13 ways I grew my small business profits

It was the typical small business circular reference, there were many things that needed to get done to grow the business but no time to do them or money to pay someone to do them. Breaking out of this cycle is not easy, but we were able to at PetDoors.com. It can be done with limited cash and without borrowing money.

After a big 2007, PetDoors.com felt the wrath of the economy’s downturn. 2008 saw the company’s sales shrink, 2009 saw them get even smaller. 2010 rebounded and then 2011 did as well, but still not to the 2007 peak. 2012 was down yet again. The company I returned to in December of 2012 was a small business caught in the typical vicious cycle.

Since that 2007-2012 stagnation, we’ve broke the company sales records each year since while also increasing profits. Here are the 13 biggest factors that helped us get there.

1. Work smarter and harder. There are no shortcuts, if you want to change your business time is a finite resource and you need to get to work. Long hours alone won’t get you there but long productive hours will.

2. Hire right. As an engineer trying to run a business, I knew I needed help to offset my lack of experience so I starting listening to all the business audiobooks who had a half decent reader. One topic came up over and over again and it was to hire right.

Hiring is difficult, and when I first started it wasn’t an option but as we eventually started to grow the team, the return on investment on the great hires was huge and made everything a lot easier.

As Jim Collins says in Good to Great, “Get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” A couple tricks that helped us on the way was to use a game theory filter with all our open positions.

When we post a job somewhere, at the bottom of the description it says “To weed out the applicants that don’t read the full job description, make sure your cover letter says the word Monkey in it. Go to petdoors.com/careers.html for more information.”

This serves a few uses. One, we commit zero effort to people without cover letters since you can tell if they attached a cover letter without even reading their email. Two, Ctrl F allows us to weed out applicants with cover letters but no monkey very quickly. 

On our careers page, the first paragraph has this at the bottom “For all positions, to weed out the applicants that don’t read this page make sure your cover letter is addressed to your favorite dog on our staff.” This allows us to give bonus points to the applicants that actually read our website a bit.

Each applicant starts with a phone interview. The phone interview is fully scripted with each applicant getting the same questions in the same order. The questions are weighted based on anticipated correlation with future performance. Same goes for Round 2 interviews which are in person with the team and Round 3 with me.

3. Use your marketing dollars wisely. A big part of our success was how to operate on a shoestring budget. We needed to spend every penny wisely because misusing our funds was standing directly between us and being able to grow the team.

The biggest change we made was from moving away from a web design marketing agency. These guys make sense for some people, but it was just too expensive for us.

The cost effective solution we came up with was to build our in-house Magento knowledge paired with a project-to-project Indian developer, CueBlocks. Hiring a web developer with Magento experience is expensive, but hiring a couple part time Computer Science or Software Engineering students from Cal Poly is not. 

4. Email marketing. You would think that if any product would be a one-off purchase, a pet door would be it. We were skeptical how useful email marketing could be since we sell products that customers tend to buy just once. I was wrong, email marketing became a big part of what we do.

We had a large amount of emails we had never used, over 150k. For about $1200/month with Listrak we send 350,000 monthly emails which was a good amount for us. We would send a monthly email to the big list, and emails to just the Openers every week or two. 

While only 12.6% of our emails get opened and only 1.65% get clicked on, that still led to over 83,000 additional visitors which over the past 365 days resulted in over 1100 conversions and over $200k in sales.

A clever move that has helped us a lot is using a smart unsub page. Our platform defaulted to having an unsubscribe button on the email that when clicked would automatically unsubscribe you. We moved the button to petdoors.com/unsub and then linked to it in our emails. 

Now, if you want to unsubscribe from our list, you have to look at three sad sets of puppy eyes.

Design your unsubscribe page to dissuade your customers from unsubscribing. Our brilliant unsub page lowered unsubs by 85% because no one wanted to click on it and say no to a sad puppy.

Instantly our unsub rate fell by 85% and our list really started to grow faster.

5. FBA. If you are a manufacturer of something, you need to sell it on Amazon and have it be Fulfilled by Amazon. Amazon ranks its search results in order of what makes Amazon the most money, if a product is Fulfilled by Amazon, it is available for Amazon Prime users which massively expands its visibility. Amazon’s cut grows from 17% to about 32% but it was worth it for us.

6. Paid search. If you are in eCommerce, paid search is a big deal. The problem is, it is pretty easy to mess up. There are two primary match types with paid search, Exact Match and Broad Match.

They are both important but for two different ways and should be used very carefully. Broad match is great for finding new keywords. If you place a bid on a broad match keyword, similar search queries will trigger your ad and you’ll get some more action and learn about a new keyword.

The key here is to not pay very much for these. Search engines take plenty of liberties with assigning broad matches to terms that are not very good. Low bids only.

Exact match ads only trigger if that exact text string is used. This is where you make your money. You need to have bids on all the exact match keywords you want. 

On a schedule, go through all the clicks that you got with broad match and do one of two things. If it’s a good keyword, move it to exact match. If it is not a good keyword, make it a negative keyword to never pay for it again.

Over time you’ll develop a thorough list of the best keywords while systematically finding new ones in a very cost effective manner.

AdWords is where most people focus their efforts, but BingAds is fantastic too. The user interface is nearly click for click identical but due to less competition it is easier to make profit. 

Yahoo has their own search ad platform too, Gemini, and it is also intriguing. For starters, it is terrible. It has a horrible user interface and is quite buggy. It also requires much more dev time to track conversions and revenue. Amazingly, you can’t even see the revenue on the standard page, you have to export a report that has your custom variable.

While Yahoo Gemini is certainly a pain, to me this just screams opportunity. It is a pain, which means overcoming it takes me to a land of less competition.

Beyond AdWords, BingAds and Yahoo, Comparison Shopping Engines like PriceGrabber, Nextag, Shopping.com and Bizrate have also helped us grow.

7. Price for profits. Quiz, if you have a product that  you buy for $150 and sell for $200 and have a 10% off sale that causes a 40% increase in sales, is that a good or bad deal for the company?

It’s actually a terrible deal for the company. 40% increase in sales means 40% more work to do, but because the margins were so small to begin with, even a 10% sale is a killer. With these figures you would be doing 40% more work for 16% less profit.

Here’s another quiz: if in the above example you raise your price 10% that causes a 20% decrease in sales, is that a good or bad deal for the company? That’s a smoking deal! 20% fewer sales is 20% less work plus with that higher margin you would actually make more profit. More money for less work is the sweet spot that helps a company grow.

Max profits are not equal to max sales. How do you determine how to price your products is hard, but we try to have close to a 50% margin. This allows us to be more aggressive with paid search and the flexibility to offer discounts to customers that just need a little nudge.

8. Efficient SEO efforts. Along with paid search, SEO is a huge deal for anyone trying to sell online. Getting in Google’s good graces is difficult, but you need to do all the easy stuff.

Start off having your website regularly crawled by a tool to find all the issues. Make sure you fix all the duplicate title tags and missing meta descriptions. Fix the broken pages and add 301 redirects on all the other 404ing and 503ing pages you can’t fix. Fix all these little bugs until your crawls come back perfect. Perfect early project for a part time Jr Web Developer that is still learning, by the way.

After your crawls are clean, make sure your top pages are optimized for the most used search queries that are important for that page. 

Run Google Search Console & Bing Webmaster Tools monthly audits and download all the data monthly so you can accumulate more data over time since Google only gives you the past 90 days of data.

9. Focus on efficiency. With limited resources, you need to make everything count and the biggest of them all is efficiency. In Revolutionizing Product Development Steven Wheelwright discussed how the percent of time you can spend to value-added activities decreases with every additional project you work on in parallel after 2. 

Peter Drucker in The Effective Executive says it best when he says do “first things first, second things never.” We try to take this as literally as possible, focusing just one the top priority until it is done before moving on to the new top priority.

10. Improve transparency. If you want a high performing team, you need high performing teammates that buy into your system and work hard because it is important to them. Being transparent as an organization will help. We have quarterly all hands meetings where we talk about the good, the bad, the interesting and how we are doing financially. 

11. Use your size to your advantage. In Malcolm Gladwell’s David and Goliath, he describes how with all disadvantages comes inherent advantages. Being a small business that is competing against Home Depot and Amazon is tough and there are many disadvantages. That said, there are a few advantages that can be leveraged.

As a small business, you make the rules and you can cater them to for max efficiency. We love to use that flexibility with our scheduling. Some people like to start early and others like to sleep in. Some like short lunches and others want to go home and take a long break, go surfing and then come back a couple hours later. We actively work with everyone to customize their schedule for max productivity instead of forcing square pegs into round holes.

We also look at our size as an advantage with career development opportunities. There are many areas that need attention, so instead of overspecializing we really try to customize each position to the person. If each teammate gets to play a role in designing the position, focus and efficiency increase.

12. Celebrate team wins. Tony Hsieh from Zappos spoke in depth of the value of having a team that is close in Delivering Happiness. Building a team that loves to hang out socially too is easier said than done, but sometimes you can better connect with someone after a beer or two.

We work to celebrate as many team wins as we can. If we have the best July sales in our companies history, we’ll go out to dinner on the company. With 14 employees, these are getting progressively more expensive, but $400/month isn’t that much if your attrition falls and people are more invested in their jobs.

While it is tantalizingly difficult to measure its net impact, since we started celebrating team wins we seem to keep breaking records.

13. Optimize the user experience. Happy customers are frequently better than great marketing and it is imperative that the entire organization focuses on optimizing the user experience. We like to say that we all have the same job, to improve the UX but that we all do it in different ways.

From Customer Service to Production to our Web Development team, by taking care of our customers, good things happen.

 

 

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