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Intro: Welcome to the Smart Energized Entrepreneurs Podcast with JP Stonestreet, episode #2.
JP: Hello everybody and welcome to the second episode of the Smart Energized Entrepreneurs Podcast. I know you guys have a busy schedule and lots of things going on your lives. I really appreciate the fact that you’ve taken your valuable time to listen to my podcast. Today, I am really excited to have a personal friend of mine and a great, great resource for online business to join me. His name is Brad DeGraw and he’s an author, coach, and entrepreneur. You can find more information about him on FBAHotList.com where you can sign up for his newsletter that’s full of great tips and tricks for selling better on Amazon, so if that is the kind of business you are looking to launch or the kind of business that you currently have, Brad is a great resource to check out. So, once again his website is FBAHotList.com. Without further ado, here is our guest for today, Brad DeGraw. Hi, Brad and welcome to my first interview for my brand new podcast. How are you doing?
Brad: Doing great. Thanks for having me.
JP: You bet. Brad, you and I have known each other for quite a while now. I was looking over my notes from our first meeting which was almost two years ago. Back then you were doing a program for authors. What was that about? Refresh my memory.
Brad: It was a program to put together products for authors, people who have books, but they don’t have the audio books, webinars, they needed to turn one platform into several, you could productize the good idea that they have in the book.
JP: But it wasn’t too long after that that you decided to start selling on Amazon, so tell me about that.
Brad: Well, I am a serial entrepreneur, which means I find it hard to stay in one place, I am always in the middle of at least two projects and this Amazon business was something that I started for my wife, something she could do in her spare time, pick up some merchandize that was low priced and sell it at a much higher price online and I found out that that was cash flowing really well and she did not have the mindset to take the business where it needed to be, so I just kind of commandeered the business and made it a fulltime income.
JP: That’s great. What did your wife say about that?
Brad: She was actually happy, we have an understanding of I run the business my way and it works, and she does her thing and I do the business.
JP: That’s good, that works out well.
JP: So, you do a pretty large volume in that business now, right?
Brad: It’s pretty good. I ship probably 1500 pounds a week and that equates to do just around 300,000 this year.
Brad: Gross sales.
JP: That’s great and where do you ship it to, what do you do with it?
Brad: Well with my Amazon business, they actually run their own fulfillment centers. So, I live in Denver, the closest warehouse is in Phoenix, most of my inventory goes there and then once customers order the inventory, they ship it out one by one to the customers.
JP: That makes it a lot easier. Then you just have to do the shopping and you box it up all at once and ship it out right through UPS?
Brad: Yes, UPS comes to my house practically every day and carries boxes away, so it makes it really easy. There is not a whole lot of moving parts and pieces to the business. As long as you get the right inventory with the right margins, there are not too many things that can go wrong that aren’t fixed pretty quickly.
JP: What made you decide to give this a shot in the first place? Why in Amazon store? Why did you create this for your wife? Why not something else? Why not eBay or Etsy or any of those?
Brad: Well, I had a job working for someone else and as a serial entrepreneur that’s the wrong place for me and long story short, I got fired and I needed to either find another job or replace that income pretty quickly and I so I read a book, it was an eBook, luckily it was just a free book that a friend recommended and with $100 and a WiFi connection, I said let’s see if this works as the idea of arbitrage where you buy low in one market, you move it to another market at a much higher price and sure enough that $100 grew and I kept plowing it back into the business and now we are doing some pretty good volume.
JP: That’s great, that’s funny. I was just listening to Pat Flynn, he is the Smart Passive Income guy, have you heard of him?
Brad: Oh yeah, that’s a sharp guy.
JP: Yes, he was saying that he got laid off from his job and was in the same boat. The economy had down turned and finding a job wasn’t as easy and he needed to find a way to replace the income and so that’s why he got into this business. It’s pretty fascinating how that happens. A similar thing happened to me. I talk about in my video that I just posted on website and I had really forgotten about this, but after I finally given up on my entrepreneurial dream, I had failed so many times, I decided I had enough, I went on and got a job as a software development contractor and on the third day they terminated my contract because the lead developer didn’t like me. I don’t think he liked it, I had opinions on everything and that didn’t agree with his and so they terminated my contract and on the way home I decided that I am not given up on this. This is what I am supposed to be doing and I lost my way briefly, but I got back out there and that’s when I started QuoteCatcher.com two months later. It’s funny how that works in life. Sometimes they say when one door closes, another opens, but you kind of have to willing to look for that open door.
Brad: Yes, that’s the destiny of entrepreneurs who are trying to be workpreneurs. It’s just not a good match and being fired in my perspective is actually freedom. You are being relieved of a stressful situation where someone else has too much influence over your circumstance.
Brad: So, it’s actually the right step for an entrepreneur who is going to start their own business. They really need to get fired.
JP: I think so. That’s what happens to a lot of entrepreneurs, they don’t work well in the company setting because they have too many ideas and they ask too many questions and people just get tired of answering them.
Brad: Exactly on the same page.
JP: Yes, so tell me how much experience did you have specifically relating to this business before you started it, did you know anything about selling online?
Brad: Zero. I knew nothing. I have never sold a single thing online before I started this business and I didn’t have the right tools at that time. I carried around a MiFi and a Kindle, the old Kindle where I punch in the UPC by hand and wait for it to search through, but the thing about making it work with no experience is you have to do one of two things, you have to either hire a coach or you have to have a mistake budget. The budget of saying, “I am going to make a bunch of mistakes and they are going to cost me money, here is how much money I can lose” and for me that number was $100. If couldn’t learn the business at $100 then it wasn’t for me. That’s how I went through it.
JP: That’s a pretty low mistake budget.
Brad: Well, in the beginning the inventory was pretty low cost. My first item I sold was a Tootsie Roll Bank, I think I bought for 10 cents and sold for, I don’t know, $5. So, it proved a theory. In the beginning, the business wasn’t about the income, that first $100 was proving that I could make the business work and if I could make the business work in the beginning, I knew I could make the business more profitable as I went.
JP: So, where did you find your Tootsie Roll Bank?
Brad: In the beginning I was buying clearance merchandise from stores like Walgreens, Bed Bath & Beyond, just older stuff that was good merchandize but they didn’t do the right marketing to bring people into buy those things, so you would be surprised at all the mismatched products those stores carry, they will blow them out for sometimes 90% off.
JP: Yes, just to get rid of them.
JP: So, tell me about the most difficult challenge that you’ve faced so far and how did you overcome it?
Brad: The most difficult challenge for me is balancing resources. Every startup, that is the challenge, whether it’s time or money or experience. I didn’t have a whole lot of money and I didn’t have much experience at all and so I really had to balance that time to make sure that I could learn the business effectively and run the business effectively without running out of money. So, those were my main concerns and even to this day, the balance is different, but it is still all about management, managing the resources.
JP: Yes, that is the challenge, that’s the challenge in every business definitely, especially when you are just starting out with that much of a budget and you don’t want to lose it, you don’t want to waste any money, so it is a hard balancing act to take the risk and not know for sure if it is going to pay off.
Brad: In the way I overcame that is I would track everything. I would track how much time I spent in different stores looking for inventory, how much time it took me to package inventory, what was profitable and what wasn’t. Find out ______ yet, how do we get there and so the only way to overcome that is to know where you are at and look for ways to improve. Each week, I would try to improve one thing, not five, just one and each week it got better.
JP: That’s good. So, what’s your favorite aspect of owning your own business?
Brad: Well, I am looking outside and the snow is accumulating and I am still wearing my pajamas and my hair is all messed up and I haven’t shaven in several days, I love the freedom of I can do whatever makes the most sense for my business right now. I don’t have a fixed schedule that I must do certain things in certain times.
JP: Yes, I totally agree with that. Two things that I love most about it is not driving in rush hour traffic, I schedule my meetings outside of my office outside of rush hour, so that I don’t have to drive in that and then also I love running my errands during the day, during the week, like Tuesday morning nobody is out and so I can go do all my errands and get them all done in a fraction of the time because I know there is nobody else there.
Brad: That’s the nice thing as an entrepreneur that gives you the license to do what makes sense.
Brad: It’s your baby, that’s the best and the worst thing about being your own boss and your business owner is your success and your failure depends exclusively on what decisions you make.
JP: Yes, it does. One question I would like to ask is how did you get your first five customers, your business is a little bit different because you are on Amazon and the way Amazon works is when you post your products, they appear right next to all the other products that are on there, so does this question apply to you, how did you get your first five customers?
Brad: Well, the first five customers for me like you said came with the business. Amazon has its own ecosystem, so it comes with traffic and payments and credit cards on file. So, for me the first 200 million customers are already there. So, I just showed up and they were there.
JP: Yes, that does make it a lot easier. A lot of the people I meet with have launched a website and they are trying to figure out how to get people to the website and how to get their first five customers. It’s a lot more difficult when the platform you are on doesn’t already have 200 million people.
Brad: That’s why Amazon is a nice business to start with trading wheels. There are not too many things that you can mess up with the arbitrage business model. The products are already in demand. You just need to make sure the margins are right. Other than that, there are not too many moving parts and pieces that will fail and then you can evolve into more complicated business models as you go.
JP: Yes. So, do you have a partner or mentor or a coach that you work with, somebody that helps you make decisions?
Brad: All the decision-making is on me, but I do have a team of people that I rely on. So, I have someone in Missouri who we have the same mindset, the same values, but we often have different perspectives on issues. I talk to him almost everyday. I bounce a lot of new ideas off you. I am also in a group called EO, Entrepreneurs Organization, and they are fantastic and we have meetings, but I am big fan of masterminds, I am always finding myself in a mastermind. When I need to learn something new, I kind of crowdsource that learning curve so that I can learn with other people who are learning.
JP: That’s a great idea.
Brad: Yes, it’s awesome. It helps you from making all those mistakes by yourself because you are still going to make mistakes, but at least you have someone with you to help you through the mistake.
JP: Yes, and where do you find your mastermind?
Brad: If I can’t find it, I create it. So, for example there has never been a mastermind on Amazon private label. No one that I could find that was doing this in a small intimate setting and so I sent out some invitations and we all had dinner and now I am teaching four mastermind groups for Amazon private label.
JP: Wow and how would somebody find out about those?
Brad: This is an invitation-only, so I told two people and they told five more people and they told several people and it ended up 30 people showing up by the dinner when I told two people. So, word of mouth is the best way, especially when in masterminds you want people with the same outlook as you. So, word of mouth is the best way, but there is no reason why couldn’t promote it on the social media at some other avenue.
JP: Yes, the masterminds are a great way to meet people and they have the same interest as you. I know that you recently traveled long ways to participate in one, is that correct?
Brad: Yes, I went to Bangkok for a conference and basically what it was a handful of guys who had like minds, we are all internet entrepreneurs, but our mindset goes deeper than we just make money online, it is how we see the world and how we see the limitations of business. We all have very similar creative thinking and it was worth it, it was probably the best thing I have done in years, was go to Bangkok for that conference and there was 200 of us, not every startup, that’s probably not in everyone’s best interest, but even if it’s getting on meetup.com and looking for a local startup meet up even starting in your own neighborhood is worth doing to expand your mindset because the business is not really about the profit and the margins and the products, if you don’t have the right mindset and you are not managing what you have well, it will fail and so, getting with other people who have better perspectives, may be they are looking from the top of the mountain guiding you around, that’s definitely worth doing especially on a startup.
JP: Yes, I told everybody that the mindset is probably the most important thing. I am a big fan of the Secrets of the Millionaire Mind and The Secret and Awaken the Giant Within. I am kind of a self-help junkie and so I totally agree, it’s really how you see the world is what makes the world and a lot of the people I meet with have a serious hangout about wealth and money and they, myself included, I grew up thinking and being told that money is the root of all evil and money doesn’t grow on trees, those were common sayings I heard when I was younger and you have to get rid of that mindset if you want to be successful because you are going to sabotage yourself subconsciously if you think money is the root of all evil and so that’s one of the first things I tell people that they need to overcome and do before they start their business even is to deal with those internal beliefs and those limiting beliefs because if they are trying to start a business, the whole point of starting a business is to make a lot of money because if you just want to earn a living, you can go get a job and not have all the stress, but if you want to start a successful business, the goal of a business is to be profitable, but if you are afraid of making money then you are going to sabotage that and it wouldn’t ever be profitable. I totally agree you have to surround yourself with people with similar beliefs and mindsets and really work on those internal thoughts that you have in order to be successful.
Brad: I will ping you back that idea and just add a couple of things on to it. If people get past the idea that money is green pieces of paper, money is actually an exchange of value, so if you provide a service, the exchange is money. It is that value that you created. So, to say that value exchange is not what makes the world go around, you really got to look deeper into yourself and say why wouldn’t I want to provide value for someone else and as an exchange for the value, yes it’s green pieces of paper.
JP: Not anymore now, it’s bits and bytes.
Brad: ______ to even go deeper than that a business either solves someone’s problem or addresses someone’s fantasy. To me that’s where the big values are. We are not in a commodity business where we are selling water or soil or reselling into someone’s fantasy or their problem and people will spend money there because there is value. People value there problems and their fantasies and so before you can help other people with their fantasies and their problems, make sure that you don’t have anything in your own way and it will come up, that will come up and you will never have a time where you don’t have anything to deal with personally, but the easier you can make it for other people to deal with their problems and their fantasies, the better your business will be.
JP: That’s a great point, this transfer of value it’s a different mindset. One of my people that I mentor and help, she has a great service and she helps people with their finances. She is like a mobile CFO, Chief Financial Officer, and one of our clients I met and talked to and they said that if wasn’t for her, they wouldn’t be in business, that their books were a mess, their inventory was a mess and she came in and straightened it all up and because of her they are still in business and she obviously has a great service that she offers, but she is afraid to sell it and I told her I said so basically you are robbing all of these other people, especially small businesses that are struggling, you are robbing them of your talent and ability to help them because you are afraid to sell it and she thought about that for a second and she thought wow that is a completely different way of looking at this and I think I am not sure that that has taken root yet, but I think I planted the seed and I am hoping that it takes root.
Brad: Yes, the thing is price is flexible for just about anything that’s not a commodity, there is a range of acceptable price. If you have time and you need more work, if you are in the service industry, price a little low, that’s fine, but as you start to balance that out between your time, your skill, the service you are providing, the price actually needs to rise up. There are all kinds of pricing strategies but I don’t see anything wrong with being at the top of your market. I love to sell stuffs at the highest price possible because people value it more, you are getting compensated better, use the money for good things to increase your business and you impact on the community. It just makes sense.
JP: Yes, you and I have talked about this pricing debate quite a bit whether or not to start high and lower if it’s not selling or to start low and raise it if it is selling. It is a good debate. One thing I read the other day was that if you start low then the people who buy it first are rewarded by paying less for it and then you can raise the price over time and then people who waited are basically punished for waiting with a higher price. I really do like that philosophy. I have always been the start low and raise it over time person, I don’t know why, it has just always been my instinct to price it low in the beginning and then raise it as time goes on and sales increase, but I think it’s an interesting debate.
Brad: Well yes especially if there is any level of service and with what’s being sold the service can improve the experience of the company, what the customer is actually getting, you are probably improving that over time and so there is no reason why because you are getting a better value, they shouldn’t have a higher price, that’s just the way it works.
JP: That’s very true.
Brad: The nice thing about the internet, if the business in on the internet, a lot of times there is no memory. You can change the price or you can do split testing where some people see one price and other people see another and find out where that happy medium point is between value, revenue, cash flow, and orders.
JP: Yes, it really is that sometimes a higher price sells better. It depends on what somebody is expecting to pay and if somebody is expecting to pay $100 and you have got it priced at $15, they are going to think may be this isn’t as good as what I was expecting and so they might have been easily willing to pay $100 for it but because you under-priced it, they wouldn’t buy it. It’s weird shopping psychology that comes into play there. You really have to price your products at a competitive price which means it’s not necessarily the lowest price.
Brad: People will do some strange things. I have had products that I have had priced at $15, they weren’t moving at all, I raised the price to $25 and they sell out in an hour. So, sometimes people respond to the change in price more than the actual price, so my philosophy is I am probably wrong, but the customer who buys is probably right. So, make the changes until customers buy and then they will tell you when you are on target.
JP: Yes, that’s a great point. That’s funny how that works. I read a story once about a guy who owned a liquor store and he got a really good deal on all these cases of wine and he got them all for about $2 a bottle and so he priced the wine at $4 a bottle and nobody bought it and it sat in his liquor store collecting dust and so he raised the price to $10 a bottle and it sold out within a couple of weeks and it’s just that perception of value most people want to buy a $10 bottle of wine knowing people that want to buy a $4 bottle of wine are in college and they are looking for Boone’s or something cheap. They are not looking for a nice label bottle of wine. So, there was no market for it.
Brad: Yes, that leads back into why do people buy? It’s not because they want the thing they are buying, they want to address they are investing in a problem or a fantasy. So, the college kid, he is investing in the experience of being intoxicated because he needs the experience of the flavor.
JP: Yes, exactly.
Brad: So, if you sell into people’s problems and fantasy whether it is a product or service, you are going to have a business that has legs.
JP: Yes, it is funny since I read that story, I actually bought cheaper bottles of wine before just to taste it out and it’s hit or miss. Sometimes they are really good and you are like “I can’t believe this bottle was only $6.” Then other times it is like “Oh my God” and you pour it down the sink. It really is a hit of miss thing. You really can’t judge a product based on their price because the person selling it may not know what it is worth.
Brad: Yes, the thing is you don’t know until you are there.
JP: Yes, it’s true. So, you have been doing the Amazon store for what about, a year and a half now, is that right?
Brad: Yes, just a little over.
JP: Wow, so you have come a long way. If you had to all over again, would you do it?
Brad: Oh absolutely, no doubt.
JP: Would you do anything differently?
Brad: I would probably invest in coaching and mentoring sooner because if you find the right coach with the right experience and the right perspective, it’s a huge multiplier effect on the business even if it’s just to get you past some of your own stuff, like I have known what to do with my business for six months now to take it to the next level and I have drug my feet and not performed and I had someone over to the house a few weeks ago and we just totally removed the obstacle and so now I am able to implement some of these 10x ideas that I had no reason not to other than I was standing in my own way. So, there are some things that you can do with your business with a coach that you can’t do without a coach and I hit that point financially early and I just drug my feet and never hired the coach, so I would hire someone to help me in the business sooner.
JP: Yes, I totally agree with that and it’s funny that you bring that up because I just yesterday met with a business coach that I am going to start working with in January. She specializes in my type of business, basically information marketing type businesses where I want to do more public speaking, more training classes and I want to write more. Those are the things I love to do, speak, train, and write and she specializes in helping people do that and she had so many good ideas for my business because this is new for me. This business model is new. I come from a web startup world where we built a product and a service and we bought pay-per-click advertising and we got affiliate deals and we sold that way. This business model is a lot different and I am finding it a challenge to learn it and I wish I would have met her a while back to help me with this. It’s so ironic too that I can help other people with their web startups and I mentor and coach a lot of people and when I am looking at their business, it’s all clear as day. I can see what they are doing wrong, I can see what they are doing right, but when I am looking at my own business, it’s much more cloudy and having a coach or somebody that’s an outside observer who has experience in your industry, they can provide so much value even if you know your business, I think everybody should have a coach.
Brad: I am of the same mindset. If you imagine a giant ladder reaching up to the sky and we are all somewhere on the ladder and for ego’s sake, let’s just say we are all in the middle of the ladder, right? No one wants to be at the bottom, but under you there is someone with the hand reached up looking for help to be pulled up one rung and right above you there is someone that’s ready to help you go up one rung. So, I think it’s important in every business, especially startups, where there is plenty of people with more experience, is to get someone with a higher PEG ratio ______ involved even if it’s just every now and then, if it’s someone that you can talk to once a month, you don’t necessarily need to have him in the business every single day, but get some outside influences who are making 10 times more money than you are and that will keep you on the right path. That keeps the pressure there.
JP: Yes, also one of things that she pitched to me was holding me accountable. A lot of people are really good at that, they set a goal for themselves, like I have to write a blog post every Wednesday and some people are really good at that. For me, it’s like Wednesday comes along and I am thinking “Oh I have all these other things I need to do, the blog post can wait till tomorrow.” It really can’t wait till tomorrow, it needs to be done on Wednesday and she is going to hold me accountable to that and make me do it and I am very appreciative to have somebody who is going to hold me accountable to that and make sure it gets done.
Brad: Yes, I am the same way on fitness and thus I pay someone to kind of hold me accountable, there is always something more interesting than push-ups. It’s not like I need more gear ______ I know what to do, I just need to be a little more driven to do it and sometimes putting someone in charge of that helps.
JP: It does, it really does. I used to have a personal trainer and I was in much better shape. So, what’s the most important piece of advice as we wrap up our interview here? What is the most important piece of advice that you can give people who want to start a business?
Brad: The most important thing to know is you are going to make mistakes. It’s going to get dirty, it’s going to get ugly, it’s not going to be smooth, but good days will outweigh the bad. You have to stay with it, don’t pay for the same mistakes twice, learn those lessons and improve as you go. The Microsoft model of get started and then improve is a better startup business model than the Macintosh if we are going to take years and years and years to make it perfect and then release it and even then it’s not perfect. So just go with the Microsoft model of it’s ugly and dirty, but it’s going to get better.
JP: Yes, I love that motto. I have that in one of my workshops that one of their quotes is “Done is better than perfect.” It’s on the wall in the Facebook headquarters and it’s so true that a lot of people they focus on trying to make something perfect before they launch that everything has to be just right, unfortunately, they get bugged down and a lot of times, it never gets launched. They are so focused on perfection that they end up not launching anything and that’s just really unfortunate and it is a disservice to the people who would benefit from what they are doing.
Brad: Yes, and as the business owner, you don’t get to be right. The customer is right. So, you are going to pick a price point, it’s gong to be wrong until the customer, you see the right price point. Just be ready to be wrong and learn from the customers.
JP: Yes and be prepared to be wrong and be more prepared to adapt to it.
JP: Don’t keep beating your head against the wall and expect the world to change when it’s demanding that. You are the one that change.
Brad: You are not going to win the game your first year in business. You have to be in business over long-term to win and so stay in business, don’t make big risks. If you are going to make risks, make small ones and just get more profitable as you go. Don’t worry about it, it will get better, but always learn from those mistakes and as you are in business over time, you get better and it gets a lot easier.
JP: Yes, the first year is definitely the hardest and a lot of people give up about the six-month mark in it. They just got to stick with it and keep trying and keep adjusting their marketing, their pricing, their product offering, the service, you just have to keep tweaking it and listening to your customers and stick with it because the longer you stick with it, the better your odds are of success.
Brad: Absolutely. If you did the homework in the beginning and you know who you are selling to, what their problem is or their fantasy, if you can engage with those people and their problems, then you will be able to earn their business. The product may change, their service may change, but people’s problems and their fantasies really don’t change all that much. So, if you can develop that relationship and develop the service or the product that they need, you are going to earn that business.
JP: Very true. Well Brad that brings us to the end of our interview. Do you have any parting words of advice for us?
Brad: Just get started, don’t do it tomorrow, do it today?
JP: Exactly, I love that one. Get started. I like to say “Go for it.” That’s how I sign my book is “Go For It.” All right this has been a great educational and inspirational talk, Brad. Seeing how far you have come in just a year and a half, if people are not inspired by that and think to themselves well if Brad can do it, I can do it, there is something wrong with them. So, then they need to go read the Awaken the Giant Within before and then re-listen to this podcast after that.
Brad: Awesome. It’s always a pleasure. Thanks JP.
JP: Yeah, you bet. I will talk to you soon.
Outro: Thanks for listening in to the second episode of the Smart Energized Entrepreneurs Podcast. If you like more information about Brad DeGraw, check him out at his website at FBAHotlist.com where you can sign up for his newsletter and get some tips and tricks on selling better on Amazon. Check out JPStonestreet.com for show notes on this podcast and others. You can also comment and ask questions there and I will be sure to reply to you. If you like to be considered for one of my future podcasts, if you like to be interviewed, please let me know through the contact form on my website, once again at JPStonestreet.com. Until next time, I am JP Stonestreet with the Smart Energized Entrepreneurs Podcast.