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