The Million-Dollar Exit

First things first...

Before jumping into product creation or brand development, it’s essential to understand the most potent lever in business: words.

Effective copywriting can be your most impactful catalyst for success. In fact, marketing missteps often stem from a failure to communicate value, rather than issues with the product or advertising channels.

Even with a fantastic product and a sleek website, if you can't inspire people to invest in your solution, you may find yourself in trouble. Advertising costs will skyrocket, profits dwindle, and inventory becomes stagnant, leaving you to face mounting debts.

If this scenario feels familiar, there's hope. Transforming a few words on your website can double your conversion rates and significantly boost your revenue. Learning the craft of storytelling through copywriting is invaluable, creating immediate and dramatic results.

It’s a crucial skill to develop before investing further in your business.

Soul-searching for products

The journey begins with a search for something to sell. But how do you even go about ideating, developing, and sourcing a product that’ll drive scalable revenue?

A common rule of thumb is to ask yourself if this is something you would buy yourself… but this only taps into your immediate needs. Another route is be to ask customers what they want… this will only get you as far as an Amazon listing or a few hundred thousand in sales.

I took another path: I talked to people and listened.

I knew I wanted to get into apparel again, so I got a few random older men on the phone, gave them $50 for their time, and asked them what was going on in their lives that drove frustration and anxiety. I listened… not for products they wanted, but for pain points they were enduring. We discussed travels, work attire, laundry day, and even dating. Plenty of laughs and awkward moments. Whenever their tone change, I pressed on the topic.

This form of research is often overlooked because it requires trust to build a deep connection and for real problems to surface. It's no surprise that typical marketers love to skip it... they're too cold-hearted to care. All they look at are metrics and use embarrassingly ineffective marketing copy that does no better than break even.

I discovered key problems that I could easily translate into working prototypes, so I set my sights on developing a product that my customers would hire. The job description: a product that'll make their lives easier, better, and more enjoyable.

From this came product description: "Butt-molding travel pants that fight saggy looks and unreliable fits so you always arrive looking slick and feeling fresh."

This is a fantastic starting point, and now I can proceed to product development!

By the way, if you’re in a position where your product is already manufactured, fear not, there’s a way to reverse engineer common frustrations and find solutions with the benefits your products bring.

Building the Product

Now that I had frustrations that needed solving, I grabbed product samples from competing brands and built a presentation with changes I wanted on them. I put it in a package and mailed it to my sourcing agent in China: Apparel Labs. I've worked with them before, so they know how picky I can be about features. I also ended up building their new website, so make sure you check them out if you're looking to get started in apparel.

On to product development!

"Butt-molding travel pants?" Easy. I added the curved waist from Bonobos chinos to mold the rear, a ball gusset to prevent crushing, and anti-theft pockets with zippers to make them travel friendly.

We’re "fighting 'saggy looks," so the product needed to stretch easily and recover to its original shape to prevent bagging out. This narrowed down fabrics, moving away from your traditional stretchy pants and onto more advanced fabrics out of Japan. This also helped me adjust fits for many types of legs.

We're helping our customers "arrive looking slick," so the pants needed to look smart casual so they can to wear them to the office but look stylish enough for happy hour after work.

Are you getting it?

I built a product that creates a narrative around an aspirational identity. The best part is, you don't need any experience to developing products. Simply consider that attention to detail is key. Here are a few pointers to help you build a tech pack that your developers will understand, regardless of the product category:

• Build a powerpoint/keynote presentation with slides.
• Describe everything in easy to understand terms, elaborating on every point.
• Provide adequate drawings to the best of your ability. You can use build-in tools for this.
• Photograph competing products and point to the features you want from them.
• Mail these samples to them and attach post-it notes to key areas.
• Never assume the factory knows what you want.
• Always assume the factory will cut corners, so make sure you make clear requests.
• Note that every additional feature will have additional costs.
• Request a quote for 1000, 2000, 5000, 10,000, etc units.

Should I manufacture now?

Absolutely not. Before even considering this, I needed the answer to the one variable that affected my cash flow and profitability forecasts: CAC or CPA (Customer acquisition cost or Cost per acquisition).

I knew product costs because I quoted them with the factory in multiple quantities. I knew shipping costs because I quoted them with the 3PL. I knew return rates because I researched them on Google. But not knowing customer acquisition costs would be like diving into a new business venture with my eyes closed. It’s the one single line item in your P&L and cash flow statement that could make or break your business. Lifetime Value (LTV), or the average expected lifetime revenue per customer, comes at a close second… but we can also make some assumptions here.

Not knowing your acquisition costs is one of the main reasons small businesses fail. It’s a test on your selling skills.

Quick tangent… I had a friend who, for the longest time, talked about starting her jewelry line and making a go at it as an online seller. She saved up the money, ordered a bunch of inventory, and finally got around to building her website on Shopify. Her friends and family cheered her on, telling her to 'just go for it.'

But once the inventory came and it came time to start selling, crickets made their terrifyingly quiet appearance. She never sold anything. Ads looked intimidating, her messaging was uninspiring, and her hard-earned cash was tied up in inventory that never saw the light of day.

Time passed and she never did give up her 'real' job. Why? Because despite dreaming about making a living online and traveling the world, learning how to sell was far scarier then remaining an employee for the rest of her life.

The reason I tell you this story because I need you to permanently tattoo this idea into your head. Research your customers first, learn how to talk to them, then stack on a testing philosophy that guides every decision you make. Don’t assume… don’t hope… Instead, make decisions based on cold hard facts. In my case, I needed to know CPA before confidently diving into manufacturing my product.

So, what’s my CPA?

Let's find out. I wrapped up product development and had a final prototype I loved. I made a request for a tiny manufacturing run (sample run) and made sure to request the 3 basic colors that make up any apparel collection: black, blue, and gray, all in multiple sizes so I wouldn't run into sizing issues with the model.

I flew to Los Angeles, hired a brilliant photographer, and led a 2-day photoshoot. I explicitly asked to be directly involved in directing the shoot, striking a pose behind the photographer so as to guide the model with the features I wanted to showcase. I had already built a mockup of the landing page I was going to be using, so I knew the photographs I needed for each of the 7 sections. I was building relevant photography that matched the story I was building. Remember the butt? Plenty of cheeky photographs!

Know what creative to request is quite the science, but it's easy to nail down if you know the intent behind each picture. The whole point is to showcase a 'feeling' and 'aspiration' behind the product.

With photography in hand, I proceeded to build a fully-specced website on Shopify. Thankfully, Shopify is now on 2.0 and building long-form landing pages is now a native feature behind any major theme available in the Shopify theme store.

From here, I needed to launch a 1-week test campaign on Facebook to find my CPA. I allocated a $10k budget for this experiment. But if I wanted to see realistic numbers, I had to test my ability to take preorders as well. Remember, the goal is to gauge acquisition costs, so any positive indication that preorders came in profitably is a testament to the worst case scenario when you're in stock.

You may be asking yourself why I wouldn't choose Kickstarter for this. I’ve used Kickstarter before,  raising over $600k with the platform. But I needed more control over the brand. The ability to quickly pivot without 'locking' your brand into a campaign that may or may not work was key. Shopify was the ideal route to take. I also had the added benefit of immediate funds availability and lower fees.

I was set on funneling all traffic to the specially-designed, long-form landing page. This page acted as a continuation to the story that would start at the ad level. The photos in each section matched each concept of the story, so they were highly relevant, engaging, and aspirational. With the site ready, it was time to move on to the ads.

Building out a proper Facebook campaign is certainly a rigorous task. It requires a bottoms up approach, meaning.... instead of launching a bunch of ads and hoping for the best, you need to test concepts against each before running a conversion campaign. It's important to narrow down messaging until you found a winning concept. Remember, Facebook is an engagement platform... so it'll only reward high quality ads that keep their users engaged.

This requires a carefully-designed testing methodology involving pre-testing of headlines, primary text, and creative for engagement. Skipping this step is no better than gambling, and is NO WAY to build a scalable and profitable business.

Here's how it works:

• Build a bunch of headlines and primary text and separate each of them concept. Keep them on a spreadsheet.
• Pre-test these headlines and primary text for engagement using a brand awareness campaign.
• Measure CPC averages and extract the winners.
• Attach creative that matches the winning concept and build a DCT using these winning headlines, primary text, and creative.
• Run the DCT on a conversion campaign, but make sure the DCT has no more than 20 total ad combinations.
• Extra the post id of the one winning ad.
• Push this ad into a broad scaling campaign and let her rip.

I went through this process 3 times and extracted 3 winning ads. I assigned them to the CPA Testing Campaign and budgeted for $10,000 in ad-spend. I targeted broad, avoided interest targeting, and skipped lookalike. You need to let machine learning do the heavy lifting... Facebook is recommending this and it's important you understand that going broad is the only way to allow the algorithm to actually work without being the restrictions of a small audience. The fact is, using interest/lookalikes is guaranteed to increase your ad costs and prevent scale!

Impressive, but certainly not a result of luck. I had essentially fed Facebook’s machine learning platform with golden inputs. By pre-testing for engagement, the DCT campaigns had fewer, but better variables to work with, so finding a winning ad was easy. It is a probability and engagement based algorithm after all… and because targeting is done at the ad level, each ad created its own lookalike dynamically. Because each ad had a different angle, I didn't have to worry about Interests or Lookalike Audiences. I trusted the machine to do a good job with the inputs I gave it.

Establish the launch sequence

After $10k in ad-spend, I now had a positive signal. Despite having an untested product from an unknown brand name and a promised 4-month delivery window, the campaign had passed the litmus test with flying colors. CPAs were highly profitable and I now had the green light to proceed to manufacturing. I had two options here:

1. Continue the campaigns as is and raise funds to fund the manufacturing order.
2. Pause ads, place the 30% deposit from my savings, and relaunch once I had a set delivery date.

The first option is lengthier in that you need to raise the 30% deposit before starting manufacturing. It’s doable, but you’ll need to discount the product a bit more to account for the extended delivery time.

I was in the fortunate situation to have enough cash for the 30% deposit. Normally I wouldn’t do this, but the results from the $10k in ad-spend were giving me a clear signal to go all in. I decided to place a massive $500k manufacturing order (COGS), gave a 30% deposit, and restarted ads a month before products were set to be in stock.

The process worked beautifully. I raised a whopping $500k in preorders on the first month, fully funding the manufacturing order and all shipping expenses like freight and delivery.

I had essentially pre-sold a third of the inventory, with remaining inventory available for in-stock selling at higher prices. I had also acquired engaged customers that were willing to fork over their hard earned money in exchange for my product. Believe me when I tell you: this is the best feeling in the world.

Note: Visitors are 100% willing to buy when you're clear on expectations on shipping times and if the discount makes sense for them. I plastered crowdfunding terminology all over the site and was clear on delivery dates.

Bonus tip: It’s important to note that a proper tech stack will keep information flowing smoothly, allowing basic basics tasks like customer service and shipping to be executed FAST and with minimal input. This way, you can run your business as a one-man operation, making it easy for someone to acquire and pour resources into. Here are the major platforms I use to automate everything:

• Shopify, e-commerce platform.
• Gorgias, for customer service.
• Loop, for returns and exchanges.
• A proper 3PL.

Make the business sellable

Once I came in stock and started delivering product, I had to establish a cadence. I continued ads, spending over $4,000 on a daily basis (yay for credit card points, see below for the best rewards card for ad-spend). I was targeting broad, so I could’ve easily raised budgets and scaled harder. But I couldn’t sell more inventory than I had available. Believe it or not, I had to purposely slow down. After selling an additional $700k in the second month, I had raised the funds I needed for the next inventory order. I had to replenish FAST.

This is where things got tricky. Lead times on apparel are about 4 months. Because the next order needs to be twice as big to keep up with the growth trajectory, additional capital comes in very handy at this point. Recycling through revenue and profits only goes so far, so a balancing act of additional capital and cash flow is needed. The thing is, getting loans or bringing on investors can get quite complicated, especially on a business with only 2 months of history.

Given all the roadblocks, I decided to take another route. With the cadence in place, the product proven, and profitability clearly visible, I started looking for acquisition offers. As best selling sizes started going out of stock, I scaled down and placed an order for a new round of inventory, easily covering the 30% deposit. This 'incoming stock' was crucial in getting the business ready for sale.

Listing the business for sale on marketplaces like Flippa or MicroAcquire is difficult because you’re dealing with individuals that are preconditioned to ask the wrong questions. I'd be dealing with potential buyers that have never ran an ecommerce business before or were looking for a valuation that wouldn't make sense to me. Both are nightmare scenarios.

Thankfully, I ran into an ad from OpenStore. This new company, founded by Keith Rabois, is buying up Shopify stores and providing exit liquidation for entrepreneurs. They made an immediate cash offer. Given the aggressive traction they saw, the hockey-stick-shaped growth trajectory, and the beautifully automated operations, they made an exciting $930,000 offer the next day. We wrapped up the paperwork in a couple of weeks and agreed on 2 months of transition services.

Not bad for less than 90 days of sales!

Final thoughts...

Whether you’re starting out or have an existing business in place, launching products like this starts by mastering the fundamentals of selling and talking to your customers. Only then can you find how your product fits a bigger narrative and develop the inputs that Facebook craves.

If you’re already selling and making use marketing agencies, ask yourself: how many have you been through already? Are they researching the way you're supposed to? Are the using uninspiring copy? Are they asking you to be patient, month after month after month? Are they using iOS14 as an excuse? Relying on agencies may be costing you the future of your business.... That's why I'm telling you my story, so you can find the inspiration to learn the skills that drive almost every dollar made online and off.

Thank you for reading, and best of luck!

P.S. Here are some extra resources:

• Start building on Shopify and get a free trial.
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• Get an 24-hour acquisition offer on your Shopify store.