Income Report July 2018
Look Mom, I’m almost ramen profitable!
July was an excellent month of learning, experimenting, and business growth. I also got to do a little exploring in California’s beautiful Sequoia National park, which features gorgeous Redwood trees.
This month’s report actually has me thinking I want to build my business more like a Redwood tree (sturdy base, deeply rooted, there for the long-term), and less like a Dandelion (scattering seeds(designs) everywhere, seasonal, here today and gone tomorrow). Either way, you’ll see a bunch of great Redwoods throughout this report and I hope you enjoy them.
Below you’ll find my complete print on demand income/expense report, as well as some insights from this wild entrepreneurial journey. Let’s get started!
July 2018 Income Report
By Spencer Shewbridge | Merch Lifestyle
- Upcharging for larger sizes that increase my costs
- Ensuring all taxes are passed on to the customer. This means VAT in the EU and sales tax in the US where applicable
- Evaluating a supplier switch to reduce total cost (while retaining excellent quality and speed)
- Finding a WooCommerce plugin that allows me to set advanced shipping rules so I don’t lose money on flat rate shipping of larger orders
Profitability grew on Etsy this month by 6% because of a few factors:
- Advertising Cost of Sales (ACOS) is back in line at 15% of ad-driven revenue. That means if my profit margins on those products are higher than 15%, advertising is profitable (profit margins average 40%+, so this is a good sign
- I raised prices on digital downloads and custom work
There is still so much potential to grow faster and wider on Etsy. I have lots of customer data (customers, favorites, other stores my customers like) that I need to sift through and take action on, which is super exciting compared to Merch by Amazon. I think Etsy will continue to grow as I compliantly solicit more reviews and take a proactive approach on avoiding negative feedback with customized outreach.
Potentially Selling my Merch by Amazon Business
This month I got my 6K tier Merch by Amazon business (and the associated IP portfolio of designs) evaluated for a potential sale by FE International. There’s a lot that goes into the process, but the important data point is that my valuation falls between 2.25-2.4x annual profit. If we extrapolated an average of just $1,500 monthly profit across 12 months and applied a 2.3x multiple, the value of my Merch business is around $41K.
When you look to sell a business like this, you essentially sell the underlying IP (your designs) along with the actual account. For me it makes sense to maximize the exposure and distribution of these assets across many platforms so I can maximize the business valuation. That’s why I will be working hard to set up other platforms (Redbubble, Etsy) with my Merch By Amazon-specific IP portfolio and trying to drive increased passive cash flow of that business. If I can increase the average profit to just $2,000/mo, the valuation would increase to $55K, and so on.
Well why in the world would I sell my Merch business?
As I learn more about print on demand and where I want to focus my resources, I’m leaning heavily towards investing in building brands over capturing opportunistic, one-off sales. I want to find and retain customers that love my products and will come back over and over again, while paying higher prices to do so.
Although Merch by Amazon is investing in the platform, I don’t like the risk associated with platform changes (rules, royalties, tiers, throttling, etc.) and the lack of context & customer data around sales. I see a lot more data, margin, and seller-friendly tools in other marketplaces and doing my own brand-building. If I can figure out how to compliantly sell a passive IP portfolio and re-invest some of those profits into growing my strategic businesses (content creation, merchandising services, and growing micro-brands), that is the direction I will take.
Focus Efforts on Competitive Advantage & Profit
I need to be applying my skills to the areas where I’ll get the most return for my investment. Period.
That means I need to be “doing the hard things” that are proven to drive long-term results. The hard things include:
- Building an authentic brand and engaging an audience
- Guiding that audience away from third party platforms and on to my own website + learning to drive my own traffic
- Investing in unique designs, products, and content
- Growing my influencer services “by hand” until I can outsource the non-value added tasks
To that effect, I’ll be putting less effort into platforms like CreateSpace and Merch by Amazon until I’m ready to outsource as much of the process as I can at a low cost. I don’t want to spin my wheels on “race to the bottom” type platforms where competition is ever-increasing and margins get squeezed too tight.
Fill Seller Central + Run Targeted Ads
Last month I talked about getting items on Seller Central and I didn’t make much progress. Part of that was the complexity of evaluating a sale of the Merch business, while Amazon won’t separate Merch out from Seller Central. I will get more of my differentiated, higher priced products on Seller Central this month, but I need to do it the right way.
Once I figure that out, I plan to get back to running Amazon ads via seller central and using the convenient free $50 in credit that Amazon offered to me this week. My concrete goal is to get Seller Central to pay for itself ($40) with sales this month while keeping my account health at 100%.
Grow Breadth of my Printed Products Brand
I plan to go hard on my best brand this month and try to grow it to $750 in profit for August. To get there, I will create and list at least 200 more listings, flesh out the brand story and refine the storefront to represent the best selling products.
In addition, I’ll be learning about whether I need to be on Pinterest, Instagram, or both and lay out a plan to grow them organically and in a way that I can outsource.
Double Down on my Influencer Services Business
I was blown away by the success of the creator launch in July, and it taught me that I need to find creators with a strong audience connection and a powerful brand message.
Sometimes people just need a little help to make a project into an income source, and I genuinely am happy that we’re providing value and helping creators earn income above & beyond what they can make from traditional sources (advertising…boo…)
The plan here is to do more cold outreach, more google hangouts/phone calls, and streamline a few processes for creator on boarding. I’d love to grow by another 150K subscribers this month to reach a quarter million viewers, I think that would be really powerful. If my analytics are worth anything at this early stage, each 1000 subscribers in the network average $2.34 in profit, so 250K subs in network would be $585 profit…I know that’s super rough math but we’ll keep refining it over time. All I need to do is get out there and sell!