Thread
I built an eCommerce business to over $2,000,000 in annual revenue.
I had no employees and never quit my day job.
Then in early 2022 I sold it for 5.2x profits.
My story and why I got out when I did. 👇🏻
🧵 THREAD 🧵
I had no employees and never quit my day job.
Then in early 2022 I sold it for 5.2x profits.
My story and why I got out when I did. 👇🏻
🧵 THREAD 🧵
First, some context:
Amazon’s marketplace generates > $450 billion of revenue each year.
50% of that goes to third-party sellers (average people like you and me).
Amazon’s marketplace generates > $450 billion of revenue each year.
50% of that goes to third-party sellers (average people like you and me).
The process to become a third-party seller on Amazon is simple:
- Find a niche
- Create a product
- Source it internationally
- Sell it on Amazon
- Amazon delivers it to the customer
- Find a niche
- Create a product
- Source it internationally
- Sell it on Amazon
- Amazon delivers it to the customer
I launched my first product on Amazon in Oct 2018.
It was a set of pillows to help take better newborn photos. Random, unsexy and simple.
But people loved it.
By the spring, I was selling 40 units/day at $30/unit.
That’s a $438K run-rate, with 1 product and no brand.
It was a set of pillows to help take better newborn photos. Random, unsexy and simple.
But people loved it.
By the spring, I was selling 40 units/day at $30/unit.
That’s a $438K run-rate, with 1 product and no brand.
Over the next 3 years, I rounded out a best-in-class brand sold exclusively through Amazon.
I added 12 new products, 24 SKUs and millions in revenue.
I dominated my small niche, racking up thousands of 5-star reviews.
But I could sense a changing wind…
So I decided to sell.
I added 12 new products, 24 SKUs and millions in revenue.
I dominated my small niche, racking up thousands of 5-star reviews.
But I could sense a changing wind…
So I decided to sell.
Why sell?
There were 5 reasons:
1. Amazon controlled my business
2. I had no moats against my competition
3. It took a ton of cash to grow
4. A bubble was forming
5. My heart wasn’t in it
Let’s unpack each 👇🏻
There were 5 reasons:
1. Amazon controlled my business
2. I had no moats against my competition
3. It took a ton of cash to grow
4. A bubble was forming
5. My heart wasn’t in it
Let’s unpack each 👇🏻
#1: Amazon controlled my business.
- 99% of customers found me on Amazon
- 95% of my revenue came from Amazon
- 50% of that revenue went right back to Amazon (referral fees, fulfillment, PPC)
It's difficult to sleep at night when someone else controls your business.
- 99% of customers found me on Amazon
- 95% of my revenue came from Amazon
- 50% of that revenue went right back to Amazon (referral fees, fulfillment, PPC)
It's difficult to sleep at night when someone else controls your business.
#2: Limited barriers to entry.
I came up with the pillow set idea after spending 30-mins playing around with Helium10’s keyword research tool.
6 months later it was live on Amazon.
If I could launch a competitor and generate sales so quickly, why couldn't others?
I came up with the pillow set idea after spending 30-mins playing around with Helium10’s keyword research tool.
6 months later it was live on Amazon.
If I could launch a competitor and generate sales so quickly, why couldn't others?
Reason #3: Terrible cash conversion cycle.
Cash is the lifeblood of any business.
Unfortunately, most eComm businesses require a lot of cash to grow.
In the 4 years I spent running the business, I NEVER pulled a dollar out until I sold it.
Cash is the lifeblood of any business.
Unfortunately, most eComm businesses require a lot of cash to grow.
In the 4 years I spent running the business, I NEVER pulled a dollar out until I sold it.
Reason #4: Market timing.
Venture Capital flooded Amazon FBA in 2021.
Aggregators collectively raised more than $15Bn to roll-up tiny brands like mine.
Even the guy who bought BTC in Nov’21 could see the bubble was forming.
The timing was right to fetch a premium multiple.
Venture Capital flooded Amazon FBA in 2021.
Aggregators collectively raised more than $15Bn to roll-up tiny brands like mine.
Even the guy who bought BTC in Nov’21 could see the bubble was forming.
The timing was right to fetch a premium multiple.
Reason #5. New passions.
Like many entrepreneurs, I thrive on new challenges.
When I’m no longer waking up excited on Monday mornings I know it’s time for a change.
If you’re not excited, you’re probably not growing.
Like many entrepreneurs, I thrive on new challenges.
When I’m no longer waking up excited on Monday mornings I know it’s time for a change.
If you’re not excited, you’re probably not growing.
How does this story end?
Thankfully, quite well.
I sold the business in Jan 2022 to a mid-size Aggregator for 5.2x my annual profit.
It was a multiple 7-figure exit.
Thankfully, quite well.
I sold the business in Jan 2022 to a mid-size Aggregator for 5.2x my annual profit.
It was a multiple 7-figure exit.
Since then, I’ve:
- Quit my W2
- Invested into 8 commercial real estate deals (incl. an OZ Fund to avoid some tax)
- Dollar cost averaged into a few tech ETF’s amid the 2022 sell-off
- Bought an old SaaS business w/ a buddy
- Gave some money away to charity
- Quit my W2
- Invested into 8 commercial real estate deals (incl. an OZ Fund to avoid some tax)
- Dollar cost averaged into a few tech ETF’s amid the 2022 sell-off
- Bought an old SaaS business w/ a buddy
- Gave some money away to charity
The outcome here was a mix of luck and strong execution:
Was I lucky to stumble into the baby photo props category? YES
But did it also take strong execution for multiple years to build a brand there? YES
Was I lucky to stumble into the baby photo props category? YES
But did it also take strong execution for multiple years to build a brand there? YES
Was I lucky to sell at the (likely) peak of Amazon Aggregators? YES
But did I plan ahead, anticipate the bubble that was forming and adjust accordingly? YES
But did I plan ahead, anticipate the bubble that was forming and adjust accordingly? YES
So what can you take away from my story?
(1) There are riches in the niches.
If I can sell $1,000,000 of baby posing pillows, what random thing can you sell?
(2) Build a business on solid footing.
Never depend on a single channel, customer, supplier or employee.
(1) There are riches in the niches.
If I can sell $1,000,000 of baby posing pillows, what random thing can you sell?
(2) Build a business on solid footing.
Never depend on a single channel, customer, supplier or employee.
(3) Don’t quit your day job too early.
My day job provided peace of mind and financial stability. It also allowed me to reinvest every $ back into growth.
(4) Keep a pulse on the market.
Things change quickly. Track valuations in your space and sell when the timing feels right.
My day job provided peace of mind and financial stability. It also allowed me to reinvest every $ back into growth.
(4) Keep a pulse on the market.
Things change quickly. Track valuations in your space and sell when the timing feels right.
Last, but certainly not least:
(5) Have fun.
If you’re not having fun you probably won’t do your best work. Make a change when you no longer look forward to Monday morning.
(5) Have fun.
If you’re not having fun you probably won’t do your best work. Make a change when you no longer look forward to Monday morning.
Thanks for reading my story.
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2. RT the tweet below to share this thread with your audience 👇
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Justin Welsh @JustinSaaS
·
Jan 23, 2023
Nice thread, Danny. Well written.
