today, given the manufacturer relationships you have, and so on, start laying out what those things are. So that you can hand the next buyer, what you believe, a meaningful starting point for a three year building plan would be to take your brand to the next level, it doesn’t mean that the buyer is actually going to take all those ideas, but it’s a starting point. And if you’ve looked at this seriously, and actually started to apply some details around what it’s going to take to make each of these different activities happen. What you’re doing is you’re helping the buyer to be able to say, Okay, once I acquire your business, I may have to kick more working capital into the business. But I can see that, yes, it makes sense for me to diversify into these products, or yes, it makes sense for me to add these additional channels. And I can see that I’m going to need to do these specific things to make that happen. Keep in mind, most companies that will buy your company, your brand, they’re not as sophisticated or running your brand as you are. So you need to give them a little bit of a map around what it’s going to take for them not only to run your business as it is today, but also where it makes sense for them to take the brand going forward. There may be a strategic acquirer who comes in and says, Listen, we’ve already got all these other channels in place we we can eat instantly launch your product, those other channels, we’ve got better sourcing than you do on all kinds of Okay, that’s great. But again, giving them a roadmap that says we thought through if certain things were possible around working capital or around time that I had, I could do these things with my brand. That’s going to be stuff that’s going to be well appreciated by buyers, because you’re helping them understand where your brand fits in with everything else that’s already out there from everybody else. And so it’s no longer just Yeah, I have a widget and I sell a bunch of widgets on Amazon. But I’ve done some market sizing, I can see where my product fits in. Now my product fits in this tranche. Within this category. I could launch a different tranche or I can expand into a different category with the types of products I have. Think through those different things. Lay it out, make it explicit, identify what it would take to actually accomplish those tasks. Those things are going to make buyers much more interested in your products because you You’re helping them with this roadmap. And that’s, that’s going to be absolutely critical. If you’re if your company is bought by private equity company, private equity company, many of them want to hold your brand for three years, they want to supercharge growth, and then they want to turn around and sell your brand. Again, when I go to private equity companies, I say to them, Listen, let me help you build that three year plan before you actually acquire this company. Because if I can help you shorten the timeframe, you have to own that brand. If I can help you shorten it by six months or 12 months, because we hit the ground running. And we actually do certain things immediately to grow the brand further, the private equity company is going to be in a position that they can realize the kind of return they want, in a shortened time period, they’re happy, they’re very happy by doing that. And it allows them to be able to move quickly, once they take ownership with the brand. If you’re the brand owner today, and you can identify here are things that can be done quickly, to find new sales, revenue opportunities, again, that’s going to be something your buyers is going to be appreciative of seeing, even if they never take any of your suggestions. If it’s detailed enough around what you do, or don’t know about your product in these new channels or new products in existing channels. All that stuff’s going to be helpful to to a prospective buyer.

Josh Hadley 41:09

Awesome. I love that. James, my my one final question that I want to ask you there is that as you, you know, provide or, you know, consult these private equity brands, or companies with three to five year, you know, plans that they could implement? What are some of the like, the levers that you had? Like, are there levers you could list off such as, hey, you know, we ramp up the to see, we start doing more external advertising or working with influencers? Or is it you know, retail, is there kind of like an a list, maybe a checklist, we could go down for brand owners just to start mulling over in their mind as they start to consider building out a three to five year plan for their business of like, here’s a list of a bunch of different levers that I’ve seen other brands be able to pull. And when private equity has acquired them, they did pull these levers, we saw great success, then they were able to turn around and do what they wanted to those brands. Any?

James Thomson 42:09

Yes, it seems like there’s a lot of stuff and go through but stuff that brands often overlook, as they prepare themselves for sale, you should absolutely know what kind of repeat purchase behavior or subscribe and say behavior you have, from your customer base, if it’s low, and your product is, for example, a consumable gosh, we don’t expect consumables to have low repeat purchase behavior. What are you doing in order to help consumers reengage with you? Do you have to start using some of these Amazon email tools? Or do you have to invest in Amazon DSP, which can be an expensive endeavor initially, but one that helps you to go back to existing customers, and get them to come back and buy your products. You want it you want to see brands that have decent repeat purchase behavior, if they’re non consumable products, then you want to start asking the question, what are you doing to merchandise, the other types of products in your catalog to get consumers thinking about, Oh, when I have this type of problem, I should be thinking about your brand to help me with this in this in this. These are all questions that I think are useful to go through whether you’re going to sell your brand or not. You’ve got to be asking, am I in fact, lowering my total cost of acquisition and cost of re acquisition, repurchase, second purchase third purchase? So looking at Subscribe and Save looking at repeat purchase behavior? And tracking that over time and asking yourself the question, What could I be doing? What should I be doing to drive a lower cost of acquisition and getting customers to come back over and over again, those problems cannot be solved overnight. But you need to be thinking explicitly about what it’s going to take for you to get consumers to start to reengage with your brand. And that’s that’s a very useful exercise and one that if you do eventually sell your brand, be able to showcase that as part of the broker deck that you put in front of prospective buyers. That’s something that buyers respond very positively to, because they see that you’re actually building some level of customer brand, awareness and reengagement. That’s, that’s, that’s going to differentiate you from every other, so called brand on Amazon. That’s basically nothing more than a logo and some UPC codes. So I like repeat purchase, looking at that. I also like being in a situation where as you prepare, eventually to sell, most brands are going to have to write down all their standard operating procedures. Turns out, most brands don’t actually use the standard operating procedures they think they’re using. And so just the exercise of documenting this and putting things down on paper and realizing, Wait a minute, why did I do it that way? Wait a minute, couldn’t I outsource this to another VA, or to another person that I have supporting my team? I’m not actually thinking about this effectively. So as you start to document what you’re doing, you’ll realize this is absurd. Why am I doing this? Oh, by the way, what am I missing? out on that I should be also monitoring. Oh, okay, that needs to be part of my standard operating procedure, not just on paper. But actually, as part of my day to day exercise. One of the tasks that we took on with some of our clients a few years back that, as simple as it may sound, but as powerful as it turned out to be is lay out what needs to be done on a daily basis, on a weekly basis on a quarterly basis on a yearly basis. And then what needs to be done based on certain trigger trigger points along the way, write that stuff all down, know exactly what needs to be done. A lot of it can be outsourced to somebody else, unless it’s documented, unless you’re tracking to make sure that it’s actually been done, you’re gonna wake up one day and the house is on fire. And you don’t understand why because nobody’s been monitoring certain things. So again, the exercise of going through and documenting what should be the standard operating procedure, who’s responsible for taking on those tasks? And are they actually being done the way you think they’re being done, you will find a lot of pimples on your business, because you’ll discover that you’re not actually doing the things you think you’re supposed to be doing. And that that will hold you back from from future growth.

Josh Hadley 46:06

Makes a lot of sense. James, this has been amazing. I have certainly enjoyed this conversation, I have about a million ideas running through my mind right now. And I love the knowledge that you’ve shared, you have such expertise in evaluating other businesses and determining whether they’re prime to, you know, be acquired or not, and seeing future growth for them. And so I hope our listeners have been able to take away some golden nuggets here today. Before we wrap up with my final three questions I like to ask every guest, I love to leave the audience with three actionable takeaways from each episode. Here are the three takeaways that I noted James, let me know if I’m missing something. So number one, I would say the first step, if you have just kind of stumbled into a seven figure business, and you don’t really have a team more than maybe a few VAs or things like that, you need to start building out your team. And delegating responsibility goes back to exactly what James just talked about, is developing those SOPs, and then start getting really good at hiring and identifying good talent and start bringing people in, you’ve got to learn through experience, how to lead and that’s something that I had to go through as a leader myself, I have made a lot of mistakes when hiring certain people. And from that, I’ve been able to better refine our hiring process, the way that we train and we onboard team members to where we can put somebody in and like you mentioned, you know, like with your kids, your you have them doing the dishes, right, and it might not be done correctly the first time, but you have a process to teach them and you know, that you can get them to the level of cleanliness that you need them to be at down the road. So that would be action item number one. Action Item number two, is you need to think about that brand equity. Starting today. We talked about this, there’s so many different levers you can pull when it comes to brand equity. We most recently just talked about, you know, what is your repeat purchase rate? Like what are you doing, to tell your story to bring customers back to have them fall in love with your brand? What are you doing with that unbox the product unboxing experience, James, I think that was a big mindset shift for myself of maybe it is worth the extra cost to add a box onto your package, so that you’re able to tell that brand story more fully. And that allows you to market additional products or help them get introduced to your YouTube channel. That’s not just hey, subscribe to our YouTube channel. It’s, hey, here are these videos to help you gain more benefit from this product. Right. And so last but not least,

James Thomson 49:00

I would say is, if you don’t already have this in place, make sure you’ve created a three to five year business plan for your business assistance or three years is enough. Three years is enough. Five years is so far into the future. If you think through what you need to do in three years, by the way, a three year plan, if you’re experiencing 10 or 20% growth, you haven’t thought about it properly. Think the way Amazon thinks which is what we’re going after, you know 20 25% growth every quarter. What What would it take in order to get there? I didn’t say you’re gonna get there, but what would it take to get there? You can if you can accomplish even half of that in the next three years. You’re gonna have an amazing business on your hands.

Josh Hadley 49:41

That’s a really, really good takeaway there. So three year plan. How are you growing your business 25% Every quarter might be outlandish but put all those ideas on a wall and start chipping away at them. And then like I said, when it comes time for preparing to exit That’s what gets a potential investor interested in buying your business is that they see Holy smokes, you’ve already laid out a lot of opportunity, I see the work you’ve been doing to prepare to, you know, take advantage of those opportunities. Let’s reinvest the capital or the expertise that we have, that we can bring to the table and help go to the moon. Does that sum things up, James? Anything?

James Thomson 50:25

That’s all you do? You’re better off than you were at the beginning of today’s discussion.

Josh Hadley 50:29

Awesome. I love that, James. All right. Let’s go through these last three questions. What has been the most influential book that you’ve read? And why?

James Thomson 50:40

As an entrepreneur, what is this partly about part of it is having flexibility, but part of it is also making money that allows me to have the flexibility to do future things. There is a book that I read recently, that is really changed the way I think about the world. It’s a book by a guy called Bill Perkins books called die with zero. That’s a book about how do you manage your money going forward, so that you don’t end up dying with a whole bunch of money, you should be making good money, but also spending money on yourself creating, you know, what we call memory dividends. So how do you enjoy your money in a way that you create experiences for you and your family? So that you’re not just a 90 year old man on a deathbed saying, I wish I’d done this, I wish I’d done that, spend some of your money and enjoy life along the way. Yes, you have to be responsible. But there’s no point being a successful entrepreneur to just keep saving money for some rainy day that you never get to experience because you’re too old or weak to actually ever enjoy it. This is, this is a concept that, you know, our society says Save your money, save your money, save your money. Yep, savings, good. But it’s also important to remember you’ve got to spend money to enjoy life. And if you enjoy life along the way, whether that means you take your two weeks, a holiday a year, and you actually do something meaningful, or you do a bunch of little things along the way to make your life simpler. Don’t be shy to spend money to make your life enjoyable along the way. That would be my that would be my most interesting book.

Josh Hadley 52:10

I love that. That sounds very interesting. And very interesting thoughts that I think consider in that book. So thanks for sharing that. What’s your favorite software, maybe a new tool that you’ve discovered that you think people should be using?

James Thomson 52:26

So I get the opportunity to see a lot of new tools, as entrepreneurs come to me and say, I’m doing this, I’m doing that, what do you think? I’ve seen, I’ve seen some saw this one tool called visit VI, z it, which is a tool that allows you to optimize your images in a way that actually looks at customer conversion. And it’s much more sophisticated than just a simple AB test. It’s actually looking at heat maps on the image and figuring out what content needs to be in the image in order to get certain levels of engagement. I was very, very impressed by that tool, have no financial interest in saying what I’ve just said about that company, which is very impressed by the tool. I do work with one company called Low gi.ai. They do influencer marketing. I’ve been very impressed by what they do specifically because PPC costs on Amazon keeps skyrocketing year after year. At some point, companies need to think about how do you play the game differently? How do you drive traffic to your listings, in a way that everybody else isn’t necessarily thinking about. And I think that in the next two to three years, we’re going to see a huge, huge increase in influencer marketing traffic, where Amazon rewards brands for bringing traffic from outside Amazon to Amazon. And you want to do that in a very high conversion manner. And so if you can find the right influencer marketing folks who understand how to communicate the benefits of your products to consumers outside of Amazon, and then drive them to Amazon, that that becomes a new way to play the game. And often one that financially is much more rewarding than simply investing more and more of dollars into Amazon PPC. So that those would be the two companies that I’ve seen that I that I really liked what they’re doing, and I’m gonna continue to monitor what they’re doing.

Josh Hadley 54:09

loki.ai

James Thomson 54:11

How do you spell that? l o g? I e.ai. All right, and then visit is Vi z it.com.

Josh Hadley 54:19

A real quick follow up question on that Logie AI. Because I think that’s a fascinating concept of three years, you know, a lot of people, you know, the outside traffic becoming more and more important. The debate is do you send that to your own DTC website? Or do you keep doubling down on Amazon? And if you’re trying to, you know, create a brand, right? If you want to exit? Is it better to be saying, Hey, look at this, I’m driving traffic to my own Shopify store, for example, or do we keep feeding the Amazon beast? What’s your perspective on that?

James Thomson 54:52

Well, you can have your cake and eat it on this one. Actually. Let’s say you are driving it to your own DTC site. Your own DTC site can have Have two shopping carts. They can have buy here or buy on Amazon and you click off to Amazon and you can actually make your own DTC site and affiliate, get affiliate revenue for driving attain Amazon, again, make life easy for consumers to buy where they want to buy. So if you drive influencer marketing traffic to your own website, or if you drive it to Amazon, you know, there are benefits either way, in most situations, private label brands on Amazon will never ever get anywhere near the amount of traffic on their DTC site that they will get on Amazon. And what we’re seeing is that external traffic to Amazon is much more rewarding than similar levels of traffic that’s gained through PPC, which is essentially just regurgitating traffic that’s already on Amazon. And so, to some degree, I actually prefer the model that says, Keep feeding the Amazon beast, because there’s 1000 times more traffic on Amazon. And if you can create yourself just enough advantage on Amazon, to get first page organic search, you’re going to be in a much better position to win big, big dividends by being a big player on Amazon than being the biggest player in the world on your own website. And again, if you decide Nope, I really do have to send it to my own website. Okay. But give customers the option by having those two shopping carts so that consumers can say you know what I’ve never bought in your website, I’m not really sure what this purchase experience is going to be like. But I know that if I buy it on Amazon, now it’s prime, I have a problem with returns, no problem. You got my credit card information already. Give customers that second option. Either way, you’re gonna have high converting traffic going deep on either your website or to your Amazon product listings. Both of those are good for your brand long term.

Josh Hadley 56:40

Awesome. I love your perspective. There that James thanks. All right, last question, who is somebody that you admire or respect the most in the E commerce space that other people should be paying attention to?

James Thomson 56:52

Well, I had the benefit many years ago when I was running the PROSPER show, to to meet a gentleman called Rick’s Cesari. And Rick was the marketing marketing genius behind many of the products that we know from the 80s and 90s, like the George Foreman grill, the Clarisonic toothbrush, he was the guy that was figuring out how do you essentially use TV infomercials to help consumers understand what a product is all about? Well, the TV infomercial concept has simply reinvented itself and is now on Amazon with different types of live TV and extensive videos and all this other types of engagement with consumers. But it all comes back to the same basic concepts, which is understand your target audience understand what problem you’re trying to solve for them, and get them excited emotionally about what your product can do for them. Rick, sorry, when he came to speak at prosper, and this is now five years ago, I remember people at the back of the room where I was standing coming up to me and saying, oh my gosh, I’ve never thought of it this way. What he’s saying all makes so much sense that you need to engage with your target audience and help them understand what it is that they’re going to be able to do with your product. I mean, let’s be honest, this is really marketing one on one or 102 applied in a absolutely crystal clean way. Rick says he’s written some books, he runs an agency, he does amazing stuff for startup brands. He doesn’t know that I’m saying this about him. But but you know what, what he does needs to be applied to to every private label brand today. One of the most irritating things that I have ever been told working with private label brands, is that they all have some secret sauce. The reality is, if you know marketing, one on one, marketing, one or two, marketing tool, one, whatever. But the basics of what’s your segment, how do you target them? How do you position your product to that target audience, that that is ultimately what this is all about. If you’re building a brand, you’ve got to understand the basics of marketing. And you’ve got to understand not only how to help people understand what you’re going to do to make their life easier. But if you can do it in a way that they get emotionally connected to you, now you have brand equity. And that’s really what this is all about. So think about how do you apply the basics of marketing? How do you engage consumers at an emotional level? How do you show them how you solve problems? That’s what works sorry, showed all the attendees of prosper show many years back. And I think about it regularly, because quite frankly, what we’re trying to do today has already been done in the past in other types of channels and other types of settings, but it’s the same concepts being applied. And we as responsible private label brand owners, we need to be thinking about what are the basics that we need to put into every single product that we launch on Amazon. It’s not about I need a pre packaged and I need a bunch of PPC that that’s not building a brand that’s just playing a game. If you want to build a real brand and you want to be truly celebrated for building something meaningful, go and look at marketing and one on one stuff, go read Rick saris books, and you’ll learn an awful lot about what you need to do to be an effective private label brand toner.

Josh Hadley 59:54

I love it. James, this has been fantastic. Thanks so much for sharing your wisdom and insight with all of us today. If people want to follow you learn more about what you’re doing. Is there a place that you would like to direct people to get in touch with you?

James Thomson 59:54

I’m on LinkedIn. James Thomson, T H O M S O N. You can find me there and certainly happy to chat with you there. Thanks, Josh for having me today. I very much appreciate the opportunity has been

Josh Hadley 1:00:19

a pleasure. Thanks again, James.

Outro 1:00:22

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