7 Shortcuts for Building an E-Commerce Startup to $1M in 12 Months

first12months_diamondcandle

 

If you had 18 months to make a million dollars, what would you do?

One entrepreneur, Justin Winter, is deciding to sell candles with a twist. And he’s projected to hit that milestone of making those millions.

Justin Winter is one of our hottest experts in e-commerce marketing on Clarity. Why?

  • Winter built a $12M run rate in 18 months for his startup
  • He is the co-founder and CEO of Diamond Candles, a bootstrapped, vertically integrated online home fragrance brand
  • Diamond Candles has been recognized as an Internet E-Retailers 2013 “Hot 100” e-commerce sites alongside Warby Parker, Bonobos and Sneakpeeq

This isn’t any of that wishy-washy BS. Winter shows you 7 crucial shortcuts for building an e-commerce site that made $1M in revenue in a cool 12 months. Without further ado, let’s look at Justin’s secrets for building a million dollar e-commerce startup.


A little over two years ago on Valentines Day my co-founders and I sold our very first Diamond Candle. A minimum viable product launch to test our concept, we sold about a dozen in the first 24 hours and were through the roof, someone would pay us money for our eco friendly soy candles with a twist!

Each candle has a ring inside worth at least $10 but up to $100, $1,000, or even $5,000. Given the understanding that 98% of all home fragrance dollars are spent by females we had found a natural fit. A new element of excitement to a product category where $10 is spent on average in each home in the US monthly.

I wish someone would have told us these shortcuts that first day. Some shortcuts we stumbled into by accident, some we learned from the wisdom of those that had gone before us, and some we learned the hard way.

1. Fight A Downhill Battle

No one brand has really attempted ‘cracking’ our industry using best of breed tech and experimenting with different models. Innovation is rampant in verticals like menswear for example.

  • Bonobos
  • Indochino
  • Flint and Tinder
  • MeUndies
  • Beltcraft
  • Ledbury
  • Den.m Bar
  • Vastrm
  • Frank and Oak

You get the point: big industry, lots of innovative players trying new things.

What are other smaller but still large billion dollar industries with little innovation at all?

Playing the game in the home fragrance sandbox compared to menswear just statistically means we are up against a smaller number of tech savvy innovators trying to do things different in a big way.

#winning

2. Don’t Become A Product Expert

dcfac6

How many years did my partners and I spend working in the home fragrance and candle industries before we sold our first candle? Hint: it was less than 3 months.

How many combined years of experience did we have at our disposal when we were rapidly getting up to speed on the entire industry in that less than 3 month period? 50+ years.

While we do manufacture the majority of our product line ourselves in Durham, NC currently where we are located, I would submit that we are the exception and not the rule.

Making candles doesn’t require a multi million dollar automated line. We made our first candles using a 5 qt stock pot and a used electric kitchen stove purchased off of craigslist.

Contract manufacturers, even ones in the North America, are increasingly interested in working on new product ideas in relatively small initial order quantities for new brands.

Use them and leverage their industry expertise to learn about their capabilities and challenger their sometimes tunnel vision of their industry with new ways to experiment with things.

Boom, that’s how the magic happens.

3. Growth Hack your Consumer Packaged Good

The father of the term Sean Ellis details several different elements of the term but at it’s core it is:

“…. a person whose true north is growth.”

Examples like Facebook where utility of the tool grows as you have more of your personal network on platform, Farmville by Zynga where users are incentivized to invite friends to play with them to earn certain rewards, and Hotmail adding a ‘Sign up for Hotmal’ link in the signature of each and every email all point towards building in ‘viral’ in the native product experience.

What if you product is a physical product and not a web app or mobile game?

  • People tend to burn candles around other people.
  • The ‘Ring Reveal’ experience of pulling a ring out of a candle is not normal and invokes curiosity and anticipation.
  • Complementing friends, coworkers, and even strangers on their jewelry is a cultural norm and occurs more often than your average ‘guy’ might notice. Ladies you know what I am talking about.

Think viral coefficients for offline product experience.

I know how many people our average customer tells about our brand that had not been exposed to us before who from having heard from our customer end up making a purchasing decision.

Product growth hacked. Done.

What physical product leans social in it’s experience that you can expound or build upon?

4. Be Different. Really, Really Different.

When evaluating an industry vertical or product category look at doing things different in that industry that haven’t been done before.

  • Manufacturing
  • Supply Chain
  • Cash Flow and Financial Management
  • Customer Service
  • Social Media
  • Paid Scalable Acquisition Channels
  • Mobile
  • Content Marketing
  • Communication of Brand Story
  • Copywriting
  • Business Model

Shortcut? Look at other industries and verticals with lots of innovation.

Look to the outliers who are the poster boys for Manufacturing, Supply Chain, Content Marketing, etc. Don’t learn from the averages, even of more innovative industries and verticals.

Copy. Adapt. Paste. Innovate

5. Focus on One

Choose one channel that is both ‘free’ and ‘paid’.

Diamond Candles grew so quickly because in the early months I literally spent several hours a day on facebook engaging and growing. Facebook was a better social channel for us compared to twitter because our unique selling position and brand story is best communicated through photos. Twitter is not as photo friendly and more of our target market exists on Facebook.

As of date of writing here Diamond Candles has 286,270 fans. 99% of which we have not used any facebook ads to acquire.

Scaling paid facebook advertising to drive new revenue is something that we have not fully exploited to date.

Didn’t I tell you learn from my mistakes :-)

With the advances in the ads api partners who work with direct response focused advertisers and the interest graph targeting capabilities, if you are say a speciaity rabbit feed brand you are in a great place.

Targeting fans of rabbits, bunnies, etc. at any given time running multivariate tests on 20+ ad photos, subject lines, and descriptions for 60! potential combinations across 25-28 yr old’s, 29-32 yr old’s, etc., your cost to acquire a customer (CPA) is going to hit the floor.

Throw in facebook login to gather insight and lifetime customer value (LFCV) data on existing customers to further hone your targeting and you are golden.

You only need $2,976.19 per day to hit your $1M run rate between your unpaid activity on facebook and your paid acquisition activity.

Assuming your market isn’t super huge but still sizable then facebook can scale to driving that amount of revenue or at least half where the other half is made up by ‘free’ or ‘earned’ social or word of mouth. Not taking into account any follow up orders from customers who have already made their first purchase.

For arguments sake if your average order value is $100, your cost of goods sold (COGS) and fixed is let’s say $40, that leaves you with up to $60 to pay to acquire a customer and break even day one. You only have to be able to acquire that customer for an average for a comfortable $54 to give you a 10% return on ad spend (ROAS).

Essentially would you give me $10 today if you knew with 100% certainty I would hand you back $11 this time tomorrow?

What if I told you I would loan you $300 today spread out over the course of a month and you wouldn’t have to actually pay me that $300 for 30 days. Since you are making $11 a day on the loan I gave you and on day 30 when you have to hand me the cash for $300 I have already put $330 in your pocket.

It is called net 30 payments terms and you can get them with facebook, google, and just about any paid traffic source out there.

Don’t want to mislead and say that you can get that going day one if you are spending $10 a day, but as you grow how much you are spending as things are profitable you can work to get it switched over as fast as possible.

Channel options/recommendations?

  • Facebook + Facebook Ads (ie. AlphaBoost, Nanigans and Curebit)
  • Content/Blog Marketing + Paid Advertising Options for Publishers (ie. Outbrain)
  • Video Content on Youtube + Youtube Ads

6. Find a Big Brother or Sister

justinandsister

You need someone that has made lots of really dumb mistakes before so you don’t have too this time around. Someone who is as excited if not more about the challenge you are undertaking than you are.

I have had the priveledge of meeting other founders via Clarity.fm and other sources who are doing some things that I am very excitd about. I get the humbling priveldge to let them know some of the bumbling mistakes I have made so far, what I have learned, and my recommendation as to how they can avoid those similar mistakes.

How do you find them?

Be helpful more than you look to be helped.

It doesn’t have to be a formal advisory role although that wouldn’t hurt. As someone naturally shows a repeated interest and effort to help let them know that you really value what they have contributed so far and that you would love to be able to have them on tap to run ideas by once and awhile.

I have a group of 3-5 people who on average once every 1-2 months I will have a quick phone call or email back or forth at a minimum running something by them and what their thoughts are on the problem I am currently working on.

p.s.-that photo is actually me and my little sister; cute kids huh?

7. Build the Best Funnel

That offline word of mouth factor is crucial here as your foundation to drive highly converting traffic.

What type of visitor converts to a sale more often, someone hearing about you from a random but relevant to them ad on facebook or one of your friends showed you the product face to face and you were able to see, touch, feel, smell, and use the product for yourself? No brainer.

How is paid acquisition effected by your overall e-commerce conversion rate?

From the example above if you can afford to spend $54 to acquire a customer, if 5% of every visitor who came to your site from a paid source made a purchase where you profited $60 leaving room for a 10% ROAS then you could afford to pay $2.70 per visitor that comes to your site.

Same scenario but only 1% of people converted? If you were paying that same market rate of $2.70 for each visitor then it would cost 5x at $270 to make a profit on that one transaction of $60. Your just lost $210. Kind of a big deal.

Step #1 is honing that on-site experience to quickly and poignantly provide the unique selling position, compelling brand/product story, display social proof through reviews and press mentions, lower perceived risk of the transaction with security seals, trials, money back guarantees, etc., clearly drive people to your primary calls to action (CTA’s) while minimizing superfluous distractions and clutter.

Dive into conversion rate optimization and take not from the people already doing this right. No reinvention, just adaption and iteration will get you there.

Once you’re converting traffic really well, you can slowly test paid traffic. You know things are looking good when you are immediately profitable on highly targeted traffic.

Wrap Up

While building a business of any kind to $1M in revenue is difficult for most people, doing so in only 12 months is even more difficult. Difficult but I would say not complicated.

People have and are doing it. I know several who have done it without any angel or venture funding.

What less vogue vertical than whatever the buzzword is today; mobile, local, big data, etc. can you go after and do something really different and substantial for that category?

If you are in mobile, local, big data, etc. I love you too. Let me know what you are working on, would love to get into your alpha and you can help us innovate the product experience and sell more candles.

If you’d like advice on honing in on your million dollar startup idea, growth hacking, social media marketing or e-commerce be sure to chat with Justin on Clarity.

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Comments.

  • Vino

    I love the piece about effective acquisition. Definitely something that is overlooked.

    • justinwinter7

      A lot of people I talk with don’t even consider it all. In some ways that is fine in the early days because focusing on product marketing fit and creating an exceptional product heals a lot of mistakes. But once that is established and people will pay you people have to stop running their business and identify channels to profitably grow the business!

  • Sara

    So many good lessons here. Thanks for sharing your story and your experience Justin!

    • justinwinter7

      Your welcome Sarah. I am steps ahead of some, steps behind others. Move fast and experiment so I can learn from you!

  • http://twitter.com/#!/georgelbowen George Lucas Bowen

    Great write up. Thanks for sharing Justin.

    • justinwinter7

      Thank you for the compliment George!

  • dane

    This is amazing!!! We have watched Justin for two years now from his tech sidelines and can attest to him going from zero 8 figures in sales! Take this stuff seriously and go build something great!

    • justinwinter7

      Thanks Dane! Everyone check out http://www.sumall.com they are a great tool we use and Dane and the team are good ‘big brothers’ and ‘big sisters’ to learn from!

  • poornima

    This is a great piece! I’m sharing it with the founder of @lotuspdenim who is running a niche focused e-commerce business. Especially like the bit about finding a big bro or sis. You’ve gotta keep reaching out and learning from other people’s mistakes, in addition to make some of your own :)

    • justinwinter7

      Glad you liked it and that I could be a help!

  • No Name

    “I literally spent several hours a day on facebook engaging and growing.”

    What does this mean?

    • justinwinter7

      Sorry for the ambiguity! Was a lot to get into one post like this.

      1. posting content, seeing what content gets most feedback aka likes, comments, etc.
      2. responding to every single facebook post from anyone on our page within 10-20 minutes on average.
      3. asking people what rings/candles they liked/didn’t like.

  • Guilherme Verri

    What happened in October 2011 that made the revenue grow so quick?!

    • justinwinter7

      Good question! A few things, we automated some business processes that were taking up a lot of our week, namely finding a fulfillment partner which freed up our time to focus on marketing.

      For marketing we started to actively reach out to influential bloggers and youtube personalities to give out products for review and for giveaways.

      Facebook related contests and promotions, introducing fall themed fragrances.

      Optimize, automate, and outsource operations so we could identify, test, optimize, automate, and outsource new customer funnels.

      • Guilherme Verri

        Awesome work! Very insightful post also.

        One last request. Can you tell a little more about your MVP and how you validated you model?

        • justinwinter7

          Beyond the product idea we made a few dozen of only 5 fragrances, did a prelaunch contest giving away a weekend stay at a beach house running on facebook, ended the contest and announced winner, told everyone to go to our website, had about 2500 people register for the contest, a few hundred people went to the site, we sold a dozen or so candles that first day.

          Not so much model validation but product validation at that point.

          • Guilherme Verri

            So you already had a facebook fanbase or you started the contest to get that first traction?

            Sorry for so many questions, but I’m really impressed with your work and your advice can be very helpful for the project I’m currently at.

          • justinwinter7

            Started from 0, ‘spammed’ all of our friends asking them to like the page of this new thing we were doing, run sweepstakes, ‘spam’ friends again about the contest, seed giveaway to sweepstake aggregator sites. 2500 or so people entered, that was our first audience.

          • Guilherme Verri

            Cool! Thank you very much for answering all my questions!

  • Chris Albinson

    Awesome post – thanks for sharing!

    • justinwinter7

      Glad you liked it and it was helpful Chris!

  • sbermo

    Great post Justin! Looking forward to your lessons in growth hacking mobile apps next.

    • justinwinter7

      Thank you for the compliment! We have lots of exciting things planned for the future and will share as I go through things.

  • http://www.20milesnorth.com/ Rob Jenkins

    This is a fascinating read, I would really like more details on how you “literally spent several hours a day on facebook engaging and growing.”

  • http://amicovolantino.altervista.org/coupons/ Logando

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  • Gordon Campbell

    Really enjoyed reading your article, thanks for sharing.

    What do you think had the biggest impact on making your business stand out online? Even though you are in a niche market you still have large competitors such as Yankee to compete with. It doesn’t like you sell on price, so what did you do to add value to make customers come to you rather than go to Yankee? Do you think it was the gift inside the candle idea?

    • justinwinter7

      The product level differentiation on the surprise inside of a candle is definitely the primary contributing factor. Secondarily the focus on quick response engaged social community and engagement. Driving happy customers to share their experience and share within their network means their is already a certain level of implicit trust by the time we are ‘talking with them’ when they are on our website and we are ‘selling’ them on their experience there and that they would enjoy it as well.

      • Gordon Campbell

        Thanks for the reply Justin and for being so open. Allowing users to submit their own images is an amazing idea, especially from a social proof point of view. You also seem to generate a large number of reviews as well.

        Great to see that your business is doing well, you’ve obviously done a lot of things right and put a ton of hard work into it.

  • http://www.ydeveloper.com/e-smart-ecommerce-suite.html Ydeveloper

    This is a great example for building an ecommerce store. http://www.ydeveloper.com

  • http://www.theedesign.com/ Lauren_Mktg

    I recently started working with an e-commerce client and found your post extremely helpful. Are y’all using Pinterest as well? And if so, have you noticed an increase in traffic and conversions from it?

    • justinwinter7

      We definitely are! We just organically without much effort on our end started seeing a large uptick in traffic now and Pinterest is big on our horizon with some projects right now on how we can ‘double down’ and really focus on fully maximizing the channel like we have done with facebook.

  • http://www.phroogal.com/ The Phroogal Jason

    Great article. Although we aren’t a e-commerce website there are a few things here we can apply onto our own bootstrapped startup. Engaging our members on Facebook has been key and now mixing that up with some paid.

    We are doing as you said taking the online – offline and for a web startup its been interesting.

    • justinwinter7

      A lot of the principles definitely apply to tech startups whether b2c or b2b!

  • Drew Sanocki

    Justin — I found this post so straight-forward, you inspired me to craft my own story: http://www.drewsanocki.com/2013/10/21/how-to-build-an-ecommerce-retailer-to-1m-in-18-months/ I think you’ll see that the lessons are very, very similar.

  • Guidora

    Great advices and congratulations for your work. We are building http://www.guidora.com, an online marketplace for travel itineraries. We’d love to have your opinion and ideas on how to scale our pre-launch signups and we’d love to help you with the candles :)

  • http://donottellmyboss.com/ Prarinya Kamta

    another great post, sparking me and inspired
    many thx.

    • http://www.iamjustinwinter.com/ Justin Winter

      Glad it could be a help!

  • Jon

    This is a powerfully focused Piece, Justin. Thank you. I find the section on conversion rate optimization and the concept of, “avoiding clutter,” to be very helpful in continuing to improve user value and user experience, in my e-commerce venture, Herotropolis. (http://www.herotropolis.com.au.) You also confirmed my current perspective on conversion rates and paid advertising – you pretty much used our very numbers too. What I really appreciate about this kind of piece, is that it advises us to give and is so giving in itself. Giving and value adding is so vital, I hope we do the notion justice in our growth and development, over the coming years. Just love your innovative approach to your industry and your awareness of the effects that your online and offline ‘viral’ marketing and product design decisions have on your target market. Brilliant.

    • http://www.iamjustinwinter.com/ Justin Winter

      Thank you for the kind words John. Keep up the good work.

  • plu

    Excellent article. I am just starting out and I am curious how much you ended up paying for PCI DSS compliancy, scans, audits, etc. and how it affected your business.

    • http://www.iamjustinwinter.com/ Justin Winter

      $0. We don’t worry about any of that. Why? We are experts in growth and exciting products not PCI compliance and security issues so we don’t bother with it. We find partners who worry about the minor details like this so we don’t have to think about it. I honestly think I have never even heard the phrase ‘PCI DSS Compliance’ before. That is the 100% wrong thing to focus on and is just ‘playing business’. Use shopify to get your store off the ground. They handle that mess. Shopify will be a great solution until you hit $1M+ annually and then there are more than likely some better holistic solutions that can take customer service, operations, and fulfillment headaches out of your wheelhouse so you can continue to focus on what made you grow in the first place and not transition to being a full-time operator but stay as a full time grower.

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  • ThomasRankin

    Justin -

    Really amazing and informative piece. Thanks so much. Would love to learn more about the unpaid engagement tactics that you used on FB. We’re competing in the more competitive vertical that you mentioned (menswear) but have an interesting value prop.

    Again, thanks for the great piece. Probably see you on Clarity soon (:

    Thomas
    dashhudson.com

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  • jakir

    What is the business of diamond candles

    • jakir

      Please ans me….

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  • Amit Mishra

    Hi justin winter u really you have done great work,even i started http://www.teewala.com,can you please help me out, how can increase traffic on my site and increase sale.

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