Welcome to episode 159 of the Food Blogger Pro podcast! This week on the podcast, Bjork chats with Mark Daoust from Quiet Light Brokerage about testing new income streams and spending money to make money.
Last week on the podcast, Bjork talked with Lise Ode from Mom Loves Baking about growing her Instagram following. To go back and listen to that episode, click here.
Different Ways to Create an Income Online
As an influencer, you have access to a ton of different ways to monetize your blog. And possibly some ways you haven’t even considered.
Mark is here to chat about those ways and to give you a better understanding of how online businesses can differentiate themselves. Between understanding how valuable your company truly is to figuring out the right ways to sell your products to finding out what your readers are craving, Mark’s tips will help you create an established, sustainable business online.
In this episode, Mark shares:
- What it was like starting his own podcast
- How to understand how much your business is worth
- What SaaS businesses are
- What ecommerce sites are and how to monetize them
- Ways you can spend money to make money
- What FBA stands for
- How to add an additional income stream to your business
- The Quiet Light Podcast
- 032: Buying & Selling Websites with Mark Daoust from Quiet Light Brokerage
- How Micro-Goals Built a Food Blogging Empire
- Neil Patel
- More about Neil Patel’s $100k challenge
- Quiet Light Brokerage (get a free valuation here!)
- Sites for sale
If you have any comments, questions, or suggestions for interviews, be sure to email them to [email protected].
Thanks to our Reviewer of the Week, Sara from Real Balanced! If you’d like to be featured, leave a review for us on iTunes and include your name and blog name in the review.
We’d like to thank our sponsors, WP Tasty! Check out wptasty.com to learn more about their handcrafted WordPress plugins specifically made for food bloggers.
If you’d like to jump to the comments section, click here.
Bjork Ostrom: In this episode I talk about building your virtual vault, and we talked to Mark Daoust from Quiet Light Brokerage about the different ways that you can build a business online.
Hey there, everybody. This is Bjork Ostrom, and you are listening to the Food Blogger Pro podcast brought to you by WP Tasty. For those of you that aren’t familiar, WP Tasty is the go-to place for plugins for your WordPress blog, especially if you have a food blog. We have three plugins right now, Tasty Links for everybody that wants to really effectively manage their links on their blog, Tasty Recipes for food bloggers that want to mark up their recipes in a way that are optimized and recognized by search and by Pinterest, and Tasty Pins for those of you that want to optimize your images for Pinterest and SEO.
Every week on the Food Blogger Pro podcast we do a Tasty Tip, which is sponsored by WP Tasty, and today’s Tasty Tip is all about creating a virtual vault for your passwords. This is something that is not exciting, but it is really important. That’s why I wanted to feature it as today’s Tasty Tip. As a matter of fact, right now, both personally and with our businesses, we are going through and doing a big password overhaul, making sure that all of our passwords are unique and all of our passwords are really secure. We’re using an app called 1Password to do that.
Another really good option for those of you that aren’t familiar with 1Password or don’t want to use 1Password is a software called LastPass, but essentially what these password management companies do, what these password management software does, is it allows you to create really secure passwords for every single login that you have, and then you manage that by having one super secretive password that unlocks all of those other passwords.
You can check out 1Password or LastPass to get an idea for how they work, but the basic idea is you want to make sure that you’re not reusing passwords anywhere across any of the sites that you use because the issue with getting a site hacked isn’t that then that person or that hacker or whoever it is has your email and password, the issue is that they can then use that in other places if you use the same password and email or username across other sites. So you want to make sure that you have a unique password for every single login that you have.
That might sound overwhelming. In my case, there’s over 1,000 different logins that I have, but the great thing is with a password management app, like 1Password or LastPass, you’re able to manage those in what’s called a vault in a really effective, easy way. The great thing is you can actually use these companies, you can use this software, to do a review to make sure that all of your passwords are secure.
They do it in an automated way where you can click little areas in 1Password. You can look and say, “Hey, what are my weak passwords or duplicate passwords?” It will show you those. If you need some proof that these are good things to be doing, just this month Apple announced that they are deploying 1Password for over 120,000 employees at Apple. So they’re using this internally for their password management, and I would really encourage you to do the same. It’s going to help you to be secure, to be safe across the internet, and that is one of our jobs.
If we’re building a business online, it’s just like if we had a brick-and-mortar retail store. We’d need to put a good security system in, make sure that we’re locking things, make sure that we don’t have a really generic key that allows you to get in through the door and to access all of your information. So if you haven’t yet set up a password management app, I’d really encourage you to do that, and I would suggest 1Password or LastPass as your solutions for that. That is today’s Tasty Tip brought to you by WP Tasty.
In today’s interview, we are talking to my friend, Mark Daoust, from Quiet Light Brokerage. Mark has this incredible perspective where he on a daily basis looks at online businesses and creates values for those online businesses because he’s like a real estate broker but for online businesses. He helps to buy and sell websites for investors or people who are looking to sell their website. He also is a online business owner. He owns businesses that run and operate online and also is a broker.
He offers this great perspective into the different ways as an online business owner that you can be creating an income. One of the realities for a lot of people that listen to this podcast is we think of building a blog or a website and then creating income from two primary ways, advertising or sponsored content, but the great thing about building an online business is there’s lots and lots and lots of different ways that you can be creating an income. And for you, the person that is pursuing this path, it’s important to think about, “Hey, what is it that I want? What is my desire? What is my goal in building a business,” and then to look creatively at the different ways that you can reach that goal.
There are some examples that are going to be more obvious than others, and that’s why I want to do a podcast like this with Mark. That was the goal is to point out some of those things that aren’t as obvious, some of those other paths that you could look at that will help you reach your goal. So I’m going to go ahead and jump into this interview with Mark. It’s going to be a great conversation around different ways to create an income with online businesses. Mark, welcome to the podcast.
Mark Daoust: Thanks for having me.
Bjork Ostrom: Yeah. It’s fun here because you’ve actually been on the podcast before and have since started a podcast. So before we jump into it, I would love to hear what it’s been like for you to officially launch a podcast for Quiet Light Brokerage.
Mark Daoust: It’s been a lot more fun than I expected it to be.
Mark Daoust: So I was inspired by you, Bjork. That’s the sole reason I started.
Bjork Ostrom: Right, exactly, the number one and only reason that you started a podcast.
Mark Daoust: That’s right. I live my life wondering how I can be more like you. No, honestly, actually some of the work that you’re doing was an inspiration for it. Then we were doing a lot of appearances as guests on podcasts, and we just found it to be a really great way to connect with people. The people that came to us from those podcasts, they had this personal connection with us that we weren’t getting through just the regular content we were producing, and we thought, “Well, why don’t we actually start doing this?”
We know a lot of people in a variety of industries, so we started the Quiet Light podcast. Now the main business, as you know, Bjork, maybe not all your listeners know, we are an M&A firm for the online business industry, so bloggers or ecommerce business owners or SaaS business owners who are looking to sell or maybe plan an exit, we work with these people. In the past, what we’ve done is we’ve just written content on this stuff, but now we’re starting to interview experts on everything from how to achieve higher email open rates to how do you go about that planning process of selling and really bringing in the vast network of experts in the podcast. So it’s been a lot of fun and very diverse and hopefully it’s got some really good information for people.
Bjork Ostrom: Yeah, and I’ll say this, and I’m not saying this just because you’re a friend, and you can plug your ears so your ego doesn’t get too big, but it is one of my favorite podcasts. I love it, and essentially the only podcast I’ve ever left a review on, which is crazy because we ask for reviews all the time on this podcast, and subtle plug for those of you that haven’t left a review, that would be a great thing to do, but it is a great podcast. To give it a plug, you are in this space of buying and selling websites. People would be most familiar with a real estate that would help you buy a house or sell a house, and what you do is kind of like that. Is that a fair analogy for online businesses?
Mark Daoust: Absolutely. That’s a very fair analogy. In this case, instead of selling a house, we’re selling a website or a web-based property. So sometimes that’ll include an Amazon store or a marketplace, but essentially, yes, it’s like selling a house. The funny thing is that we talk about all the time is for anyone out there that is blogging or has something online that’s generating money, oftentimes this is the most valuable asset that you own, but we never think about our sites that way. We think about them as things that we’re doing, but it might be one of the most valuable assets that you own.
So a lot of our pitch, if you will, and we really don’t do pitching, but a lot of what we try and get people to do is to just know the value of what you own because it is probably valuable, and it’s good to know where that lies.
Bjork Ostrom: We can talk about that a little bit. One of the things that I was going to say before we get too far away from the podcast is that one of the reasons I love the podcast is because even though it’s under the umbrella of Quiet Light Brokerage, which is buying and selling websites, you talk specifically about how to run a really profitable, a really clean, a really well-organized business.
Even though we have no intent to sell in the near future any of the things that we’re doing, we have this very long-term mindset with how we are building our businesses, I love listening to it because it allows me to build a business and specifically an online business that is really, really solid because in order to have a good sale of a property it has to be a really solid business, and why not just take that advice and implement that as you are working on your business, even, like in our case, you have a long-term mindset with what you’re doing. I love it. We’ll link to it and make sure that people can follow along with what you’re doing there.
One of the things that I wanted to spend a little bit of time with before we get into talking about the meat and potatoes, food analogy, use them as much as possible on this podcast, before we get into the meat and potatoes of the podcast, is talking about this idea, you talked about valuation and the value of your business. Can you spend a little bit more time on that talking about how do people get a sense for how much their business is worth, even if it’s high-level, general idea?
Mark Daoust: Yeah, absolutely. Let me just touch on something that you said. I’m a firm believer that owning a business is better than selling a business. So taking a long view on your business is the way it should be. It’s a good thing to own, but a good business to sell or a business that’s going to be valuable is a good business to own and run. So that’s why we do cover all those topics. We want people to build really great businesses to own.
As far as the general value of a business is concerned, there are different approaches to valuing an online business. It’s important for everybody to understand when we’re talking about a valuation method or any valuation methodology, what we’re really trying to do is we’re trying to predict what somebody will pay for your business. It’s a predictive formula.
So I’ve had people come to me before, and I’ll give them their valuation, and they say, “Well, I dug out this textbook with valuation formulas, and I think we should really be using this. It gives me this value instead.” At the end of the day, I just try and tell them, “It doesn’t really matter what formula you use. It’s a predictive thing.”
So when you’re calculating the value of your blog or your business, what you want to do is you want to be able to say, “Okay, what is somebody potentially going to be able to pay for my business?” A general way to do that would be to take a look at the amount of money your business earns over 12 months. When we say earns, I’m talking about money that you earn after you pay your expenses, not your own salary, just the regular business expenses.
So you take that number and then we’re going to multiply it by a number. This number could be on the very low end if the business is suffering and having troubles. It might be a 1.5. On the very high end, depending on the type of business, which is going to be what we’re going to be talking about a little bit in this podcast, I guess, it could be five on the very high end. Most are going to settle in-between that 2.5 and three. I would just caution people when you hear that to understand something here.
When anybody quotes you numbers in terms of multiples like this when we’re talking about if you want to know the value of your business, take your earnings and multiply it by three, understand this, it’s not as simple as that. This is just very, very generic. There’s a lot of things that go into determining what multiple your business receives, and there’s a lot of things that go into understanding what the earnings of your business is. You can get a pretty good sense, a ballpark sense, if you take that generic framework.
Bjork Ostrom: Got it. That’s super helpful and really interesting to think about. So if you have a website, your blog, or something that you’re building, let’s say it earns $50,000 a year, a really, really rough estimate with all of those disclaimers on it like there’s lots of things that go into it and can impact it, but a really rough formula that you could use is a multiplier of somewhere between 2.5 and on the high end let’s say four.
So if you had a $50,000-business, it earned you $50,000 a year, and you multiplied that by three, it could be worth potentially $150,000. So it’s fun to play with that a little bit and to think about the value of the thing that you own. If people want to learn more about that, we can actually refer you to episode 32, way back. It was one of the first 50 episodes we recorded with you, Mark, and it was all about buying and selling websites. You go deep into what goes into that multiplier and how that works. So you can get there by going to FoodBloggerPro.com/32.
But today what we’re going to talk about is we’re going to actually look at online businesses from a couple different angles. One of the things that I try and do as much as possible on this podcast is encourage people to think creatively about, number one, what their goal is, and number two, how they can get there. Oftentimes the goal for people wanting to build an online business is freedom and flexibility in their schedule, maybe the ability to build an income that is tied to how hard they work and strategically they work, so your raise becomes effective when you do, which is a nice thing to have.
The other thing is what I mentioned about looking from different angles, and that’s what we’re going to focus in on. So can you talk, Mark, about, in general, when you look at a website and when you look at an online business, are there certain businesses that you look at and say, “Okay, a business that sells a physical product, that’s worth less than a business that sells a digital product,” or are there any things that people should consider if they’re strategically thinking about what type of profit they want or where they want their income to come from with an online business?
Mark Daoust: Sure. So if you’re talking about it strictly from a valuation standpoint, yes, there are different strata of businesses that could be worth more. For example, right now SaaS businesses, software as a service, they tend to get higher valuations just because of that subscription aspect, that renewing, recurring revenue, which can really grow and multiply upon itself. That tends to be a little bit more valuable than, say, an ecommerce business where you’re simply reselling somebody’s product.
So there definitely are different valuations that you could place with different types of companies, but, that said, I mean one thing that I would encourage people while thinking creatively about how can they monetize their content, how can they monetize their blog, to also make sure that you’re getting into something that you’re going to be able to do.
I know some people that would be terrible at SaaS. If they try to build SaaS, then at the end of the day it’s not going to work. I myself, I’m terrible at ecommerce. I can say that. I bought an ecommerce company before, and that was a terrible year for me. I was very glad to get rid of that. It just doesn’t lend itself to my personality, but generally speaking-
Bjork Ostrom: Yeah. Before we get too far away from that, can you talk a little bit about that? So you purchased an ecommerce site, and it was something that as you got into it you realized, “Hey, this isn’t a good fit for me.” You can talk as specifically as you’d like. What was the business, and why wasn’t it a good fit?
Mark Daoust: Yeah, so, obviously, I see a lot coming across my desk here. I mean we literally have dozens of people reach out to us on a daily basis for a valuation, and this was, I don’t know, maybe four or five years ago. A woman came to me, she had owned these sites forever. There were eight websites, and they were selling gun safes and fire-rated locking cabinets and medical cabinets. What I loved about it was that they were really old, so really nice, old domains. They were on old technology, straight up HTML, no shopping cart system, really…
Bjork Ostrom: So they built it all on their own, essentially.
Mark Daoust: Exactly, and I’m looking at this kind of salivating like, “Oh my goodness. What can I do with this?” When I did buy it, it was a pretty small acquisition. I shouldn’t say pretty small. It was a very small acquisition, but where I really found out that I just wasn’t very good was the minutia, dealing with, “Okay, I’ve got to write product descriptions for 250 SKUs now, and then I have to figure out shipping.” When you’re shipping a gun safe, I mean that’s not easy. You have to ask, it’s like, “How many stairs do you have to take this down? Do you have a lift gate?”
That sort of detail-oriented thing just didn’t work for me, and I think something that I’ve learned, I’ve done an acquisition since then, for me personally, I’m service oriented. That is what I’m good at. I’ve got a natural empathetic personality, and so service-based businesses work well for that whereas other people … I just worked with one client and he was telling me how he moved warehouses. He moved from a 9,000-square-foot warehouse to a 20,000-square-foot warehouse-
Bjork Ostrom: Wow.
Mark Daoust: He was telling me how much he enjoyed that, and I’m thinking, “You’re a nutter. Really, you liked that?”
Bjork Ostrom: Yeah, it just sounds terrible to you. Yeah.
Mark Daoust: Yeah, right. So yeah, so that was that. It was a great lesson for me. I ended up probably making out just as much as I put into that business-
Bjork Ostrom: Sure.
Mark Daoust: And I decided to get out because it was taking up way too much of my time and I wasn’t having fun.
Bjork Ostrom: Yep, and it was a huge lesson that you learned, and you’re able to apply moving forward and have a better understanding of yourself, which I think is valuable, obviously not monetarily, but also monetarily as you think about what you want to be doing moving forward and what you’re going to be most successful doing.
Mark Daoust: Absolutely. I’m a huge believer, especially for people buying … I’m thinking we’re a little bit away from the topic here, but for people buying, if you’ve never bought before, start out small and buy yourself an education. That’s essentially what I did. It wasn’t super expensive. I learned a lot about myself. I’d be pretty slow to do ecommerce again. That doesn’t mean you shouldn’t. If you’re good at managing vendor relationships or you’re a good networker or really good with operations, that’s a good place to be because those people tend to do well.
Bjork Ostrom: Got it. Okay, so you were talking about SaaS businesses, and you were saying that’s something that’s going to, in general, be a valuable business. So that’s one type of business, SaaS meaning software as a service, so it’s something that you sign up for and you pay for on a recurring monthly basis.
An example would be we have a nutrition slash label generator called Nutrifox that bloggers use. They put that into their recipes, and then that hooks into tasty recipes and things like that. That would be a SaaS service. All of the software is located on the cloud, so it’s a service. It’s not something you download and have on your computer. You pay for it on a recurring basis. That would be one business that you could start, is a SaaS business.
Obviously you would have to lean in towards technical, or have people that you know or on your team that are technical, as we do, so it’s not me doing the development with that. I would guess that there’s a vast majority of people that listen to the podcast that wouldn’t necessarily say, “Yes. I want to do a SaaS business.” But that would be something you could do.
How about people that … Let’s looks at Pinch of Yum as an example. Obviously it’s a personal-ish blog. It’s Lindsay talking. But let’s just to speak generically about a blog that is monetized via sponsor content and ads, what category would you put that type of business into?
Mark Daoust: We just put those into, probably misnomer category. We would just call them a content site, even though a lot of sites are driven by their content. But we just put them in a generic content site. It’s a content site and it’s gonna be monetized by advertisements, so that would be the generic category we would look at.
Bjork Ostrom: Got it, so a content site meaning this a site that is getting the traffic which then converts into dollars through content. They’re publishing things that bring people to the site, and then people are either seeing ads, and then they get money from that sponsor content, get money from that, or products, and they get money from that.
Let’s talk about the different product categories a little bit. There’s the e-commerce product category, and then there’s this digital products category. Are those two things different? Or are those the same? Can you have a content blog that is also e-commerce and sells digital products? How do those all overlap?
Mark Daoust: Yeah. All right, so e-commerce is a big umbrella. We can really break this down into very minute categories. I don’t want anyone to be overwhelmed when thinking about this because it can get a little overwhelming, but digital products would be one.
Digital products are great. They’re great in that they’re easy to create, they’re easy to delivery, there’s really no cost with them once the product is actually built and developed. The downside to a digital product is they tend to have a limited life span. Oftentimes, you often see with digital products, you’ll see a big bump when they’re first released, and then you see them tail off in revenue over time. Then they might settle in on a pretty settled monthly amount of revenue. But you really do have to continually be generating new products.
I think what I would … I’m not sure I would put subscription or education under that as well. But you might want to put an educational content site underneath that as well. Somebody pays access for a course, and there’s a video course, again that would be a digital product that’s being delivered, just under a different medium.
Bjork Ostrom: Sure. Food Blogger Pro would be an example of that.
Mark Daoust: Exactly.
Bjork Ostrom: We have a forum, we have videos, things like that, so people are signing up. Sometimes those products are one-time, and sometimes they’re recurring. In Food Blogger Pro’s case it’s a recurring, monthly or yearly. Sometimes you’ll have just a one price point. A lot of times it’s a higher price point, $500, $1,000, and you can get access to this course.
Mark Daoust: Yeah. I think those types of sites … We were talking about SaaS and how available those can be. Membership sites in general that have that recurring aspect to them tend to be pretty valuable as well. If you’re able to develop a good membership site, that’s obviously a really good option.
Bjork Ostrom: Yeah. Why is that? Can you talk about why something like that would be more valuable than maybe a one-off general digital product?
Mark Daoust: Sure. A lot of it comes down to being able to measure just how valuable every customer is. You get somebody to register for a year, and you know that they’re going to probably stay with you for three, four, or five years. That’s future income that you are able to predict. From a buying stand point, I think this is important to understand, when a buyer is looking to acquire a business, they’re really concerned about, “Am I gonna make my money back? Am I gonna see a return on investment?” If you know that there’s a subscription, you already have that customer base which is likely to continue to purchase from you.
Now if you are selling a physical product, say a bracelet of some sort, you could sell them a bracelet, but then you’d have to pitch them again to sell another bracelet. They’re just not automatically gonna be saying, unless you have a subscription based e-commerce business, you typically have to sell them again. It’s not terribly difficult to do, but there is that effort that’s needed. There’s also that additional cost.
When you’re dealing with a subscription based business or a membership based business, there’s often a cost to bring in that member initially, and that can be pretty high. But after that, the cost of supporting members tends to drop off pretty low, and it doesn’t necessarily expand at the same rate with larger members. For example, let’s say you have a membership site with 100 clients. You are offering a certain amount of content to them. If you increase that to 500 members, you still have to generate new content, but it’s not like you have to generate unique pieces of content for every single member.
If you are selling a physical product, and again using the example of a bracelet, you can sell a bracelet to every member. Then if you increase to 500, you need to sell 500 bracelets, which means you have to acquire that. In the world of e-commerce we call that the cost of goods sold. You have to grab that good, and there’s gonna be a cost associated with that. Because of that, they tend to be a little bit less valuable just because you don’t have that future revenue to bank on.
Bjork Ostrom: The predictability of the past revenue being future revenue, how likely is this to stick around.
Mark Daoust: Absolutely. You can get super geeky with the data and honestly, Bjork, you’d probably be better to speak about that I know that you love a lot of that stuff, but you get into ideas of what is a lifetime value of a client? What’s the cost of the acquisition? What’s your M&R? All these acronyms start getting thrown out. But what it all boils down to is you can understand a little bit better what a customer is going to represent in terms of revenue, and how much it’s going to cost you to support that customer in a much clearer sense.
Bjork Ostrom: Yeah. It’s interesting, that can be applied across the board, for people to think about that maybe advertise based, or they get their revenue from advertisements. You can think about that and you can say, “Okay, I can look at my dashboard,” if you use AdThrive or Mediavine, or one of these ad companies. You say, “I know that on average,” I’m just throwing this out, I’m not saying this is what it is all the time, but let’s say $15 for every 1,000 visitors.
You can crunch those numbers and say, “Okay, if I can figure out a way to pay for 1,000 people to show up,” and this would be really hard, but let’s say you can figure out a way to pay for 1,000 people to show up and only pay $10, then you have this little lever that you can pull and say, “Okay, I’m gonna spend money to make money.” That’s something that we’ve never done a great job at, we’ve always been pretty organic, but I’ve heard some people in the online buying and selling space talk about the value of really understanding how to use advertising to generate income. Can you talk about how that works, and from a value perspective, why that’s important.
Previously before I started to understand this better, I thought, “Hey, it’s more valuable to have really good SEO, where a lot of people would come organically. But I’m starting to understand that that’s not necessarily the case.
Mark Daoust: It really depends on who your buyers is. But there’s a lot of buyers out there that really like the value of a paid acquisition channel. Paid acquisition being you’re paying for those people to come in. The reason that is liked and why it’s preferred in many cases is because you can really control that volume pretty heavily, and it can be a lot more targeted.
I remember seeing an example, I think it was on NeilPatel.com, where he showed the example of two different landing pages, just by way of example. In order to do an organic landing page, you needed to have it set up for organic, which is not always the best for converting somebody to a customer. With paid acquisition, there’s just a lot more fine control over how that person interacts with your website, how do they convert to a soft lead with your site. Then you can also control the amount that you’re spend.
SEO is a little bit less dependable. I think just from a market standpoint from buyers, there’s still a little bit of sting out there for people that are familiar way back when with the panda, penguin, hummingbird updates, they call them the animal updates at Google, where all of a sudden they changed the way that they were ranking websites. It was traumatic. A lot of the rules that professional SEOs thought were in place, got changed overnight. I think there is a little bit of distrust with SEO. But again, it’s also just something that’s a little bit out of your control.
Whenever you’re looking at any business, and not just from a selling your business standpoint, just from how valuable is it and how good is this business, you want to be able to say that it is protected from outside risk. Whenever your business is entirely dependent on an outside source, that’s a potential risk. I’ll give you a quick example. It doesn’t deal with Google, actually it’s Facebook.
I was working with a client who had a Daily Deal of the Day site. You would go in and they would just … I forget what they were selling, but let’s just say it was electronics. They would go out, they would source a bunch of TVs, sell them for a huge discount, and everyone would buy it. They were doing all of this through Facebook acquisition. They built up a really great Facebook audience. As most of your listeners probably know, Facebook is really hard to do organically now, they’ve just toned it down a lot because there’s just so much commercial noise. They went from having two warehouses, because they needed to expand that quickly, to all of a sudden having two warehouses and no traffic.
Bjork Ostrom: Which isn’t a good position to be in.
Mark Daoust: The problem was they were reliant on one source. The benefit of paid acquisition is you’re not completely reliant on one source, typically. You’re able to control that flow a lot better.
Bjork Ostrom: Got it. In order to do that though, you need to have some type of product that you’re selling. It would be rare to do paid acquisition for advertisement if you have CPM ads, or paid acquisition and then do an affiliate thing.
Mark Daoust: It would be really hard to do. I remember years ago seeing some people do it, but it’s not common. It would be crazy difficult to do that.
Bjork Ostrom: Yes, got it. This is really helpful. We’ve talked about SaaS businesses, software as a service, the general content category, and we talked about the fact that content really, if you’re strategic about it, should be applied to any type of business that you’re doing, and can be applied to it, e-commerce, digital products, physical products, membership sites. The goal here is to talk about all of these different angles that you can think about building a business so you don’t get stuck in just thinking about one way of creating an income, so you can move towards achieving that goal, whatever it is that you have.
Another area that I’m really interested in and have very little knowledge about is this idea of FBA. I see these businesses popping up all the time. I understand how they work from a distance, but can you talk about what FBA is, and why Amazon stores are so popular?
Mark Daoust: Yeah. Amazon FBA stands for Fulfilled By Amazon. It’s where you take product, you ship it to Amazon directly, and then they can fulfill the products for you. When you shop on Amazon, if you are shopping for, let’s use the food analogy, you’re shopping for a set of really nice knives. You go on there and you are looking up Wusthof knives. You find that pair and you click Buy Now. There’s a place on there that will often say, “Sold by,” and it’ll be an individual store. It’s not necessarily being sold by Amazon directly, it’s just being sold through their market place.
Anybody can sign up and start selling their products through Amazon FBA. There are some categories which are restricted, and you have to be able to get special permission to sell in, but for the most part, anybody can start shipping products to Amazon, and Amazon will start to rotate your products in. As you get good feedback and there’s a lot more complexity to it than I’m gonna let on right now, and I don’t understand it fully, but as you develop a good reputation on Amazon, you end up winning more of what they call the Buy Box. You become that default seller for those particular products.
Bjork Ostrom: It’s kind of like SEO for Amazon.
Mark Daoust: Exactly. Exactly. What you’re doing is you’re really riding the Amazon train. I know everybody knows Amazon is big, but I’ll just throw this one statistic out there, and it’s probably even outdated by now because I think I saw this last year that … Let me see, that would probably be 2016 then. In 2016, Amazon did more e-commerce revenue than every other e-commerce company combined. That’s Walmart, that’s Target, that’s Best Buy, and every tiny little shop.
Bjork Ostrom: Every tiny little shop.
Mark Daoust: They did more than everybody combined. Also, Google is losing some search results in the e-commerce world to Amazon. Over half…
Bjork Ostrom: ’Cause people go straight to Amazon.
Mark Daoust: People go straight to Amazon. Over half of product searches start on Amazon now.
From if you’re selling products, for the most part, almost every product that’s out there, it makes sense to put it up on Amazon. The way it usually happens and what we’ve seen this with e-commerce stores. People will start up an e-commerce store and they think, “Well, why won’t I open up this Amazon sales channel as well.”
Next thing you know, they go from being an e-commerce business with MyGreatStore.com, to, “Oh my goodness, 75% of my business is coming through Amazon now.” It just blows up on that side. That’s where you’re seeing all these stores pop up. It’s really a fertile marketplace that Amazon continues to grow and all the merchants that are on there are growing right along with them.
Bjork Ostrom: That’s great. The idea of being, you purchase this product in bulk, and you can have something that’s … I know you can do White Label, which is essentially the same type product that somebody makes and then they put your brand information on it. Or if you wanted to be really strategic and really dive deep on it, you could create your own custom product, whatever that would be, and then one of your strategies could be having that available in Amazon for people to purchase. Do you see a trend with this? Are most people doing this category of White Label, where, like you said, maybe there’s a set of knives, or a cutting board, or something. Then they say, “Okay. I’m gonna take this, list it on Amazon, but I’m gonna put my brand on it, and try and be really strategic to get it to show up.”
Mark Daoust: Yeah. Within the Amazon world, there’s also this strata of types of businesses. I’ll start at the bottom as far as the least valuable, and the one that I wouldn’t necessarily recommend doing. Then we’ll go up to what is the most valuable and most sustainable. I’ll start this out by saying Amazon is a bit of gold rush right now. There’s a lot of money to be made there. I think people do need to look at this. But there is a problem with Amazon, and that is that it’s a general marketplace without a lot of distinguishing factors.
When you buy a product from Amazon and a third-party seller, chances are you don’t even know that you’re doing that in the first place. How do you distinguish yourself on the marketplace is the number one question. How do you distinguish yourself and protect yourself from competitors? With a website, it’s pretty easy to do. You can have different designs, better customer service, all sorts of things. Amazon, it’s really down to the product and then your store ratings. That’s essentially what it is.
With that in mind, we’ll start at the very bottom, and that is the people that don’t really have a single product to sell. These people go out. They’re kind of like … If you ever watch the show American Pickers, they’re kind of like those guys. They’ll go out to Walmart and see, “Oh man, they’re selling these clearance items. I’m gonna buy these clearance items, ship them off to Amazon FBA, and I’ll make a couple bucks.” That’s not really a business, that’s more of a trade, and more of a hobbyist. Very little strata.
Second on the list would be people that are simply buying wholesale, and they’re buying from a company in Alibaba, or what have you, and they’ll put the product over at Amazon, and they’ll sell it. The problem with those companies is there’s really nothing to distinguish them from somebody else coming in …
Bjork Ostrom: No competitive advantage.
Mark Daoust: Exactly. Then it becomes a race to the bottom. Who can get the best price because that’s really your last distinguishing factor. We don’t really recommend those either.
Then you get to the White Labeling, like you talked about, where you take a product and you put your own brand on it. That begins to distinguish yourself a little bit, but it can be difficult too to do that. We had a client a few years ago, they were selling those Moscow Mule mugs that you would see. Initially they just blew up on Amazon. Then sure enough, all sorts of competitors came in and started to eat away at their market share.
The third would be these unique products where you actually have created something on your own and you’re selling it on your own. These are the most valuable. They’re also the most difficult to do, of course, because you have to have a unique product and manufacture it. But these are the crème de la crème of the businesses on Amazon, with the most stain power.
I would say for anyone listening, I would go with those last two options. If you can get a brand, do it. There’s value in your brand and that’s a good starting point. Then starting to fold in creating products, that’s also a really good sustainable model.
Bjork Ostrom: If somebody has an established brand, let’s say they have a website and they have an audience, are they gonna be at an advantage in creating their own product, that they then offer on Amazon? Or is it just gonna be the power of Amazon, and the reality is so many people are on Amazon. Even if you have 100,000 people that coming to your site, it’s not really matter because there’s 100 million people coming to Amazon every day. I don’t know if that’s true, but that’s what it feels like.
Mark Daoust: It’s what it does feel like. I do think there is gonna be some advantage to having that brand and bringing it on. But I think, at the end of the day, standing next to Amazon, or beyond, that mass traffic is gonna take over at some point.
Having a brand, again, that’s gonna set you apart. What is really important about having that brand is when you’re listed on Amazon, when you White Label a product, you aren’t going to have people selling the exact same product. If somebody clicks on a Sony product, they are going to be buying a Sony product. There’s only one person that’s gonna sell that Sony product, at that given time. There might be 100 people trying to sell it, but when you pull up that listing, that’s what you’re gonna see.
But if you have … If you’re your own brand, you’re gonna show up separately in those product listings. It might be the same product, but you will have your own listing there, and you’re not gonna be fighting for the one listing with a bunch of other people, if that makes sense.
Bjork Ostrom: Yup. It does, for sure. Again, the purpose here is with any single one of these, we could go really deep into explaining the intricacies of how each one of these categories work. The hope here is to expose these to people, to allow you, the podcast listener, to say, “Oh, actually, that’s really interesting. I want to look into that.” It’s planting the seed and we’re not gonna water it. We’re not gonna give it any fertilizer, that’s your job. But if there’s something that sticks out here as one avenue for you to potentially pursue business growth in, I would really encourage you to look into that and explore that.
One of the questions that I have for you, Mark, let’s say that somebody is moving along. They’ve kind of figured out content. They’re good at producing that. They’re maybe making a little bit from ads on their site and maybe occasionally they work with a brand and do a sponsored piece of content. If somebody has those skills, those abilities, what would be a good next step for them to add in another revenue stream to their business?
Mark Daoust: Well, I think it first depends on what they want to add in, but with any of these things testing … Whatever testing you can do first to see how are your clients, your customers, or your reader’s gonna respond to this would be really important. Let’s say that you wanted to start up a membership site. Try it out maybe on a very small test basis and maybe email only a portion of your readership to see, again, what is that response going to be? If you’re going to try and launch a product of some sort, maybe partner with somebody first and do on a test basis there and just say, “Hey, we partnered with XYZ company over at Etsy,” for all we know. Go ahead and take a look at this product and see what the response is from your audience before you really jump in with both feet.
Bjork Ostrom: Yeah, I think that’s so great, and one of the things that we talk abut occasionally, but probably not enough, is this idea of push versus pull and figuring out the things that you can create, and when you give them to your audience or talk about them, it is a pull of, “Please, people.” You can imagine people pulling it towards them and being like, “This is something I want and need” versus you having to push it on them and be like, “This is something that’s awesome. You really need this,” and using testing to do that. I think that’s such a great idea and we did that actually with Food Blogger Pro.
We felt like there was kind of some pull from people saying, “Hey, we’d be interested in this,” and so we did this pre-sale for three months where we didn’t have the product built and we said okay, let’s see if people would actually be willing to pay money or this thing and if they are, that will confirm what we think is true which is this could be a sustainable business and it turned out to be the case and here we are, whatever it is, fix, six years later still running it and we have small team with it. But, a lot of that comes not from us having this brilliant idea. It comes from the people that we were working with and alongside in our audience saying, “Hey, this would be something that would be valuable,” and responding to that, so I love that idea about testing and getting a feel for it before you actually launch that.
What would that look like? You talked about psychical products. What would that look like with a physical product? Can you talk through how that would work partnering with somebody and would that be an affiliate relationship that you would do or how can you test the market with that?
Mark Daoust: Well, I do think there are probably people out there that are smarter than I am on that topic. If it were me, though, I would probably start with that affiliate sort of relationship and more of a partnership and joint venture sort of relationship. If there’s somebody who’s selling something then and you’re just an absolute fan of what they’re doing, partner up with them. Reach out to them and see if there’s a unique product that you can create for your audience rather than just selling something that they already have and doing that completely through them.
I would probably do it as easy as possible. If I were doing it, again, my first step would be to say, look, can we set up just a dedicated landing page on your website before our audience only? We’re gonna sell this unique product through you and drive some customers over your way and see what the results are. Understand, of course, that the results on something like that are gonna be a little bit different than if you set up your own store, as well, but you’re just kind of looking to see. Your push versus pull is perfect. Is your audience craving this sort of thing? Have you built up that relationship with them where they really love everything you’re doing and trust you to be able to lead them that right direction, as well?
These are things that you want to test for right away, so I would probably start out with some sort of a joint venture or affiliate relationship with somebody, and then if that works out well then I would probably move at that point to setting up a Shopify store which is something that we haven’t talked about yet, but when you develop products or if you find out what you want to sell, at that point maybe setting up a Shopify store. Setting up a Shopify store is not terribly difficult to do in the grand scheme of things and it’d be a nice next second step to be able to see how much attention there is there and how much you’d be selling some of these physical products and then you can build from there.
With any of this, Bjork, I’m gonna actually give you a plug on this here because you came on my podcast right when we were starting and if anyone wants to listen to it, I love the episode. You had talked about making these just small continual improvements every day. When you’re thinking about, “Oh, man, I’m gonna start up an Amazon business and an e-commerce business and get physical products and inventory and oh my goodness, it’s overwhelming,” it absolutely is, but when you think about it and digest it into these small chunks and not worry about the big picture so much as what am I gonna do this day and this week to kind of move in this direction and how can I do this without investing the next six months of my life into something that I don’t know how it’s gonna result? Having that mindset I think is super important.
Bjork Ostrom: Yeah, and to be able to learn and build, learn, and iterate … You build it, just a tiny little version of it. You learn about it and then you iterate on that and continue building and it’s just this loop: build, learn, iterate. The nice thing about that is you’re not building for a long period of time and then learn. You’re taking those small steps and learning along the way which I think is so valuable. We’ve hit some really good categories here and I think it’ll open a lot of doors for people that normally were doors that they didn’t know, rooms that they didn’t know existed in terms of building a business online. Is there anything else that you would add, Mark, that you don’t feel like we were able to talk about or other types of businesses that would be important? The one that you had mentioned just recently was Shopify. You can talk about that a little bit and anything else that you can think of that would be an important business category to talk about online business.
Mark Daoust: Yeah, so something that I’ll touch on here would be Etsy. I think we should probably talk about that briefly. It’s just a great place. It’s a great marketplace to be able to test products and test to see what sort of pull is there? The only caution I would give with Etsy is there’s not a lot of flexibility once you grow there. You can’t sell an Etsy store. It doesn’t get moved at all and once you get to a certain size, you probably want to move off them, but I do think that would be a good place if you have a unique product idea. It would be a pretty good place to test it and see what sort of reaction you would have there, but again, if you have an established audience, if you have an established blog and people are reading you … You’re doing some basic level of email engagement with them, Shopify is a great resource to learn.
There’s lots of free resources out there to teach you how to use Shopify and with a Shopify store, you can realistically get set up with an e-commerce store relatively quickly with them and that would be a place … Again, I think as maybe that second or third iteration of, okay, we’re gonna enter into this e-commerce area that I would look at. Lastly, a resource that I would point people to, and Bjork, I can email this to you later for a link in the show notes. I’m gonna confess I’m a bit of a Neil Patel fanboy, and-
Bjork Ostrom: For those that aren’t familiar, can you talk about who he is and what he does?
Mark Daoust: Sure. Neil Patel is a content marketer. He’s been in the game for a really, really long time. He’s founded several multimillion dollar companies and he blogs an insane amount. I think for a while there, he was writing three blog posts per week that were 5000 words or above.
Bjork Ostrom: Wow.
Mark Daoust: Kind of crazy when you think about that. Obviously, he has a team behind him doing this, but it’s pretty insane and he gives out a ton of information about what he’s doing. He’s done a couple of challenges over the past few years. One of them was on neilpatel.com where he had just started the site and he said, “Okay, let’s see how long it takes me to get to up to 100,000 readers per month and I’ll tell you what I’m doing,” and so he tracked that live. Then, another challenge that he did was, “I’m going to build an e-commerce business or I’m gonna build a business that generates $100,000 in revenue per years within less than a year and I’m gonna blog about that journey along the way,” and so he started a site called Nutrition Secrets and he showed what the traffic was every day and then he showed how he was going to end up monetizing that and he went that route where he started with content and just pure content marketing and built up the readership rapidly there. Then, he transformed that into an e-commerce business where he was selling nutritional supplements and then expanded over to Amazon and he hit that $100,000 in revenue in that first year.
Bjork Ostrom: I think it was 100,000 a month, wasn’t it?
Mark Daoust: I think that was the visitor count, but maybe I’m wrong on that.
Bjork Ostrom: I’ll have to look it up and see, because I remember the one that you’re talking about and I remember I was just like, “What?” It was insane. We’ll have to link to it and see. I might be wrong on that, but it was a really cool experiment because it was all done in real-time from the ground up.
Mark Daoust: Right, and you kind of think, okay, well, he cherry picked what he was doing. He actually let his readers choose the niche he was going to be in and then initially he started out with his name and everyone said, “Well, you’re Neil Patel. Of course you’re gonna get links and stuff like that,” and then he said, “Fair enough,” so he stepped back and he had one of his friends run it and he was still able to do it, so I think it’s really appropriate for this conversation. We’re talking about taking a content site and monetizing it in a different way and finding different monetization, because 100,000 visitors per month, my first thought would be ads, but his first thought was, “I’m gonna sell something,” and it worked very, very well and so I think that’s a good resource to study.
Bjork Ostrom: Yeah. That’s great, and we’ll be sure to link to that in the show notes, as well. Last question for you, Mark, like you said, you see lots of businesses that come through, lots of proposals are putting together lots of estimates for business and you have this unique ability to look inside of hundreds of businesses. Obviously, it’s not just you. It’s your team, as well, but over the past, let’s say, six months or a year, what are some of the things that you’ve been able to see as trends or things that are working well with online businesses that you would say, hey, after getting a sixth sense for what’s working well and what a successful business looks like, some of the things that they’re doing, what would be, let’s say, the top two things if you can think of them that you’ve seen with businesses doing and things that we should consider as we’re building our businesses online?
Mark Daoust: Oh, that’s a really good question. The top two things that I’m seeing businesses do … I hope this doesn’t come across as too generic of an answer.
Bjork Ostrom: Nope. Anything works.
Mark Daoust: Anything works. Good. What I would say that I’ve really seen, and this has been over probably the past five years, out of businesses that have been able to sustain the changes in Google, sustain the changes in Facebook, would be more of a business-like approach to people’s businesses and understanding the ability to outsource the stuff that people are bad at and keep doing the stuff that you’re good at and enjoy. My business partner keeps telling me all the time, he’s like, “Mark, what do you suck at? Stop doing it,” and, “What do you hate doing? Stop doing it.”
There’s this gut instinct of, okay, if I don’t do it, then I’m gonna have to pay somebody. I don’t want to have to pay somebody for this, but you know what happens and I’ve done this slowly in my business, as well? When you stop doing that, A, life becomes way more enjoyable, and B, you’re actually freed up to do the stuff that you do better more often and that actually has a net increase effect on the business, so that would be probably the number one thing that I’ve seen people do is really understand how to build out teams in a smart way. It doesn’t have to be a full on employee. It can be a contact worker. That would be the top thing that I’ve seen people do.
Bjork Ostrom: That’s great. Yeah, and how valuable that is for you from a lifestyle perspective, not just a business perspective, but if you can get to the point where you are excited about getting up and doing what you’re doing every day as opposed to dreading it, which even for entrepreneurs that have built a successful business, I know a lot of people that will kind of have this dread towards they’ve built themselves a job that they don’t like and so to think strategically even from the outside, even if it’s just a couple hours a day to have somebody help out with some of the things that need to get done, but maybe aren’t super excited.
Mark Daoust: Absolutely.
Bjork Ostrom: I think that’s a great little tip.
Mark Daoust: We always say here that we want to work to live. We don’t want to live to work.
Bjork Ostrom: That’s great.
Mark Daoust: It should be that direction.
Bjork Ostrom: Yeah, absolutely, and I feel like that’s a really great note to end on, so we’ll wrap up, but before we do, Mark, can you talk a little bit about where people can find you and then maybe talk a little bit about your podcast if people want to subscribe to that and listen?
Mark Daoust: Absolutely. You can always find us at quietlightbrokerage.com, and one thing I would encourage everybody to do would be to reach out to us to get a free evaluation. We will not try and convince you to sell your business. I’ve already said in advance your business is better to own than it is to sell. That’s everybody’s business. It’s great to have business that you can own, but you should know the value of it and we can show you what’s going on with your business and what makes it valuable and what you might need to work on to make it more valuable down the road, and that should make it a better business to own.
Bjork Ostrom: I think that’s such a great little point that you made where you’re able to say, hey, this would make your business more valuable if you did this and that in and of itself is such a valuable thing, so I know firsthand from the long time that I’ve known you, the conversations that we’ve had, that it’s like a very, very zero pressure kind of conversation and would encourage people to touch base with you just to make that connection and to learn a little bit more about online business, so we’ll make sure to link to Quiet Light Brokerage in our podcast, as well.
We’re coming to the end and wrapping up, but it’s actually one more thing that I just remembered that I wanted to talk about and I feel like is worth mentioning. For some people, the best avenue to go down is not to build from scratch, but to buy, and I feel like it’s worth pressing pause on wrapping up on this podcast to talk about that because I know it’ll hit somebody and they’ll be like, “Oh, yeah.” Building a business doesn’t have to start from zero. There is a way where you could look for a business and online business if that’s what you want to do. Find one that’s a really good fit. You can crunch the numbers, get a good idea. Maybe you’ve saved up a lot of money and have cash for it or maybe you need to take out an SBA loan or something like that, but you can purchase a business and know that it has built in cash flow and a little bit of history, so I wanted to mention that and even though we’re at the end wanted to point that out, as well. There’s a way where people can go to your website and look and see what listings you have, as well. Can you talk about the real quick?
Mark Daoust: Yeah, absolutely. You can find all of that at quietlightbrokerage.com/listings, or just click on the top menu that says buy, and if you want more information on that and … A shameless plug on the podcast here.
Bjork Ostrom: Yes, please.
Mark Daoust: I interviewed a guy by the name Walker Deibel. He actually just joined our team as a broker. Award-winning documentarian. Premiered at Sundance Festival. He’s bought seven businesses over the last 10 years and he talks specifically about that, about that aha moment that he had where he was trying to start businesses with limited or varied success and then he thought, “Maybe I should be buying these,” and was able to really turn that into something quite valuable, so he talks about ways to go about buying and turning that into a different way of pursuing entrepreneurship. Next week, we’re actually … I interviewed some professors from Harvard, because we worked with them over the past five years. They have a whole course on entrepreneurship through acquisition, so we talk about that on the podcast, as well.
Bjork Ostrom: Is that the Harvard business review? The people that did the Harvard business review stuff on that?
Mark Daoust: It is, yep, so it’s Royce and … We’ve been working with their program since they started in supporting them by providing them with some case studies.
Bjork Ostrom: Yeah, that’s great. I know that there’s gonna be some people that hear that and it’s gonna be a little light bulb for them, so I’m glad that we stuck that in at the end. Mark, thanks so much for coming on the podcast. Really appreciate it and great to connect with you.
Mark Daoust: Hey, thanks, Bjork.
Alexa Peduzzi: Hey, hey, wonderful listeners. Alexa here bringing you the reviewer of the week and this one comes from Sara from realbalanced.com. It says, “I’ve been a longtime listener of the podcast and follower of Pinch of Yum, but haven’t yet taken the time to write out how helpful the Food Blogger Pro podcast has been for me. Bjork does an absolutely fantastic job with his interviews and each episode is clear, concise, and always leaves me motivated in new was. Between listening to the podcast, being a member of the Food Blogger Pro community, and Lindsay’s food photography course, I’ve managed to become a full-time food blogger after only having my blog for 16 months. I’m truly grateful for the resource that Food Blogger Pro provides. Thank you.”
Wow, Sara, thank you so much and congratulations on all of your success. We are so thrilled and honored to be a tiny part of your awesome journey and if any of you would like to leave us a review on iTunes, we would really appreciate it and you’d get a chance to have your review, your name, and your blog name mentioned in this section of an upcoming podcast episode, so from all of us here at FBP HQ, we’re signing off until next week. Make it a great week.