Dec 14, 2016

The EXACT business if I would start over from scratch today

The EXACT business if I would start over from scratch today

In Episode #10, Wilco answers the question that he got asked a lot, listen as he discuss what he’ll do if he has to start all over again from scratch and what kind of business will he start.




Bulletproof Coffee

Hey, it's me Wilco de Kreij here, back with you again. Today, I'm going to answer a question that I get asked a lot and I usually really, really don't want to answer this question. The question is, "Hey, what would you do if you had to start all over from scratch again?" Or, "What kind of business should I start?" A lot of people ask me that and the reason why I think they ask me that is because at this point they don't have a business yet and they want to sort of know the pathway from zero to hero.

They sort of want to know, "Hey, what should I do in order to become successful online?" I think that's just an impossible question to ask. It's way, way too broad. It's pretty much like if I were to ask someone, "Hey, how do I build a house?" There's so many things you could mean with that. Do you mean on the planning side? Do you mean how to buy it? Do you mean what kind of stones to pick, the constructional side? What do you mean? How do I start a business is not really a question that can be answered. Right?

Over the last weekend, something very interesting, and a lot of fun in the process as well, happened. Because like every Saturday morning, my wife and I we do our grocery shopping for the whole week. While doing that, we always take down a nice lunch for Saturday afternoon. Right?

Same thing this weekend, so we sat down at noon for our Saturday lunch at home. We were talking, we started talking, and one of the things we sort of run into ... Not really run into, but some of the things we talk about is that I'm an entrepreneur and I can work from wherever I want. It doesn't really matter whether I'm here in the Netherlands or whether I'm traveling. I can work from pretty much wherever.

She's, more or less, the career type, so she has a job and she's not an entrepreneur, she's not a marketer, she doesn't do anything online. She's just like, she goes to her job and she comes back. There's not really much room for traveling, except for when she has time off which is kind of limited every year obviously.

We started talking and she's like, "What if I would start something online?" Right? "What if I would have my own thing as well?" Right? She's not really much of the online type. Like I said, she doesn't know anything about marketing and at the same time she also doesn't want to rely on just online stuff. She wants to actually, if she would start something, she would want to have a physical product for example, something like e-commerce. She wants to actually see the product. She doesn't want just have a digital product like I do, for example, with software.

What happened was we started this conversation at 12, at noon, and we didn't get up from our table until 5:30, which is kind of crazy, we spent roughly five, five and a half hours on this conversation. We just kept talking and talking, and brainstorming on things we could do. Looking backwards, what I realized is we sort of formulated the business model that she would be able to start if she would do this. I'm not sure if she would, she's really focused at her job, and there's a lot of other stuff she wants to do as well like sports and friends and all of that. I'm not sure if she actually would, maybe, maybe not.

We'll see. Regardless of that, like what came out of this conversation is actually pretty interesting, I think, for you guys. For all of my audience that maybe is on the pathway to start something. I figured I'm just going to record an episode on basically what the model is that I think, that I definitely would start if I would be her. Personally I'm really much focused on the software side, and I love the digital products, but let's say I want to start a more physical business with an online, obviously online based, but like an e-commerce or anything like that, what my model would be exactly.

The first thing I would consider in picking a niche or picking a market would be to pick a market where you know there is money to be spent. It needs to be something that, for example, pretty much all B2B, business to business markets that would be the case, but there's a lot of business to consumer markets as well. I mean if people are pregnant there's a lot of money in that. People buy on emotions. People buy on things like that, and you can more easily charge something without people actually knowing what it is. Basically the market needs to be something that where people spend money on, and it should not be a commodity, because a commodity, that's pretty much a race to the bottom.

People know how much they spend, for example, on coffee. Obviously you can increase the value of that a bit by making it all healthy, or making up like you get all coffee from all parts of the world, but still there's no way people are going to pay $80, for example, a bag of coffee beans. It should not be a commodity, it should be something where people are willing to spend money on. It should be something where people buy on emotions. That's what I like, because when that happens, when people buy on emotions you can more easily create your own brand and then charge whatever you want, in a way. Obviously there's a limit to that, but if you market it right you're in more control of your pricing, and because of that you're more in control of your margins as well.

That's really what I'm interested in. Without really solid margins it's really hard to advertise. That margins are not even there just to make a profit, but the margins are there to be able to advertise on the line, and still make a profit. I see a lot of people struggle with that. In fact, my wife she actually did one project before, and that's why I brought up the coffee example, because in the past she started a web-shop for a subscription-based coffee bean shop. The problem with that was that there was really, almost no margin. There was like a 10% margin, or something like that. The only way she could drive traffic into that web-shop was if she would be able to send free traffic. There's obviously a lot of limit to that.

Either it takes a lot of time, and even then it's sort of limited. Going back to what I would do if I would have to start over all again, I would pick a market where people spend money, where people buy on emotion, and it's not a commodity. That way you're able to find something where you can put your own price tag on it, and go for a good margin on your product. What I would do next is inside that market is I would start looking, this would be a shop in the Netherlands. What I would do in this case. This goes also if you go for an English-spoken market, but I would basically look at what other products are doing, or what other people are doing. For example, if I see any Facebook ads inside that market, and there's obviously some tools out there, we've covered some on our Connect IO blog, at ConnectIO/blog you'll find some tools.

If you look for spy tools or something like that you'll find various sites where you can find basically tools where you can find existing Facebook ads to go through. If I could find any ads to similar products, and see if they have a lot of likes, or a lot of shares. If they get a lot of likes, for example, we did some research and we saw some ads that had like 20,000 likes on the actual post that I know for a fact that that person who is running that advertisement has been running it for awhile, and there's no way that person would keep on running that specific Facebook ad without making a profit.

Now I know that that person is targeting that Facebook ad to a specific product while making a profit. I know, hey, that's a good start. I would start inside that market, I would start looking for various products which are all really cheap to get. I would go for physical products that are roughly, if you check them out on Alibaba or Ali-express, which is one of the sites that you can buy stuff on in China, ideally stuff that you would be able to buy for between $3 and $5, $3 and $6. Something like that. Like really cheap, but these have to be things that people don't really ... It's not a commodity, and you have your own, you put your own swing to it, and you can really solve a problem with that. That way you could ... You think you'll be able to charge, for example, $15 or $20 for that.

You'll be paying, for example, $5, and you'll be charging $20. What I would do is i would try to find, roughly, let's say three, four products of these. Like not more than that. Just three or four, that will be your best bet. That's the first phase of what I would start. I would start advertising that. I would see which one of those products I would be able to make to get the best return on. It doesn't even have to be profitable at this point, even if it's just break even that would be perfect. Let's say if I would be spending $5, and I would get $20 back, that would leave so like $15 for overhead cost plus advertising cost.

I would start testing it all out, I would start driving, in my case mainly Facebook ads. All these three or four products, see which one works best, I would then cut off all the others that are not working, and I would just pick one of those products. Just super easy, because one of the things when first starting something like this is also your motivation. I know that for my wife, for example, she's not someone who's going to be super passionate, super motivated, who is going to be working for months and months and months before getting results. I really suggest to go for just one product first. Make it as simple as possible so that you're going to stay motivated as well.

You're going to pick three or four products, see which one you can get work on, spend, for example, $100, $200 on ads on every one of those products, which might seem a lot, but that's the amount of money that you need to put into this in order to fully test to see what happens. Pick the one that's working best for you. That's the one that you're going to go for. Then you're going to optimize. You're going try to see maybe a couple different sales pages for example, different ads, and see if you can get to better. That will be your front-end product.

Once you've got that running, right after what I would do is I would add a recurring element on the back-end, which means that after they purchase that first product, I would try to get them into a recurring subscription style business. That could be for example an online course, or an online membership, which would be my preference, because I'm all about online. If it's all online then you'll only have fixed cost to create it. For example, if it will be a membership with like videos and all of that, you would have to spend money on making those videos, maybe, but there's no cost of actually sending the products out, which means there's a lot of margin on that.

This could even be a low-ticket, a really cheap recurring subscription. Could even be like $10, $20 a month, for example. Obviously it starts to add up, because that's really what we want. We don't want to just keep on selling, selling, selling in order to grow, but if you have a recurring element the every single month you're going to get more people into that membership, and into that subscription style business, and that way it starts to grow. Even if your sales are flat. Even if your sales are the same every single month. I'd be doing that. I'd be adding a recurring element, and in case of my wife, like I said before she's really into the physical products and she really likes doing that, so maybe for her it would be better to go for a subscription box.

In a lot of niches and a lot of markets you have these boxes where every single month you send something their way. Well I just told you about the coffee business that she sort of started, which is like that web-shop, and I think she only had like seven or eight customers, like not a lot. That was for a subscription-based for coffee. The thing is, and that's actually what raffled me. I think she had like a total of seven customers, which is not a lot, once again, but she started that roughly two and a half years ago. Two of their customers who started right from the start are still a customer, so every single month, they still receive coffee from my wife's business, and they still every single month they pay for it. That's the power of recurring. Like even two, two and a half years after they're still a customer, that's really why I would want to add a recurring element into that business.

That would be my second phase. I wouldn't start it off creating that recurring element right away, because initially I don't even know whether this business works. I don't even know whether that front-end product is going to [inaudible 00:13:06], but once I do know that, that's when I right away, I start adding a recurring back-end offer. Now, one thing I would also do is instead of just shipping out products from China or whatever, that's what I would initially do, right. I would initially just buy products from China. Keep it super low-key, keep it really easy to get started and don't over complicate it. Right after I prove the concept, I would actually create my own brand. I would hire a designer, I would create my own brand name, I would create my own logo, and all of that. Every single product that I would sell would have that exact same branding.

I would change the packaging, it could be the exact same product, but I would change the packaging so that it's actually ... It all adds up to the brand. Let's take an example, if something is a brand you become exclusive. There's nothing else that could offer that. I mean if you would sell, for example coffee beans, there's a lot of other coffee beans. Let's say, this is a silly example, you would have the brand Coolio Coffee, whatever. There's no other place where you can buy Coolio Coffee. Obviously you're not selling coffee, then you would be selling something like a new, exploring new tastes of the world. Whatever your hook is. Like, you're not selling the actual product, you're selling them an emotion. Of course coffee might not be the best example, but in most businesses you don't really sell what product you're actually selling.

I don't know if you guys know from Bulletproof Coffee, they're not really selling their coffee. What they sell is productivity and high-performance. That's what they really sell. It's just delivered in the form of something else. That thing that you're actually selling them, that emotion that you're actually selling them to, that's what you want to have in your brand all the way through. Going back to, so like wrapping it up. What I would do is I would, once again, I would pick a couple of products, front-line products, physical products, all low cost products like $3, $4, $5. Sell them for like roughly $20 or so. Start driving Facebook ads to them. See if any of those actually converge. Once it does and actually proves the concept, I would start creating a brand, I would also create a recurring element on the back-end, so right after someone purchases it I would actually say, "Hey, you know what, you've now joined this membership."

Get them into that recurring membership, and then the next phase would be to add a higher-ticket item. Something like, especially, once again, this is from my wife's perspective. She wants to also work one-on-one with people. tHat's what she likes to do. If that's what you like to do that's awesome. In that case I would ideally add also a higher-ticket item on the back-end for, for example, $5,000. Where people get to work with her, like workshops or whatever, the market she would be in. More or less a one-on-one or one-to-group kind of level. That would be a third product in the line. At this point it's a pretty simple business. We would end up with one actual product on the front-end. We would have one recurring element on the back-end, and we would have one high-ticket item afterwards that as well.

All of that is in the same brand, and obviously everything you do, if you start a blog, or if you do any outreach or anything like that. Everything adds up to that single brand. Once you got it running obviously you want to add multiple front-end products. I mean I sort of see that as an octopus funnel where all these kinds of products all lead into the same bucket that you have in the middle, which is that recurring element. That's pretty much in simplified way what I would do if I had to start all over from scratch if I would not go for a fully digital business.

Honestly I'm a geek. I love all this online stuff. I would probably go for something that's 100% digital, because there's just a lot more margin, and because of that it's easier to advertise and scale up. If I would be like my wife, or maybe you're the same as well, who just wants to have a physical product, who wants to see what they're selling, who wants it to be actual real in the real world, then this is definitely what I would do. Perhaps maybe this is something that my wife actually is going to execute on. We're going to see if she does. I'm obviously more than happy to help her out along the way. If we do that I'll definitely report back on this podcast. If you are listening to this, let me know if this inspired you, or if this helped you. I'd really love to hear that. That having said, I think I'm going to stop recording now, and I'll talk to you all soon.

“In most businesses, you don't sell your product, you’re selling the end result they'll get.”