Building a $3,500,000 Business for a Stranger in 42 Mins

Summary

Podcast Summary: "Building a $3,500,000 Business for a Stranger in 42 Mins"

Podcast Information:

• Title: The Game with Alex Hormozi
• Host: Alex Hormozi
• Guest: Cody Shilson, Owner of Trophy Outlet
• Release Date: April 1, 2025

---

1. Introduction to Trophy Outlet

In this episode, Alex Hormozi interviews Cody Shilson, the third-generation owner of Trophy Outlet, a longstanding business specializing in trophies and awards. Cody shares his journey, business metrics, and the strategies he aims to implement to scale his business to $3.5 million in revenue.

Notable Quote:

[00:25] Cody Shilson: "Last year we did about $1.72 million in revenue, mainly trophies and awards. Personalization, about $110,000 in profit, 6.4% net margin."

---

2. Current Business Model and Revenue Streams

Cody outlines Trophy Outlet's primary customers, including coaches, event organizers, HR departments, and gift purchasers. The company offers free engraving, fast shipping, and personalized products ranging from $4 to $900, with the most popular items being 4, 5, and 6-foot trophies priced between $89 and $130. Additionally, they sell specialized items like dash plaques for car shows.

Notable Quote:

[01:12] Cody Shilson: "We offer free engraving, fast shipping. Everything we do is personalized to the business or the individual."

---

3. Sales Channels and Marketing Strategies

Trophy Outlet utilizes multiple sales channels, including their website, Etsy, Amazon, and TikTok Shop. Cody highlights the significant revenue spike from a viral TikTok video that generated $250,000 in December alone by selling 13,000 units of "death signs."

Notable Quote:

[02:45] Cody Shilson: "We had a video go viral with 20 plus million views. So we went crazy. So 250 of that came in one month."

---

4. Business Challenges and Goals

Despite the steady revenue, Trophy Outlet faces challenges such as low net margins and high cost of goods sold (COGS). Cody's primary goal is to double the revenue this year to reach $3.5 million. He acknowledges the need to enhance marketing efforts and improve profit margins.

Notable Quote:

[04:14] Cody Shilson: "I just need more people to the site, more people buying and we can fulfill it. So. And also very product heavy with low margins."

---

5. Pricing Strategy and Recommendations

A significant portion of the discussion centers around optimizing pricing to improve profit margins. Cody admits that previous pricing strategies were inadequate, with products sometimes selling below cost. Alex advises shifting from a cost-plus model to a value-based pricing strategy, emphasizing customer willingness to pay.

Notable Quotes:

[23:07] Alex Hormozi: "Every business I know that does a cost plus model doesn't make a lot of money. You want to switch to value-based pricing."

[08:36] Alex Hormozi: "I would suggest you start split testing, kind of like 80, 20 on your highest sales velocity items."

---

6. Marketing Focus: SEO and TikTok

Cody discusses their efforts in SEO and paid advertising across different platforms. With a robust SEO strategy yielding a 13 to 1 Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio, Alex recommends maximizing SEO investments. Additionally, the potential of TikTok is highlighted as a primary growth lever due to the platform's viral nature, especially for gag gifts.

Notable Quote:

[07:43] Cody Shilson: "We have about 90,000 visits to our site, about 2,500 orders, just a 2.8% conversion rate."

---

7. Operational Efficiency and Consolidation

Cody reveals that Trophy Outlet operates two locations but plans to consolidate to focus more on e-commerce. By shutting down the underperforming retail location, the business can save on costs and streamline operations, thereby increasing profitability.

Notable Quote:

[15:05] Cody Shilson: "We're actually looking at consolidating and going more e-commerce and kind of cutting the retail business."

---

8. Leveraging Email Marketing

With an existing email list of 10,000 contacts, Alex emphasizes the untapped potential of email marketing. He suggests implementing automated email flows based on user behavior and long-term nurturing sequences to drive repeat business and increase revenue without additional ad spend.

Notable Quote:

[35:23] Alex Hormozi: "Most mature e-commerce businesses get between 30 and 50% of revenue from email."

---

9. Strategic Advice from Alex Hormozi

Alex provides a comprehensive strategy to scale Trophy Outlet:

1. Consolidate Operations: Shut down the unaffordable retail location to save costs and focus on e-commerce.
2. Revamp Pricing Strategy: Transition to value-based pricing by testing and optimizing prices on high-velocity items.
3. Maximize SEO Efforts: Invest further in SEO to drive more organic traffic, capitalizing on their strong LTV to CAC ratio.
4. Amplify TikTok Marketing: Increase TikTok content production to 3 videos per day, leverage viral trends, and collaborate with influencers.
5. Enhance Email Marketing: Develop automated and long-term email sequences to nurture leads and encourage repeat purchases.
6. Improve Offerings: Introduce more compelling offers in packaging to incentivize additional purchases.
7. Optimize Paid Advertising: Redirect ad spend from underperforming channels like Facebook to high-potential platforms like TikTok.

Notable Quotes:

[14:09] Alex Hormozi: "You want to switch to value based pricing, which is purely based on what someone's willingness to pay is."

[33:07] Alex Hormozi: "This could easily double profits if we just add the 6%. Right. That's all we'd have to do."

---

10. Future Growth and Potential Acquisition

Cody mentions the possibility of acquiring another trophy business in the St. Louis market to expand operations. However, Alex advises caution due to the high customer concentration risk, as the potential acquisition's revenue heavily relies on a single customer.

Notable Quote:

[10:50] Alex Hormozi: "That's a pretty big buy. I would try and find out if I could, who the vendors were that he has in China for his connections for his raw materials so that I could try and use those vendors."

---

11. Conclusion and Action Steps

By the end of the conversation, Cody feels optimistic about implementing Alex's recommendations. The focus will be on streamlining operations, optimizing pricing, leveraging SEO and TikTok for marketing, and enhancing email strategies to drive sustainable growth.

Notable Quote:

[42:25] Cody Shilson: "Yeah, I feel really good."

---

Key Takeaways

• Pricing Optimization: Transitioning to value-based pricing can significantly enhance profit margins.
• Marketing Focus: Prioritize SEO and TikTok for high ROI marketing efforts, reducing dependency on less effective channels like Facebook.
• Operational Efficiency: Consolidate retail operations to focus resources on e-commerce.
• Email Marketing: Utilize the existing email list to drive repeat business and increase revenue without additional ad spend.
• Strategic Growth: Carefully consider acquisitions, focusing on reducing customer concentration risks.

This episode provides a deep dive into the practical challenges of scaling a traditional business in the modern digital landscape, offering actionable insights for entrepreneurs aiming to optimize their operations and marketing strategies.

Transcript

[Alex]

If you wanted to hit 3 million next year, I was like, we could do 10 million next year. I would just say we're going to take all of our resources, we're going to go all in on TikTok Viral Organic and you're going to deploy everything into TikTok shop and get influencers to do lives for you showing all these funny gadgets because like the, the trophies are so built for shareability.

[Cody Shilson]

Yeah.

[Alex]

What's up?

[Cody Shilson]

How we doing?

[Alex]

Good.

[Cody Shilson]

Awesome.

[Alex]

Let's talk about trophies.

[Cody Shilson]

Yeah. So my name is Cody, Cody Shilson. I own trophy outlet. So last year we did about $1.72 million in revenue, mainly trophies and awards. Personalization, about $110,000 in profit, 6.4% net margin. And I'm third generation owner of the company for almost 40 years, so that's amazing. Yeah, kind of fun.

[Alex]

So what's the. Yeah, what's the goal?

[Cody Shilson]

The goal is 3.5 million in revenue. I really want to double revenue going this year. This year, yeah. Okay, I think we can do it.

[Alex]

So who do you help?

[Cody Shilson]

So mainly coaches, event organizers, as well as businesses and organizations, which is like HR departments, business owners, sales managers, you know, people like that as well as get gift. Yeah, purchasers.

[Alex]

I got that. I got that vibe.

[Cody Shilson]

Yeah.

[Alex]

Okay, so how do you help them?

[Cody Shilson]

So we offer free engraving, fast shipping. Everything we do is personalized to the business or the individual, something like that. They go to the website, to our platform purchase, you know, add the personalization info, the logo, things like that, and then we fulfill it if it needs approval, anything like that. But most things ship in one to two days. So.

[Alex]

Sweet. So how do you make money?

[Cody Shilson]

How do we make money? All right, so on our website, directly on our website, most of our products kind of land in that 100 to 150 price point. We have products that range from $4 all the way up to 900. So it's a wide range. Most popular item is a 4, 5 and 6 foot trophy which kind of lands about $89 to $130. And then dash plaques which are like little car show things that guys collect when they go to car shows. And yeah, so it's kind of selling for A$25. We minimum 50, but we sell thousands of them a year.

[Alex]

I've never heard of that.

[Cody Shilson]

Yeah, there's like these little pieces of metal that people just. They have these big boards that they set out at car shows. It's kind of funny, actually.

[Alex]

I'm always amazed how many ways to make money There.

[Cody Shilson]

Right. And that's one of the things our company was started on.

[Alex]

So. So how do you get customers?

[Cody Shilson]

Tropical started in 1985, so almost, you know, this is our 40th year. And we launched our Etsy business in 2019 and we did about $70,000 the first year. And then in 2013 or 2023, we launched Amazon and did about $300,000. And then last year we launched TikTok Shop and we did about $270,000 in revenue, but 250 of that came in December alone. So we had a video go viral with 20 plus million views. So we went crazy. So 250 of that came in one month, so that was kind of fun.

[Alex]

And you sold those?

[Cody Shilson]

We sold those, yeah. And not quite family appropriate, but yeah, little death signs that people boug boss or whoever. It was so kind of fun, but I was a little crazy for December.

[Alex]

No, I love that. And you were able to fulfill on the amount of orders that came in?

[Cody Shilson]

Yeah, yeah, we did about 13,000 of those.

[Alex]

So do you have any factoring set up? Like, do you.

[Cody Shilson]

Yeah, we produce everything in house. So we engrave, cut, build it all it, ship it.

[Alex]

Sweet. Okay.

[Cody Shilson]

Across four different channels. Most of our clients come through online and internal is through SEO and Facebook ads. We just launched Facebook ads in Meta about October, November with an agency.

[Alex]

Yeah.

[Cody Shilson]

And then Amazon, we spend about $7,100 a month between agency and ads. And then etsy and then TikTok. Still kind of figuring that one out a little bit since it all happened in December, but about $2,000 so far. Got it in ads there. So.

[Alex]

Well, how many customers have you sold so far?

[Cody Shilson]

Yeah. So in 2024, directly on our website, and I have this broken out per channel in a couple slides, but total visits is about 90,000 visits to our site, about 2,500 orders, just a 2.8% conversion rate. And. And about 781 products. So it's a lot of products.

[Alex]

So do you carry all those or is everything. Everything made to order?

[Cody Shilson]

Yeah.

[Alex]

Okay, so that's not. So it's not like you're carrying a ton of inventory. Like you've got raw.

[Cody Shilson]

Raw materials and then raw materials. Most of it we bring in from our vendors kind of as we need it. We don't carry a huge, huge, you know, except for like the death signs and stuff. We'll kind of stock those up since they went so crazy. But that's kind of an exception to the rule.

[Alex]

All right, then what's been holding you back.

[Cody Shilson]

So I think it's marketing fulfillment wise. We proved that in December. We can handle about double fulfillment, I mean, with limited complexity. So. So I just need more people to the site, more people buying and we can fulfill it. So. And also very product heavy with low margins. So working on the margin piece, getting profits up a little bit.

[Alex]

So do you want to like sell this company eventually or like what's the ana? Do you want to double?

[Cody Shilson]

I haven't really had any thoughts of selling, but I want to create a business that is sellable.

[Alex]

Yeah.

[Cody Shilson]

So I have the option if I want to sell or no. But I would love for it to be a fourth generation business someday.

[Alex]

Got it.

[Cody Shilson]

If that's an option. But yeah, that's kind of the ultimate goal.

[Alex]

All right, so how many locations do you have? Because you have brick and mortar. Correct.

[Cody Shilson]

We have one retail location. Now we have two locations total. We closed the other retail location down in its production only facility.

[Alex]

Okay.

[Cody Shilson]

So the other retail location, you know, does maybe $150,000 in revenue out of that location.

[Alex]

So just like walk in traffic and whatever. Yeah.

[Cody Shilson]

Walk in email stuff.

[Alex]

Does it break even?

[Cody Shilson]

Not really. Okay, so we're kind of.

[Alex]

So you have a manufacturing facility in one retail.

[Cody Shilson]

Yeah. Which also does some manufacturing as well. Yeah.

[Alex]

Is there any downside to just like consolidating to the one?

[Cody Shilson]

It's something that we're actually looking at, consolidating and going more e commerce and kind of cutting the. Yeah, the retail business. I mean, most of our stuff's E commerce anyway.

[Alex]

So I mean, online retails, I don't think it's going anywhere and I don't think many people are like, you know what, I'm going to go to the trophy store today.

[Cody Shilson]

Yeah. I've never heard somebody say that.

[Alex]

Yeah, yeah. Like on my list, walk by like, oh yeah, Return some videotapes and then go to the trophy store.

[Cody Shilson]

Right.

[Alex]

So these are the issues. What are the metrics you got?

[Cody Shilson]

Yeah. So numbers. 1.72 million in revenue, about 110,000 in profit, 40% gross margin.

[Alex]

I would have expected gross margins to be higher for this business.

[Cody Shilson]

And it varies per product. Tons of, you know, like certain acrylics.

[Alex]

I was expecting like, you know, one like you buy these trophies and they're like, you know, a dollar and you're like, there's no, like this is made of rubber, you know, like.

[Cody Shilson]

Yeah.

[Alex]

Okay.

[Cody Shilson]

So it just varies widely between the products and platform and stuff like that. But net margin about 6.4% LTV 133 and then CAC 1190 LTV to CAC ratio 11 to 1. And that's blended across all channels.

[Alex]

How do you come up with pricing?

[Cody Shilson]

Guessing for the most part, or I'll look at some competitors, but there's not really good apples to apples comparison necessarily.

[Alex]

Do you have like a. Do you like a cost plus or like.

[Cody Shilson]

Yeah, so I have massive spreadsheets of all of our cost, things like that, factoring labor, and then I just kind of add my margins to it and, you know, have slowly been trying to bring that up over the years.

[Alex]

What percentage of customers are new versus return got?

[Cody Shilson]

I would say probably just on our website. And internal customers, probably 50. 50.

[Alex]

Okay. Because this is a real business, so you'd think there'd be a decent amount of return.

[Cody Shilson]

Yeah, A lot of our business, I mean, $530 in revenue comes just internal. So emails, calls, things like that. Most of that is revenue, is repeat business.

[Alex]

Do you have very high fixed costs in this business?

[Cody Shilson]

Not too bad, no.

[Alex]

Because if you have half the business comes in from word of mouth, I would expect the margins to be higher. Like the net margins. Because I wonder, like, is it. I just think of this as big hypothetical. It's like if we got rid of all of the new customers.

[Cody Shilson]

Right.

[Alex]

And we just sold the five hundred and something thousand from return customers, that should be free customer acquisition and then we should make money. Yeah, right, Right. But looking at this, I'd be like, I don't know if we would make money.

[Cody Shilson]

Yeah, our cogs are pretty high.

[Alex]

I do think there's a pricing issue.

[Cody Shilson]

Yeah.

[Alex]

Which we'll get to.

[Cody Shilson]

Okay.

[Alex]

Okay. This is good. But your LTV CAC's pretty strong. Yeah, it looks like.

[Cody Shilson]

Yeah, it's pretty decent. And I learned that a few months ago coming here the first time. So I started increasing.

[Alex]

And that's not lifetime revenue. That's my stuff. That's gross profit.

[Cody Shilson]

That's profit, yeah.

[Alex]

Okay. Yeah, interesting.

[Cody Shilson]

We estimate people stay about three years, excluding Etsy, Amazon. Yeah, those ones are a little hard to calculate, but through Trophy Outlet, they. They order yearly pretty consistently. We've got customers been with us for 30 years, you know, things like that. So. So pretty heavy repeat business there. Once we get a customer, they're fairly sticky.

[Alex]

So with pricing, I'm gonna. I'm gonna hit on this one because I'm almost positive there's a big pricing issue. Who is in charge of pricing that whole time? Like, you took it over from your old. I guess he took it from his old man. So, like your third generation?

[Cody Shilson]

Yeah, my parents ran the company. They didn't have a price structure. They just kind of.

[Alex]

And on an annual basis, do you review all prices every year?

[Cody Shilson]

Yep.

[Alex]

Interesting.

[Cody Shilson]

About February, March of every year is when our vendors raise prices. So then I adjust accordingly.

[Alex]

Got it. Was their margins the same when they were running it?

[Cody Shilson]

Much less lower. Oh, way low. Like, not making money at all. So my mom was running it. I remember very distinctly looking at a product and the cogs on that were like $50, and we were selling it for like 45. I mean, it's a.

[Alex]

This does not work.

[Cody Shilson]

Yeah. So I immediately raised prices. It like, you know, doubled them almost.

[Alex]

Okay.

[Cody Shilson]

And I'm constantly just continually up them.

[Alex]

Yeah, I think I have some ideas there. All right, what else you got?

[Cody Shilson]

All right, so channel breakdown. So direct traffic and internal is our, you know, biggest 13 to 1 LTV to CAC ratio. Amazon, our highest conversion rate, and 9.6% conversion and of course, the blended, 11 to 1 LTV to CAC. So.

[Alex]

Interesting. And so you don't have LTV metrics on TikTok?

[Cody Shilson]

No, couldn't quite figure that out yet.

[Alex]

Okay, well, the easiest way to do it is just go total revenue divided by total number of customers. So you did 262. Do you know how many customers you sold on TikTok?

[Cody Shilson]

I think it was about almost 13,000 customers.

[Alex]

13,000. So, okay, so 20 bucks, that sound about right?

[Cody Shilson]

Average is. Yeah.

[Alex]

Unless they have your order value. Right. We just don't know how many times they've purchased. Right.

[Cody Shilson]

Which is one as of this, you.

[Alex]

Know, thing is, that might be artificially inflating your LTV CAC venture because you have zero CAC there.

[Cody Shilson]

Okay.

[Alex]

Or did you not? Did you. No, that's actually skipped it all entirely from the calculation.

[Cody Shilson]

Yep.

[Alex]

So you want to double revenue. Yep, got it. What's this I hear about you wanting to buy another business?

[Cody Shilson]

Yeah. So I had a business reach out to me that's in the same industry in the St. Louis market that we're already in. So he's getting old, wants to retire.

[Alex]

And what's he doing in revenue and profit?

[Cody Shilson]

He does about double what we do. About 3 million in revenue. Don't know profits yet or anything. We haven't even got to that point yet. But he's got a. From what I understand, he does pretty decent on his margins just through communicating and talking to him. He does a lot more custom stuff, so. Which is a lot higher margin on some of that stuff. He has a lot bigger orders, which is nice. So he can bring it in from China or from elsewhere and keeps his margins low. Or keeps his margins higher. I'm sorry.

[Alex]

Yeah, I got you.

[Cody Shilson]

The biggest concern with him is 70% of his revenue comes through one customer.

[Alex]

Yeah.

[Cody Shilson]

So that's a pretty big.

[Alex]

Pretty big buy.

[Cody Shilson]

That wouldn't buy that. Gotcha.

[Alex]

I would try and find out if I could, who the vendors were that he has in China for his connections for his raw materials so that I could try and use those vendors. Yeah.

[Cody Shilson]

That was actually one resource I thought was well, if I could buy this.

[Alex]

And it's cheap enough, it's monstrous customer risk. And especially if you have somebody retiring that, that one customer might be.

[Cody Shilson]

Even if he was willing to stay on for two, three years, four years to help that transition.

[Alex]

Well, part of it is what kind of business do we want to build? Right. So you just want to like you're. You're considering closing down the first location. We have to. Basically there's a bet that we have to make which is like do we think that the future of this business model is lots of brick and mortar locations? If so, then we have to look at the brick and mortar model in a lot more detail with the unique economic return on capital or it's we're going to be online and if you're online then why bother?

[Cody Shilson]

Which most of his stuff is shipped as well. It's not retail business.

[Alex]

I mean it's not brick and mortar. Yeah.

[Cody Shilson]

Yeah. I mean he has a retail storefront but most of his business isn't.

[Alex]

Is online.

[Cody Shilson]

Yeah, but 70% it's not necessarily online. It's through basically wholesale.

[Alex]

Yeah.

[Cody Shilson]

Customers that sell, you know, to large, large clients, things like. Like that. So that's a super comfortable.

[Alex]

I'm thrilled about it.

[Cody Shilson]

Yeah.

[Alex]

One, there's the customer risk. The other thing is it's like it's not the business that you're. Even though you're obviously in the trophy business. It's like it's not actually how. It's basically all net new. It's like B2B versus B2. Cuz we have to think about all available moves on the board. Not just like this because like said differently. If he hadn't emailed you, would you have approached him?

[Cody Shilson]

I would have actually kind of pursued it a little bit just to get the information. I was a connection through our vent, one of our vendors. So that's how I got to know him.

[Alex]

Well, I'll zoom out from the, from back forward which is like what do we want to be when we grow up? Basically this is going to become a media slash marketing business that monetizes through trophies.

[Cody Shilson]

Right.

[Alex]

Or you can go the B2B wholesale route which is probably like outbound sales team that's calling wholesalers and whatnot.

[Cody Shilson]

Yeah.

[Alex]

From what it sounds like, it sounds like you're better suited for the E commerce direct to consumer side. That's what it sounds like.

[Cody Shilson]

I don't know, like currently, that's where we're at. Yeah, we do some wholesale currently and it's just easier. But that just kind of came naturally. It wasn't anything we pursued necessarily. But yeah, majority of it's all E commerce.

[Alex]

And you might have one of the simpler plans that I have. Yeah, yeah. Which is, I mean simple doesn't mean bad. Simple is good. You know, sometimes you have like 10 things to do. It's better to have three that move the needle a lot. And I think you're kind of in that situation. There's three big things. But I think we'll. Why don't you come over here and then we'll, we, we'll, we'll net it out. What percentage of customers are gag gifts?

[Cody Shilson]

So that's the Amazon, Etsy, TikTok. TikTok, that's all that.

[Alex]

So it's like 40%. Yeah, roughly.

[Cody Shilson]

And that's kind of been the fastest growing since 2019. That's for sure. When we launched that. Which is all under a different brand technically.

[Alex]

Okay.

[Cody Shilson]

We started a different brand back then because we're, we don't want the explicit vulgar to be under trophy outsource, you know, church moms and stuff. Get.

[Alex]

I hear you, I hear you. With this business, like fundamentally you just have, it's, you've traffic in a conversion page. Like and then if you already have, let's call it for right now, not a constraint on manufacturing or anything like that. The three big kind of levers that I want to go off of is number one is consolidation pricing, which also instantly adds to profit.

[Cody Shilson]

Absolutely.

[Alex]

And then medium. So from a consolidation perspective, we have the SKUs. Right. And then we also have the brick and mortar locations and then we kind of have like model. So like in terms of like how I'm thinking through this. Okay, so from a SKUS perspective, if you're not carrying that, like normally I'd be like we need to massively cut down on SKUs. But like if you're not, if you don't have like this warehouse full of stuff and it's just like More options for people to purchase. I don't think we need to like get rid of anything.

[Cody Shilson]

And a lot of the SKUs too. It's the same product, just maybe for football versus yeah.

[Alex]

Right. It's a. It's a goat trophy and you just put a different plaque on it kind of thing. That doesn't bug me. And if you're like, man, it's super hard for my team to build all these different things that I'd be like, all right, well then we should. We should look at that. But if it. It doesn't seem like you're stressed on the manufacturing side.

[Cody Shilson]

But that's where my skill set lies to. As far as operations.

[Alex]

It's. No, that's good to know. Where's the constraint? Right. So the second is the brick and mortar. Right? Right.

[Cody Shilson]

Yeah.

[Alex]

So if you have this retail location and it's basically breaking even or losing money and that's not even the future of the business, then to me I would say let's just save our 50,000 a year in rent and then just add that to the bottom line. I feel like that would be a good idea because that would increase profit by 50%.

[Cody Shilson]

Yeah. Which is like chill pretty much instantly.

[Alex]

Yeah. And also there's just like the headache of like it's this thing over here. Yeah. And you've got. And you probably just take the couple good people from there, bringing them to bring them home.

[Cody Shilson]

Right.

[Alex]

You know? Yeah. So that feels good. So the next one is model. So this is the thing that I'm really like, I don't know, torn on. At least for me. What appears to be the obvious solution is to go on the where. Where the fast growth is. Right. Which is the gag gif thing. The problem is that there's zero kind of reoccurring nature of that. Right. So it's basically like we. You have that business. You have essentially a media arbitrage business where it costs you almost nothing to get a customer. You make a spread and then that's the business you're in. And every month you're going to be looking for how do I make new media. And that's the game you're in. If you want to go, I want to just get every league in the nation. Like if you were like, this is like, if I wanted to make this the most valuable version of the business, not necessarily make the most money today, but the most valuable version of the business it would be. I'm going to be really targeted with the few avatars. You have like leagues event Organizers, whatever, and say like these are the four avatars we have and we're going to be targeted with our ads for those people and our SEO and the whole business is around like we only deal with customers. And I would probably even say do you have phone sales or anything like that or some.

[Cody Shilson]

Or email to place the order?

[Alex]

What's the average order value for the, for the like a week?

[Cody Shilson]

So internal orders? I think it's like, I want to say it was like 350 or something like that. So it's a higher order value.

[Alex]

Yeah, yeah, for sure. Okay. Because I wonder if in some ways you have two businesses, let alone like if you were like forget about the third one, you're thinking about buying like you already have two and I'd rather have one. I'm not saying cut the one that you have, it's obviously a 40 year old business, but like I really have to make that decision and that's actually not a me decision, it's a you decision. So I'll say it the way that I think. Layla loves framing opportunities this way because I always think about upside, she always thinks about downside. And so it's like what problem would you rather solve? So in the gag gift path, the problem that you're gonna have to solve is you're always gonna have to find new cheap forms of media. So it's gonna be like TikTok shop is what it is today and live shopping and that'll probably be good for another year or two and then it's like that'll start to get more expensive and other people compete and it's like, then you're gonna be in the next whatever the next game is and you're just gonna have to get really good at paid ads and creative and conversion optimization on the site, increasing average order, that kind of stuff. The other path is you build either an outbound sales team so that they can sell these kind of B2B offerings that are, you know, or B2C if you want to consider the fantasy leagues and, or just like a meta, just like a simple meta ad strategy that would lead people to call the number functionally and then there you're saying, cool. Our goal is to be your trophy provider for life. And I think the fact that your 40 year old business sounds really good, it's like, hey, we're 40 year old business. Our goal is to be your manufacturer for life. And so of course we're going to do this one. But if you want, we'll also give you 20% off next year if you make the order now or something. I don't know. I play around with that. But which of the two paths sounds like the life you want to live?

[Cody Shilson]

Yeah, that's. Gosh, that's tough. Only because media for me has always been a, a hurdle.

[Alex]

Do you like it? Okay, fair.

[Cody Shilson]

I will do it. But I don't know that I love it per se.

[Alex]

Because you could. Because like, if you wanted to hit 3 million next year, I was like, we could do 10 million next year. I would just say we're going to take all of our resources, we're going to go all in on TikTok Viral Organic and you're going to deploy everything into TikTok shop and get influencers to do lives for you. Showing all these funny gag gifts because like the, the trophies are so built for shareability.

[Cody Shilson]

Yeah.

[Alex]

Like, and so that's, I mean, 20 million views is a monster video. I think if that was all you focused on, you would be able to figure out because these are funny.

[Cody Shilson]

Right.

[Alex]

And I think having like little skit scenarios where people, you know, walk in and they see the boss's thing or they change their, their, their plate or, you know, someone loses and then it just says like biggest loser, you know, like that, like the, the negative versions, I think that would just make for really viral content and I feel like.

[Cody Shilson]

That would be easier to replicate just constantly doing that.

[Alex]

The leagues thing is like, that's like, that's the, that's the very stable version of this business. And if you did ultimately want to sell it in the future, you being able to go to a potential buyer and saying, like, I have 5,000 leagues that buy our trophies from us every year. And leagues on average stay for 12 years. You know, like guys who do fantasy or whatever it is, it's like that's fairly, you know, that's a pretty, that's a pretty reoccurring business. You know, that's a, that's a, that's a pretty good business.

[Cody Shilson]

Yeah.

[Alex]

Harder to build though, and slower.

[Cody Shilson]

Right.

[Alex]

That's also why it has more value. So that's the. So if, if between those two paths, the, like, I would like to just make more profit now and potentially scale faster, then we can talk about the media version of this.

[Cody Shilson]

I think that's probably where I would.

[Alex]

Okay, cool. So first things first is we're going to consolidate attention. So we're going to shut down losing location. So that should right off the bat be a plus 50% improvement to profit, which is great. And I think it could be more than that because your attention is going to not be split anymore between two locations. Okay. The second thing, you have basically something called a cost plus model. You look at your costs and then you add a margin in and whatever. And a lot of businesses do it because it seems very logical. The problem is every business I know that does a cost plus model doesn't make a lot of money. And so you want to switch to value based pricing, which is purely based on what someone's willingness to pay is. And that could be unlimited. And it doesn't matter what your stuff costs because why do they care what it costs? Right? And so basically, as your vendors increase their costs to you, in some ways, it shouldn't have any effect on the price of what you sell because the price of what you sell is completely divorced of that and based on what somebody's willing to pay. So in terms of how we can do this, there's a couple thoughts here. So a which will seem a little bit less scary is I would consider, and this is sound crazy, but like monthly like 5% price increases, like just keep going and just keep going. That is like path one. And the thing is that every time you raise the price by 5%, you double your profit. Or I'll say 6% if you want to be like, hey, I doubled my profit this month, then the next month you can raise by 6% and then more than double because it's 6% times 6%. Right? So that is one way. The other way is that you just start immediately split testing, kind of like 80, 20 on your highest sales velocity items. And so this is simple, right? This is simple to do. You have to do any thinking. You just add it and that's what it is. This one will probably get you more profit faster. It just takes a little bit more thought. So you'll take those four, four foot, five foot, six foot trophies and just start like just keep bumping the price and just seeing what conversion rate looks like. Because what we're trying to optimize for. Did you have an engineering background? Okay. You said you were good at the manufacturing.

[Cody Shilson]

My dad came from manufacturing, so I picked it up there.

[Alex]

But yeah, so what, what you're trying to optimize for is gross profit times units sold. And so if you think about it, it's like, you know, down here it's like I'll have a ton of sales velocity, but I'll have low margins versus here I'll have fewer, you know, fewer items sold. But it's like, where's the sweet spot where I get the most amount of units sold at the highest gross profit. Oftentimes it's higher than you think it is. Because where I think a lot of entrepreneurs get stuck is like sales velocity goes down and then they get afraid. But the thing is that you will usually make more money before you make less money. When sales velocity drops usually. So it's like we sell 10 people at, you know, with a hundred dollars of gross profit and then when we, you know, move the price up, it's like we sell 80 people but we're at 150. But you're like all the sales team's like, I don't know, do the price. The price seems really high or like, oh, the conversion on the page drop. It's like, yeah, but we're making 50% more money. We lost 20% of sales. If it were me, I would 80, 20 this. And this is what I'm solving for. For pricing on the most sold products.

[Cody Shilson]

Okay.

[Alex]

You can have a much faster feedback loop for the testing. And so in terms of cadence for price tests, would you do it on the site more or do you think you would be doing it on the phone?

[Cody Shilson]

It'd be on the site.

[Alex]

Okay.

[Cody Shilson]

Yeah. Cause that's where customers see the pricing. Even if they call or anything like that.

[Alex]

Yeah. I don't know how many people like buy. Is it a super price sensitive market?

[Cody Shilson]

Trophies? Yeah.

[Alex]

Okay.

[Cody Shilson]

Like car show guys are cheap.

[Alex]

I'll bet you. What's interesting about this is that your recurring revenue business is very price sensitive. It makes me lean more towards the, the gag gift side anyways because it's like we can get customers for free and we have far more pricing power because they're in the moment. They think it's funny whether it's $8 or it's $12 or $16. Like I kind of just want to buy it.

[Cody Shilson]

Yeah.

[Alex]

But that's, you know, the difference between 8 and 16 is monstrous. Right?

[Cody Shilson]

Yeah.

[Alex]

For the business. So psych pride test. And I would probably start with the gag gifts here and then I'll make three. Let me try one. Six percent on boring side. Now this is the major part is if your focus is going to be media and that's going to be the direction that you're going in. Was there an influencer or something who made the video that had the trophy in it?

[Cody Shilson]

It got tagged. Our product on TikTok shop got tagged and we sold 70 to 100 off of that. And it made a follow up video and that's the one that had 16 million views.

[Alex]

Okay. How many TikToks are you making a month?

[Cody Shilson]

Right now we're doing about one a day and we're trying to ramp that up to three a day.

[Alex]

Okay. Yeah. Because the thing is like your Amazon and Etsy I would imagine are fairly passive. Normally I would consolidate it. If you were like, I'm running all these things, I would say like, let's focus. But if that's like kind of on autopilot and I am familiar with like Amazon handles a lot. So the direct site traffic right now comes predominantly from SEO. So talk to me about that. Do you have an SEO firm or you're gonna. Yes.

[Cody Shilson]

No, it's an SEO firm agency.

[Alex]

How long you been working with them?

[Cody Shilson]

This one, about eight months.

[Alex]

Three months.

[Cody Shilson]

Additionally, I've only. I've always had pretty good success with SEO.

[Alex]

Okay.

[Cody Shilson]

And then we stopped SEO. Cause the company wasn't. Previous company wasn't performing and we just let it go for several months and then hired another company.

[Alex]

And then when these guys came in and started going back up again. What stops you from like doing more SEO? Or rather what stops that? Like if you were to say, hey. Cause I mean when I see you 13 to 1. Right. I'm like, that sounds interesting. If you were to say, hey, I want you to give me like three clients worth of focus so that you can give me three times the backlinks and three times the articles or whatever it is that they're churning out for you. Is there anything that's. Because if you get 13 to 1, it's like we should spend as much as we possibly can on that.

[Cody Shilson]

And that's why I started Meta is.

[Alex]

But it's different though.

[Cody Shilson]

Yeah, right.

[Alex]

Because it's interruption based ads versus SEO, where it's intent based. Because it's also like these things are things that are not taking your time. So this is like Media One is SEO max out and the SEO company.

[Cody Shilson]

Wants me to do Google Ads is throw into that mix. Okay.

[Alex]

Yeah. Especially like these are both intent based, right?

[Cody Shilson]

Yeah.

[Alex]

Like at the very least you should own your own terms, which is like all your names and derivatives of your names. Like I've rarely seen anyone in any business just own their own terms and not make money off of it. And so people like, why I want to pay for a click I was going to get. The thing is, is like you're not always going to get the click. And so having it there, I'm like, you're going to make the money like just you Know, I mean, but then the second version of that is, you know, associated terms. That's where the like the long tail key keywords and because yours. Because the boring side. So this is all, this is all like the boring side of the business. Because trophies are so like, oh, I have to get trophies for the team this year. It's like they're in this window and they're just going to buy whatever is like pretty much immediate. Yeah. So I think this all makes sense. I don't know if people. I mean you're running the meta ads to get the boring trophies. I would bet that that's probably. And you could do it. But this feels like, like people like it's less interruption based, more high intent based now gag gifts, 100%. No one's like, hey, you know, fuck your moon, follow the plan, you know, trophy. Right. Or whatever. So this is the like if, if we're looking at this, these are all what I would consider like black and white, very low lift, almost guaranteed to make you more money moves. Almost all of these will just make you more money. This is 13 to 1. This is probably going to be high return. This could double the profit this takes. Adds $50,000 to the bottom line. The price that's for sure going to increase on the gag gifts. So now we can talk about the. The media side. So you're gonna go from one to three a day. I think that's a good idea. What I would suggest you do is look for. So there's gonna be you. So there's gonna be you. So we're gonna go from one to three a day and I think that you should focus on trends and memes. So like. Cause this is a gag gift brand. So it's okay for you to just like be silly and ridiculous and so like just hire a 17 year old.

[Cody Shilson]

Um, turn scroll.

[Alex]

Yeah. And just be like what's, like what's trending right now? You know what I mean? Like some. What's interesting is that a lot of these TikTok ones also do well on Instagram. So you could repurpose there. Do you, do you post on Instagram?

[Cody Shilson]

Yeah.

[Alex]

Okay. Yeah.

[Cody Shilson]

Started.

[Alex]

Yeah. At least you're gonna, you'll, you'll get double, you know, you'll get double usage on that. But yeah, TikTok is like the perfect platform for you for these bi gifts. Like it makes complete sense to me. They did 250,000 in a month. And so when I, the reason I said the 10 million is like, okay, well that happened on accident let's do it on purpose. And if you can do 250amonth just from that it's like well there's 3 million. I think you getting really ridiculous with the volume will get you a lot better. And I think this is one of those things that you should live close to. Like you like these things are all things that you can do probably the week you get back. You know what I mean? This one is going to be the, this is like the big commitment of what's the bet we're making. The bet we're making is that mastering TikTok live, selling, et cetera is going to be the way. Now the second part of kind of like TikTok mastery is going to be influencers. What's nice with TikTok shop is that your stuff is automatically going to be listed there and other people can make videos for it and you're in the price point that's perfect for TikTok shop. Like 20, 30, 50, like it crushes for that stuff and it's such easy videos for people to make. And I mean fundamentally these are basically one time work. This is the only ongoing work that you do. And so trends and memes and I'd be posting one to three times a day there repurpose on. On ig, right? That's, that's just free traffic. And then the influencers will also kind of. This will, it'll be like a loop here. So it's like they'll give you idea like they'll, they'll do something that works well and then that will feed like it'll just be this nice loop where they're also creating content for you.

[Cody Shilson]

Okay.

[Alex]

And then I'll put, I'm going to put number seven on here because I think this is worth it. The TikTok ads which you said you just started, you make the ad right? Or sorry, you make the content. You already know where I'm going, I know what you're doing, but you're making content that TikTok content, 10% go viral, whatever and then 90% flop, right? Then this, you put ad money behind it and you send this to influencers and say make stuff like this because this is what's converting. And then they'll make versions of this that'll also inform your content which you'll then try to make iterations of what they're doing. And so like you're kind of your source, like you're starting. Here's the TikTok content some does well great push ads behind it by the way guys, here's the ones that are working well, they make stuff, you can take theirs, push money behind it as well and model it and make for permutations of it.

[Cody Shilson]

Gotcha.

[Alex]

And so for this stuff I would be kind of hook centric, meaning for most short form platforms the hook is everything. And once you have a winning hook, I would reuse it over and over again. And so if you have whatever your winning hook is and then you could just basically sell down the line of skus once you know we're using the same hook. Yeah, exactly. Over and over and over again. I told you, you actually have a really simple one. The nice thing is that I have a lot of confidence in your like there's basically no like I'm not really sure like site price test could easily like 2x profit.

[Cody Shilson]

Yeah.

[Alex]

Like on its own because the margins are so sim right now. Right. 6x. This is a 2x on profit for sure. SEO max out. Well right now it's 50% of revenue is coming from that. So it's like if maybe we get a 50% boost from them doing a better job on it, PPC will just get you good returns. This might give you like a 10 to 20% boost. So I don't think it'll be huge, but it's like it's free and it's a one time setup so it's not hard to do. TikTok's gonna be the big lever of like how do we go from 1 million to 10 million? It's like if you did nothing else but just say like a year from now, if all we did was master TikTok and TikTok shopping, we would win. Like if you did nothing else. This is just going to take all of your existing business and make it more profitable so that you can take all of this cash and float into here. And the fact that you have such low margins excites me because when you make 5 or 10% improvements, you double or triple. And the fact that you haven't liked that there was no pricing discipline. There's no process to pricing. Besides we'll just keep raising it when our costs go up. Usually there's just like when I see a business like that, there's like massive unlocks like I'm saying 6% on boring trophies. But like you might be able to push 25. And that 4x is 5x is profit.

[Cody Shilson]

Right.

[Alex]

And gets very interesting.

[Cody Shilson]

Yeah. And the gag gifts have much higher margins too.

[Alex]

Yeah. And ooh, let me add something else in. What's the offer that you have in the box.

[Cody Shilson]

Usually it's a little code that says like 10% something to order here.

[Alex]

Why don't you give something much better than that? So we have to come up with a really compelling offer to get people who are buying. Because the nice thing, the important thing is so is are you doing fulfillment for Amazon sales?

[Cody Shilson]

We have some fba, but most of it's fbm.

[Alex]

Okay, great. So you're fulfilling most of it. That's wonderful. Okay, so. And Etsy, same thing.

[Cody Shilson]

Etsy. We fulfill everything.

[Alex]

Yeah, great. Okay. So that means that we can put something in the box to be really compelling to get them to buy something. So if now Amazon and Etsy, the purchasers who are buying there, are they more bread and butter people or are they more gag people?

[Cody Shilson]

I would say more gag.

[Alex]

More gag. Okay.

[Cody Shilson]

Because they're more like funny death signs, funny sayings, stuff like that.

[Alex]

I would put a bogo offer in or a. So buy one, get one to two free and then just fix the pricing of the one so that it makes sense.

[Cody Shilson]

Yeah.

[Alex]

But then the. I would basically have this little thing here. So that would be the headline on the top of my little, my little, my little doodad. Yeah, you got your QR code. And then I would have my top one, two and three gag gifts.

[Cody Shilson]

Okay.

[Alex]

Because they just bought one. So it's like, let me tell you the other gag gifts that people buy the most of.

[Cody Shilson]

Gotcha.

[Alex]

And I would put that into every one of the boxes.

[Cody Shilson]

Okay.

[Alex]

For them.

[Cody Shilson]

And would you have that QR code go back to that channel? So like Amazon or would it go back to our website?

[Alex]

It's a good question. It's a good question. Well, to make that offer you'd probably have to bring em back to the site. Yeah, well, the cut I'm not as worried about. We just gotta fix the pricing. But like either way, I mean it would be an interesting test, but I think this is the better like. Cause you can make a far more compelling offer.

[Cody Shilson]

Yeah.

[Alex]

The other thing is, what do you. How big is your email list for trophy side? Yeah.

[Cody Shilson]

I think we have like 10,000 contacts.

[Alex]

Okay, well guess what, we just found ourselves another couple hundred grand. So let me tell you a stat that'll blow your mind. Most mature e commerce businesses get between 30 and 50% of revenue from email.

[Cody Shilson]

We're missing out a lot.

[Alex]

Yeah.

[Cody Shilson]

On that.

[Alex]

So there's probably like one and a half million sitting there.

[Cody Shilson]

Yeah.

[Alex]

And that's all profit because there's no ad spend. Most e Commerce businesses basically break even or lose money on spending ads to get customers and they make it up with their email follow up. Nine is going to be email follow up. Okay, so what do you use? Use BigCommerce. So they probably have. So there's going to be two different types of email that you need to do. So number one is going to be flows. So these are based on user behavior. So when someone visits a specific product they should get like a five email sequence of being like hey, saw that you were looking at the goat, whatever. Right. And that should just, that should happen for anybody who opts in or does a two step or abandoned cards. Right. The, the other piece is we need the long term nurturing. All right. So what I'd recommend is three times per week. The question is, feels like a lot for trophies because trophy is a less frequent purchase. The gag I feel like is, is like if you buy one gag gift you'd be willing to like buy them for many people because you just think they're funny. They are separate brands though because you have like. Okay, so I would. So this I'm, I'm cool with on the gag gift side because right now you're not making any return sales anyways. Right. So you might as well get.

[Cody Shilson]

We don't really have an email list for the gag side cause it's all through.

[Alex]

Oh, does TikTok not give you email? Okay, so I think we'll go one time a week and we'll not worry about the gag gift.

[Cody Shilson]

Okay.

[Alex]

I think just one time a week of. And if, if your basically domain score, your domain health, your domain authority stays healthy and your open rate stay okay. And your click through rates stay okay. I would increase frequency.

[Cody Shilson]

Okay.

[Alex]

So you start with one a week and then you're probably thinking okay, what am I going to, what am I going to email them about? Right, right. So when you have customer stories, cool trophies. Because I'm sure there's every week there's like one trophy or something that's just like interesting that you guys have, right. Probably stuff about recognition status and cheapest compensation. So I think if I were to, if I, if, if I owned your company, right. So I'd be like, okay, are we in the trophy business? No, trophy's what we sell. But it's really just the vehicle for giving people recognition, status and compensation. Right. And so the things that I would email would probably be about how you could either give your team a pay raise or you could give them a trophy. And believe it or not, here's this research, the trophy is actually even more meaningful. So they like it more and you like it more as a business owner. Right. So it'd be that kind of stuff that I'd be. You only have to write 52. It's not that many emails. Right. You could literally probably do it in like a day and a half or two days. And I would be hitting this and then I would just weave in examples and the examples will do enough modeling for people to basically click and then go back to the site because all we're trying to do is just bring them back to the site. Now, on every one of these, these emails, I would have a P.S. funniest trophy of the week. So think about like newspapers, like they have all the articles that are serious, but then people just buy them to read the funniest. They read the cartoons. And so we do the same thing here. Because you probably have some hilarious trophies that get made, right?

[Cody Shilson]

Yeah.

[Alex]

And then just be like explicit, you know what I mean? I think that people would find it hilarious. And if you're worried about explicit, then don't put those ones. But I still think that you have funniest trophy the week. And even if, and this is me taking the complete extreme stance, people may care about this. People might just think this is funny. And if you just did this, it's like you're almost just sending them jokes and memes. It's the same as making content on the Internet. And so if they're like, oh God, what is the, like, what did they, what did they make this week? Right, right. And then again it's just like, I just want to stay top of mind. I want to remind them. And I think about this also seasonal. So what are all the things that are coming up that like that are coming up next season? Because you know what the buying cycle is for trophies. So it's like what are like, okay, Christmas is coming up. Okay. So there's going to be end of year bonuses for people. There's going to be. Okay, fantasy what, what, what? Fantasy league ends in October, so probably like hockey ends or whatever. Right? Like best costume. Exactly. So it's like we have to remind them of what people get status and recognition for using trophies. That's the job of the long term nurturer. What things are people going to be rewarding next month? That we get hip to be people by this month. And we just. Every month you look at your calendar, you're like, I have to think of four emails that apply for next month for next month. Right. And I would probably, I put this as like, okay, I've got my business one, I've got my, you know, season one, I've got my sports one. So these are like my buckets for my emails. So every email it's like, it's almost like you're hitting from a different angle and reminding people of different components of their life. And so that's, that's probably how I'd have my long term strategy and provided all of the metrics look good, I would just increase frequency. Yeah. Okay, so keep it low in the beginning just to like get a feel for it. See how like the first couple emails are going to shake out because you're going to have a super responsive list and we want to keep these alt text. You can have I would say link to the image because then the curiosity is going to drive the click. And also image based tend to get lower deliverability rates than like full text 1. And when people opt in or, sorry, when people purchase or opt in the abandoned cart, the first one I would have is reply back for funniest trophy of all time. And so as soon as someone opts in, it's a double opt in. So it'll increase your deliverability and so they'll, they'll reply back and then it's an automation, you have to do anything and then you'll send them the, the link for the, for the clickable picture and they'll be like this is ridiculous. And then underneath of that. So when you have the, when you have a clickable link, you want to have it take them to a page that looks like this and then here you have. So like you can have the funniest thing. But it's also CTA to get someone to buy something.

[Cody Shilson]

Gotcha. Okay. Just not in the email.

[Alex]

Yeah, yeah, they see it and if they want to buy it, it's right there.

[Cody Shilson]

Right. Super cool.

[Alex]

Well, I think we found a few doubles in the business.

[Cody Shilson]

Absolutely.

[Alex]

Feel all right. Little money. Money Mat I think you will significantly more than double profits. Well that gives you 50 and that's the first thing we do. This could easily double profits if we just add the 6%. Right. That's all we'd have to do. If you increase SEO, you will make more money. How much more? We'll see. But more. This is free money. But this is actually the biggest, I think this is actually the biggest finding.

[Cody Shilson]

We have is the emails.

[Alex]

Yeah. 30 to 50% of revenue. Like clockwork. Yep. Especially. And so it's interesting is the, the less ad dependent your business is the higher the percentage will come from email. So like if you have a fast growing company that's spending more and more money every month and the percentage by math would be smaller when you have a more stable older business that's coming from email like it'll be greater and greater. Like I know a company right now that is 8,90% they do a billion a year. 90 comes from email.

[Cody Shilson]

Wow.

[Alex]

Yeah.

[Cody Shilson]

Okay. And I would say also in that kill Facebook ads for trophy outlet trophies.

[Alex]

It just, it would, it wouldn't have been my I mean right now it wasn't profitable if I'm not mistaken. I'd rather redirect resources to the things that will make us more money. I'd rather just do TikTok ads instead of meta ads given that's like you did 250 for free.

[Cody Shilson]

Right. So yeah.

[Alex]

Right.

[Cody Shilson]

Absolutely.

[Alex]

Feel all right?

[Cody Shilson]

Yeah, I feel really good.