← Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business
Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business
How a $0.10 Domain Turned Into a Multi-Million Dollar Business
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In this episode, I’m breaking down how I built my e-commerce business from scratch, why I focused on high-margin products, and the costly mistakes I made so you don’t have to. 🚀I’ll walk you through: ✅ Why I chose e-commerce and high-margin products...
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Tyler Jorgensen
What if I told you that you could start a business for less than a dollar? I did. I had a 10 cent domain that was on sale and a $100 Google AdWords credit. And that's all I had to get started on my first e commerce business. And somehow I turned that into an international company selling wholesale, retail, direct to consumer. But before the good stuff all peaked, I'd made every mistake possible. Mistakes that will stop most people from even getting started. Today I'm going to show you what worked and what didn't and why the biggest risk isn't failing. It's never getting started at all. You're listening. Welcome out to the Rich dad radio show. The good news and bad news about entrepreneurship. I am your host, Tyler Jorgensen. In this episode, I'm going to break down three really important things for you. I'm going to break down why I chose E Commerce, specifically high margin product E Commerce. And then we're going to go about how I launched my first website and how much easier it is today than when I did this back in 2008-2010. And then I'm going to go through some big mistakes that I made so that you don't have to make those too. Let's get into it. So why did I choose E Commerce, specifically high margin products? And it's pretty simple. One, I really wanted a lifestyle that I could spend time with my family, time with my kids and be able to travel and see the world. I didn't want to be stuck behind a desk or 9-5ing it all day. E commerce seemed like the right solution for me. I also knew I didn't have a ton of experience in e commerce. I'd sold some things on ebay, I'd sold some things on craigslist. None of those things were the same as trying to scale a company online to be able to pay all of my bills and fund my lifestyle. And so I knew that I was not the kind of person that was going to be really laser focused that was going to sit there watching every dime and every penny. So I needed margin. I needed the, you know, hopefully we know what margin is. I needed margin in the business so that I could make mistakes at the I remember these numbers pretty well. At the peak of the business, our average order value was around $114 and our average cost of goods was 7. We spent more on shipping and way more on advertising to acquire a customer than we ever spent on the cost of goods of the I knew that if I was going to be Successful and get and hit my goals quickly. I needed the margin in that product to be able to spend money to acquire customers and be able to make mistakes. So high margin business became a need for me. When I was looking at what type of products to sell, it became like the minimum that I would look at is 5x. I wanted to be able to find a product for $1, sell it for 5. I want to be able to find a product that cost $10, still up for 50. But really my goal was 10x. And usually we were close to that. And so that led me into things like supplements and beauty because there's high margin in those, there's high perceived value. But when you're manufacturing, the cost of goods are pretty, pretty dang good on those things. Building a website today is pretty easy, but back when I was building websites, there weren't as many choices. Things like Shopify or BigCommerce weren't even really out yet. Shopify wasn't for sure. And so I actually started on WordPress and I found a, a free theme that I could get started on And I used PayPal buttons and that was it. I had free WordPress, a free theme and a free PayPal account. That's all I had. That's all I had. That's, that was everything that I needed though was be able to write good copy, have an offer that was position positioned better than the competitors and then start running some ads. I remember and I'm gonna go, I'm gonna break those things down in a minute. But I remember I built things that first night and then I went to sleep. I probably stayed up till three or four, building everything, getting it all ready, launching the ad. And I went to bed and I woke up that next morning and, and I'd had a sale and it was for almost 200. I was like, that was the best night of sleep I've ever had in my life. I slept and made money. And so I was like, I gotta figure out how to keep this going. So I went back to the website and checking the ads and everything, seeing what was working and what wasn't. And so I want to break down a little bit of what I, what I said a moment ago about the need to be able to make my ads better and make my offer better. See, there's a lot of people that sell any product, right? Unless you are coming up with a brand new crazy invention that nobody's ever heard of. If you're entering a market, there's competitors, they probably buy things similar or in Your competitors probably sell things similar to you. So what I did and what I would recommend you do too is I said, how do, how can I differentiate this? And the product that I was, I started selling was a, a liquid vitamin. And everyone else was selling one ounce. And their average price was around, if I remember, right around $49. And so it was $49 an ounce. And if you think of things like a lot of the liquid peptides today, they're way more than that. Right. So it's not out of the, out of question for a supplement or a vitamin or something like this to have a reasonably high cost. And so I, I was like, man, I don't have the ability to just go negotiate lower prices or do things. What can I do to just give a higher perceived value? So right off the bat, other places all my competitors were selling 1 ounce and 2 ounce and I said, nope, I'm gonna sell 2 ounces and 4 ounces and 8 ounces. So I immediately just went way up in the quantity that I was selling. But I was able to make my eight ounce cost, if I remember right, about $25 an ounce. So that's half price compared to the people that are selling $50 for one ounce. And all of my advertising, everything that I did focused on the part that mine was the cheapest per ounce. So I had people that would buy, that would buy the product and share it with family members or share it with friends because they realized, man, we're saving so much money just buying it here. It didn't cost me that much more. My nominal cost differences between a, buying a one ounce bottle and buying a two ounce bottle were often only one or two dollars and buying. And then I would ship for, in order to have an eight ounce product. No one had eight ounce products. I just shipped to four ounces. But, and so that, you know, that was a little bit more expensive, but not the same. It was so much better for me to have a $200 order because I could spend more to acquire a customer and still be left with a good amount of profit. So the other things we did is we tried to make stronger guarantees. And I couldn't make, make specific guarantees around the product because, well, those are health claims and you can't do that if you're in, in anything in the health and wellness space. And because I wasn't super great yet at running ads, I was able to do just a good, I was able to do a good enough job to start making money and start getting some revenue. And that was Great. But I needed to go faster. And I wasn't skilled and trained at scaling ads. What I was good at, my strength was people. So I started reaching out to blogs and people who already had the type of traffic, the type of customer that I wanted, already had them in their, in their world and in their ecosystem. And I found one blog, still grateful to them to this day. They, they ended up also growing really well over the next couple of years, scaling their business, launching cookbooks and all kinds of things. And I remember I reached out to them, I bought a, a small ad on the side of their, of their blog, and it made a ton of money. This was it. I'd found the perfect mix. I had paid ads running all the time. I'd find sponsored blog posts and things were working. I remember it took me less than 30 days to replace my income and hit the goals that I had set for my dreamline in, in terms of daily, average daily income. I thought, man, everything's amazing. And so I slowed down. And when I look back at this, some of the biggest mistakes that I made were not scaling. When I had something that was winning, I could have found someone that was an, an expert in ads. I could have started finding new places to run ads. If I was profitable running on just Google, what would. I could have run ads in other places, but I didn't have that experience yet. And so I didn't know that if I'm, you know, if I'm spending this much on ads, man, what if I 10x that spend or 20x that spend, what would happen, right? And because my goals were already set at this level that I'd already achieved so quickly, I slowed down. My advice would be, holy cow, like have experts around you, like bring, bring people into your world that know the things you don't so that you can scale faster and not make those kind of mistakes. I remember that there were, there were merchant processing issues, there was website issues, there were E commerce, you know, things about E commerce that I just hadn't learned yet. And so over that first few months, we moved off of WordPress onto BigCommerce at the time. And then we, we were able to start doing things like not having ad accounts shut down every five minutes. I realized I couldn't just run it on just a simple PayPal account. I needed to have a real merchant processor that was underwritten, that was actually able to make sure it didn't get shut down every other day. Because what was what I didn't want to happen and would happen sometimes is I was out enjoying time with my kids, and all of a sudden I would notice sales weren't coming in, but ads are still running. I'm still spending money on ads, I'm still driving people to the website. And when I'm all. When I'm seeing, holy cow, I'm spending money on ads and no sales are coming and something's broken. And this little sense of panic would set in and I would freak out because usually what had happened is someone broke the website. Someone on my, you know, either. Either I broke it the night before and didn't realize it, or PayPal or my merchant account stopped saying, I stopped taking money, stopped processing the charges. So the customer would go to check out, everything looked fine, and then it would just fail. And those were the worst times is when you think you're. When things are going great, but you're actually not running it quite right. And so the big lesson, right, is learn what the rules and regulations are both for advertising and running the business. There's a lot of things that aren't law, but that are regulations. For your merchant account, there's a big company called Stripe, and a lot of people run their, their businesses on Stripe. But if you read the terms and conditions in Stripe, there's a lot of restrictions. You see, Stripe is the kind of thing that basically anybody can open an account. They don't do any underwriting, they don't really look at your account, but once you start processing, then they take a look and see what's going on. And if you're not in compliance, they shut it down. The other way to work with a merchant processor is they go through a whole underwriting process. They look at your website, they look at your return policy, they look at your terms and conditions. They make sure that you, as the business owner, are credit worthy and that you're going to be able to handle chargebacks and refunds. And so when you go through that side, you're much less likely to be shut down because you've checked all the boxes. And so I see it all the time today, people launching businesses, they haven't really checked terms and conditions. And then they get mad at Stripe or PayPal or whoever that may be because, well, they're shutting down. My. They're ruining my whole business. Or what happens a lot right now is people get shut down on Facebook. Oh, Facebook's killing my account. I'm trying to spend money. They won't take my money. And I'm like, first of all, you're spending so little compared to the Big players in advertising. Yeah, they want your money, but they're, they're not that stressed about it. You're not a VIP customer. And did you check and make sure you did everything that you were supposed to do in setting up those ads? One of the big things that happens in Facebook is, is the basics of having your domain verified and just going through the onboarding process to run ads properly. And so the lesson is, bring in experts, ask people advice, and talk to people who have already done it. I tried to do everything on my own, and I was just like, I'll just figure it out. It was an expensive way to learn. I often say it costs nothing to advice. It costs nothing to ask advice of a friend. Ask your friends. Ask people in your world and in your network for advice. If you're not in a mastermind, seek out a mastermind. So you have a group of people who are entrepreneurs and business owners that you can learn from to shorten your learning curve. That's a big thing that, that you're going to need to do in your business is make sure that you have people around you that can guide you and coach you and make it make things easier for you. It is way cheaper. A wise man learns from his mistakes, but a really wise man learns from the mistakes of others. So launching and getting the business started that first 30 days, as hard as it seemed, was actually the easy part. Scaling was a whole other story. You see, as we started scaling, we started going, we went international, we started selling into wholesale, and each one of these new things added in greater complexities to the business. And that's when I ran into my first real problem. I ended up having to hire somebody off Craigslist to import product from the US Into Canada and may not have followed all the rules the right way. We'll get to that in the next episode. Thanks again for tuning in to Rich Dad Radio. I'm your host, Tyler Jorgensen.