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375 : Fred McKinnon – The key to get through challenges is multiple streams of income

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Could you get through a major challenge with your business right now? How about two? three? Fred will explain how he has ..so far! He will tell you that knowing your numbers is the key to weather upcoming storms. Seeing the upcoming problems and adjusting to handle them will get you through, up and over walls. The other side can be so much better knowing you have a plan. The other key mention from Fred is about getting a business mentor. Sound, experienced advice from someone you trust can be the difference between emotional decisions and educated decisions.

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Fred previous interview #174

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Transcript: (note- this is a new tool I am trying out so it is not perfect- it does seem to be getting better)

Fred:                                     [00:00:00]               The attorneys and, and just be frank, there were local attorneys who don’t specialize at all in this type of a transaction. They were having a very difficult time wrapping their heads around what the actual asset was. Um, you know, there’s no inventory. There’s no. Because I was not selling the private label. I was keeping that

Cool voice guy:                  [00:00:23]               welcome to the ECOMMERCE momentum. Will we focus on the people, the products, and the process of incomers silimed today. Here’s your host, Steven Peters in.

Stephen:                             [00:00:37]               So you’re looking for an advantage to help you woo a brand. Well, one of the tools that you can use this scope, you can check out their product and then check out their competitors and find the keywords that competitors were using and check out theirs and see that they’re not. And then say, okay, I’ve got an idea. Let me do this. Let me enhance your brand. That’s the thing you can bring to the marketplace. When you can enhance the brand, you’re going to win that account. So try it. You get a free trial, but seller labs.com, forward slash scope. Use the momentum and save 50 bucks. It’s a free trial, try it and see if you can enhance the brand. It’s time to get the listings right? So what should you do? You should get your images right, right? So amazing freedom has a program to help you do that and we’ve used them.

Stephen:                             [00:01:20]               It’s phenomenal what they can do. You got to go look at this. So you go to amazing freedom.com, forward slash photos and take a look at the examples of what you can do with an image you take and you give them some sample images, some simple images, and then what they do is they take an insert them with lifestyle photos and so all of a sudden you’re going to see an example of what a plain image looks like and then what it can be enhanced to. Why is this a value to you while you’re in the wholesale business and guess what? You want to add value to the brand and this is just a simple way to do it. They offer all those kinds of services. Scroll down to the bottom. If you really want somebody to help really improve this service and you want to bring value to that brand because you want exclusivity, the services that they offer for a listing enhancement will blow your mind, so again, it’s amazing.

Stephen:                             [00:02:08]               Freedom Dot com, forward slash photos. Take a look at what you can do for your brands that you’re trying to get. If you’re ready to learn about wholesale than I suggest best from the nest and Robin Johnson, her unstoppable Amazon Academy will help you learn from basically even open ending account. If you’re brand new to Amazon, but then all the way to brand building, how do you. How do you enhance the brain? How do you have that conversation? There’s 300 plus videos, probably more than that by now, so very simple, little as $49 a month best from the nest.com forward slash esm. That’s it. Best from the nest.com forward slash m checkout the services that they offer. Check out some of the events that she hosts. Do you want to go walk around and check it out best from the nest.com forward slash? Yeah. Add an important member to your Amazon teams’ solutions.

Stephen:                             [00:03:02]               Four ecommerce. Yep. Solutions Four ecommerce. Karen Walker’s team helps manage our Amazon account. We pay full price just like everybody else. We’ve been using it for a couple of years and the reason is is because of the results. We modify a lot of listings, especially in wholesale because we’re trying to enhance that listing, right? We’re trying to help the brand and so guess what? That’s the type of service that we get from solutions for ECOMMERCE, so it’s solutions, the number four e-commerce dot com forward slash wholesale, and you can get $50 off her service. Go try it, give it a shot and say, hey, could you help me get this listing in line? And guess what? That allows you to go out and develop relationships with wholesalers and then the work gets done by Karen and her team. I can’t recommend it enough. We use it again.

Stephen:                             [00:03:47]               We pay full price solutions, the number four e-commerce dot com, forward slash wholesale. Save 50 bucks. Get that important part of your team working for you. Welcome back to the ECOMMERCE momentum podcast. This is episode 375, Fred Mckinnon. Now this is a, a, a pretty serious story. I mean, it’s worth listening to probably more than once to hear what could happen to you all outside of your control. All you can do everything right and things happen. Life happens and life has happened to you and other things. So it guess what it could happen to here is as we both kind of talk about, you need an umbrella because it’s going to rain. And so Fred’s had the, as he describes it perfectly, the perfect storm in with his ecommerce business and a personal life. So I think it’s a great story, a great example of a guy who’s got clarity on what really defines him, not what used to be.

Stephen:                             [00:04:46]               And he’s one of the guys who like me because we’re about the same age that are career use to define us, not anymore. And Man, it’s, it’s a shame. It took us both so long to learn that. But man, to see him come out on the other side, it’s amazing. He’s so inspiring. Um, by the way. And, and it really addressed this very much. He does consulting, he’s got some pretty big clients. He sold over $65 million on Amazon. So if you’re ever looking for somebody to help you scale, this is the guy to do that. Let’s get into the podcast.

Stephen:                             [00:05:23]               All right. Welcome back to the ECOMMERCE momentum podcast. We’re excited about today’s guest to return guests and it’s been two years since I’ve had him on the show. His life has turned a over two or three times. His business has turned over two or three times and it’s very, very interesting on the reaction and I was fortunate just to see him a couple of weeks ago in Atlanta at the Atlanta mart and we got to spend some time talking about changes and then adapting to those changes outside of your control. Fred mckinney, welcome back, Fred. Hey Man. It’s great to be back on and it’s great to have you again. It was great to see you a couple of weeks ago. That was, that was an amazing experience because both of us were brand new to that market. Neither one of us had been there before. It is over and I only went in that one building. You and I were in. Did you make it to all three?

Fred:                                     [00:06:12]               Yeah, I went to all three buildings. I spent two days there. I think my fitbit says I’ll walked about 12 miles and I, I would guess that I saw 30 percent of the show.

Stephen:                             [00:06:26]               It is, you know, you know, I am New York now, coming up in a couple weeks. Maybe. Maybe this will be out. Probably already been there by then. But um, massive. The javits center in New York. It’s huge. It’s a five room. I mean, you take it for a lot of trade shows there. I honestly believe that the Atlanta Martin was significantly bigger. I have to look to do the square footage because it just felt that way. I just kept going to floor after floor after I’m like, we’re. And then I just wonder down hallways and I never made it down. All of them. And I only stayed in that one building. Incredible.

Fred:                                     [00:07:00]               Yeah. It’s overwhelming to say the least. And I’ll tell you the lesson that I took away from it, and honestly I should have known this because, uh, I learned this at asd. Um, if you don’t go with a plan ahead of time, then you’re just basically lost. Yeah. So, uh, now, you know, an American smart has a great app on a iphone APP and website. So, uh, I had the APP and I really wish now in retrospect, I had spent a couple of days a glancing through all of the exhibitors doing a little research on them and making a, a plan that they have a really cool thing where you can build your whole plan and the APP and it’ll give you a floor plan of exactly where you need to go and you can type notes in for each exhibitor. Really an incredible thing that I didn’t really utilize. And now in retrospect, I wish I had utilized it board, but I’ll know better next time I go.

Stephen:                             [00:08:01]               Yeah, I think it’s, there’s always a learning curve. I don’t, you know, every place. So like, asd, any one of them, there’s always a learning curve and I didn’t go with any intention of buying anything or seeing anything and really with zero expectations, I was there for another purpose in Atlanta. I had the next morning to kill, um, and other than to meet with you. Um, and I a breakfast I never made it to, by the way, I got lost in Atlanta, has a subway system. I literally, I went on for, I went south, I went north, I went south and went north and I finally said that guys, I’m not going to meet him for breakfast. I, there was no way. I don’t know what I was doing. I have no clue. Anyway, um, I had zero expectations, um, but I found wholesaler accounts there that I am going to do business with and it was very, very surprised by my cool stories is this, I’m walking down this aisle and I didn’t pick my head up at all.

Stephen:                             [00:08:51]               I just looking at a product and it caught my eye and I’m reading it and it says something about a, made in a, something about Carlisle Pennsylvania. And I’m like, Carlisle, Pennsylvania, I’m like, that’s where I live. And I would look up and I recognize who the manufacturer is. And they’re like, well, I didn’t even recognize it first. I’m like, Carlisle. Pennsylvania goes, well, we’re really from a little place south of there. You would never hear it. I’m like, dude, here’s where I live. He goes, oh, it was so cool that there’s this local. I mean, local to me was there in a big way. And it really, I guess that that also showed the breadth of the products that were. They’re just phenomenal.

Fred:                                     [00:09:30]               Oh yeah. I had a very similar experience. I was walking by a booth and uh, the guy read my badge and saw St Simons Island, Georgia. He goes, Oh, you’re from St Simons? I said, yeah, you know, and he goes, well, no, but there’s another company from St Simon’s right there across the, across the aisle. And so sure enough, I think, well, I’m going to know who they are because this isn’t a large island. Right? I mean, I feel like after having lived here since 1995, you know, everybody, I know everybody not even be related to half of them. Right, right, right. Um, and they and they all know me more than I know from my former job where I was in front of 1500 people, you know, every week. So, uh, at any case, I’ll walk around the corner and I’m like, number one, I’ve never heard of this company in my life. Number two, I’ve never seen these individuals in my life. And sure enough company doing tons of business right here out of my own backyard. People I’d never met before. Of course we all knew the same people, so I was like, I can’t believe we haven’t met. So yeah, you really know. You never know what’s happening right behind you.

Stephen:                             [00:10:42]               Did that opened an opportunity for you?

Fred:                                     [00:10:45]               It did. Not in the sense that they were not interested in being on Amazon at all. I did discuss it and, and it could open up opportunities in the future and really I probably wouldn’t have pursued them regardless. I, the product just didn’t seem to be the type of product that I felt would really do well. I’m online. It’s the kind of thing you really want to touch and feel.

Stephen:                             [00:11:12]               Yeah. I might company the one that, what they sell. I’m just not interested in selling it. No, it was explaining to my son this morning we were having a conversation and I said to him, I said, I’m at that place in my life. I only want to sell things I’m interested in, um, I don’t want to sell things just to make money. I really want to be interested in a particular product or I’m just not interested in selling it. Um, it, it, there’s just too many other things that I think you have to build depth on whatever you’re selling. And if I’m not interested in a product, it’s going to be eh. Got It. Now you know, there’s no connection. Maybe that’s the better way to say it.

Fred:                                     [00:11:49]               Yeah, absolutely. To me, to the place where you could make those.

Stephen:                             [00:11:54]               Yeah. And I think it’s a choice, right? And in, you know, staying interested in making sure that, you know, this is a job. I don’t want to say that because I’m showing you manage, check said that a while ago that, uh, as, as jobs go, and I think we can attest, you could attest to this. This is a pretty good job. Um, and there’s nothing wrong with a good job. Nothing wrong with it at all. Now let’s segue that right into your situation. So, um, fred is a musician. I’ve been at a business, a church for 27 years, is that correct?

Fred:                                     [00:12:28]               Well, not the same church. Uh, I’ve, I’ve been on a church staff since 1994. Okay. So I worked for Tom. It’s two years at one church that I in Mississippi. Then I moved here to St Simon’s island, Georgia. Worked for one church for 12 years and I’m just finished working at a, another church on the island for almost 12, 11 and a half years. Long time.

Stephen:                             [00:12:52]               A long time. And so outside of your control. And, and I mean, I, I know this might be a little sensitive. So tell me when to pull back. Steve say too much, but outside of your control, the situation changed. Now Fred is also was a significant drop shipper, right? Do you don’t hide that? I mean massive. You were your best year. 14 million, if I remember correctly.

Fred:                                     [00:13:13]               That sounds about right. Yeah,

Stephen:                             [00:13:15]               so 14 million. Massive. I remember the conversation and you margins may be four percent or something like that, but at that time, and we were talking to the precall the biggest challenge. You were coming into his customer service, an expectations. The market’s changing and you know, your costs are going skyrocketing and this net, right? So that was a scenario a couple of years ago. That’s all going well. A staff is good. You’ve got people helping you, you’re working at the church and then all of a sudden a few things have come together, right? So I don’t know which piece you want appeal first.

Fred:                                     [00:13:51]               Yeah. It’s just, um, you’d like for everything to happen and it’s perfect time and this has just been the perfect storm and it all really started unraveling a couple of years ago. Um, and when it started unraveling was right after, you know, right around that $40, million dollar a year mark. Uh, we, I just honestly really started getting burned out on that whole process of massive drop ship. Uh, you know, we had close to a million listings on Amazon. Wait, say that again? Million on listing million. A guy used to channel advisor and on numerous occasions, um, my feet stopped working because I had an excess of 1 million skew in the system and you know, that doesn’t mean they were all active by any means. I think at one time maybe there was close a half a million active skied on Amazon and you know, things were going well, but my heart wasn’t in it anymore.

Fred:                                     [00:15:01]               The stress was unbelievable and I was coming into a season of life as a husband and as a father where I just didn’t want to continue to bear the burden of all of that stress and work. And then I’m still working full time for a church and my responsibilities at the church began to increase. So some of the things I was originally hired for, I began to be responsible for more of that and I enjoyed it and so it was always important to me to give my best energy there. That was my full time job and then just manage my employees and make sure the business was running well. Uh, but I finally got into private label and I started a private label brand and I was really happy with the margin there and I was also happy with the lack of stress having my own private label.

Fred:                                     [00:15:57]               I wasn’t getting shut down by Amazon for trademark or copyright infringement. Uh, you know, the returns were not happening hardly at all. The margins were good and I just realized that I could almost make the same money off of that than I could with all the other stuff. So I set out to sell the company and make a long story short, uh, right away, found a buyer and we agreed upon price and all of that was great. But the transaction fell apart in the fall. It fell apart. Where were these things often fall apart and it was with the attorneys.

Stephen:                             [00:16:37]               Okay. So it wasn’t a financing issue, was an attorney issue and rights and all that kind of jazz? Correct.

Fred:                                     [00:16:43]               Yeah, it was, it was really. Both Ali could have pressed through the attorney issue what the attorneys and, and just be frank, they were local attorneys who don’t specialize at all in this type of a transaction. Um, they were having a very difficult time wrapping their heads around what the actual asset was. Um, you know, there’s no inventory, there’s no, because I was not selling the private label. I was keeping that.

Stephen:                             [00:17:12]               So this was really your intellectual system in, right?

Fred:                                     [00:17:16]               It was a, essentially they’d finally is what they called it, a system, a money system that consisted of, of our, our seller central account, our history, our feedback, the it solutions that we use, all of our vendor accounts. And uh, but they were really struggling to put that into legal. Yeah.

Stephen:                             [00:17:38]               Terms. It’s 100 percent goodwill and banks don’t like to finance goodwill. Uh, because it’s the, it’s arbitrary, right? It’s, it’s, it’s, it’s interpreted, it interpreted. I don’t know how to say that word,

Stephen:                             [00:17:50]               but you know what I mean. Yeah,

Fred:                                     [00:17:51]               yeah. Subjective, I think, you know, the banks here, small town, local bank, you know, they were cool with funding the purchase or where the, where the rubber really hit the road was with all of my drop ship distributors who over 10 years I had, I had built up massive credit lines, you know, some of them to $300,000 a month, net 30, uh, and all of the, my account and all of my key great pricing would transfer to the new owner. Those credit lines obviously would not transfer to the new owner and the credit lines that the potential new owner was receiving were not enough credit to make it through even one week of sales. And I knew what that would happen. I knew that, uh, after about four days he’d run out of credit with the distributors and couldn’t process anymore orders all this to say we were heading into October and I felt like it would be suicide to try to get this guy into the business when he had never done ecommerce before. Oh yeah, and I couldn’t do it in good conscience and then we got hit with Hurricane Matthew and we had to evacuate and the hurricane passed within a few days, but we weren’t allowed access back to our homes and offices for about a week. Um, we couldn’t get back onto the island.

Stephen:                             [00:19:18]               This really is the perfect storm. You’re not kidding when you say all this. Yeah.

Fred:                                     [00:19:22]               Wow. So that falls apart. And in retrospect, I realize now that I sort of spiraled into a bit of a depression, not like clinical depression, uh, couldn’t get out of bed kind of a thing. Not to make any light at that very serious obviously, but I was really disheartened and discouraged. My staff knew it. It’s tough to tell your employees and your team, hey, love you guys, but I’m selling the business. Um, and then so they know you’re a, you’re done. They know you’ve checked out.

Stephen:                             [00:19:55]               Right. And so all of a sudden their world’s changing. It’s in, to be fair, it’s not an unfair thing. It changes the conversation in their mind to themselves, what about me? Where’s my future? And you probably were like, no, I’ve got a good guy, it’s going to take care of things you were trying to address the uncertainty,

Fred:                                     [00:20:12]               right? Um, and so then when it falls apart, I come back and, you know, and I think, you know, in their hearts, they all know, well, he’s not back because he changed his mind. He’s fat, but it fell through and he’s still not really into it. And on top of all that we began to see historical plunges in our gross sales unlike we had ever seen. I mean, one of our biggest marketplaces at the time was jet and jet had just launched and we were a part of actually launching jet. We were one of their friends and family launch partners. Um, and uh, just a business change business model change with jet a, we were doing tremendous volume on that website. And overnight we lost all of that volume because they went straight to our distributors and they cut us out. So that was a massive loss of revenue. And about the same time Walmart started suppressing any listing that wasn’t price competitive to Amazon. So literally we watched our gross sales just plummet to the point where we were no longer able to, um, you know, cover our budget.

Stephen:                             [00:21:27]               Can I ask you a question on that? Let’s go back to the jet description. Um, you, you’ve been doing this a long time. You’ve had relationships with these companies forever, right? So if it would, I mean, you’ve been doing this for a long time. Why, why did that company go direct? I mean, what was, what, I mean, if you had to think about that now, if maybe if you were in their shoes, what were, what did they gain, what do you think they were trying to gain? I mean, they weren’t trying to stick it to Fred, obviously that has nothing to do with it.

Fred:                                     [00:21:58]               No, they weren’t. Um, of course I would just have to be careful in what I say only in the fact that I’m not under any contract or obligation. But

Stephen:                             [00:22:09]               yeah, don’t bad mouth them. I’m just trying to understand what they were trying to do

Fred:                                     [00:22:12]               to, uh, put myself in that situation. My, if I had to guess, I would say that, uh, they were burning through money like crazy and that, that’s not a, that’s public knowledge. They were burning through capital and funding and they went through numerous rounds of, of venture capital and they were burning through it faster than, you know, it was crazy and they had to stop the bleeding and one of the ways they could stop the bleeding was by cutting out the middle man, which was totally against what they, their model when they started, which was that they would never do that and that when they initially launched the platform, you know, you are promise you’re never going to compete against jet, like you compete against Amazon retail. So, you know, it just, it just turned on a dime. And uh, and, and that, that hurt a lot. So that changed the whole business.

Stephen:                             [00:23:07]               So let’s be clear. So it wasn’t the manufacturer that we think we don’t know. So again, we don’t know, but however it was now there was no the mean, you know, you kind of hear this about Amazon sometimes is that you know, that they go, well, I know they do, so I go to a show, I’ll be in New York in a show in a couple of weeks. Um, and I met an Amazon Rep. they’re signing up those wholesale accounts just like I was. That was their job. That was her job. Right. And so she’s there to, not to compete against Steve. He has no clue who I am, but she’s there trying to squeeze out any customers they can because they want to have every product they can write. And so that same thing was happening on other platforms outside of your control. You did nothing wrong. Right. Okay. Okay. I just want to. Yeah, I think that’s the hard part for people to hear is, is that, you know, but they need you. Fred, you were, you were huge customer of theirs, right? I mean massive,

Fred:                                     [00:24:03]               right? Well, yes and no. I was a massive customer, but I was a customer that they were not in profit with me because they were actually subsidizing sales stages, uh, meaning that, uh, they would take a loss to be able to match Amazon’s price on a product that we sold, but they would still pay us our asking price. So if our price to jet was $50, they would pay us $50, but they might sell it to the customer for 30 and they’d take a $20 off

Stephen:                             [00:24:35]               and that was so they could gain market share and get established, get their foothold. Okay.

Fred:                                     [00:24:39]               Exactly. Yeah. And that’s not uncommon, but, uh, yeah, it’s important for listeners to know that this happens all the time. I’ve, I’ve visited one of my big distributors, warehouses. I’m actually up in Harrisburg, Pennsylvania, massive warehouse and uh, and it’s interesting, you know, that you see all of the product rolling down the rollers and there’s one whole section of it with individual Amazon boxes going down. And I’m like, these aren’t truckloads of stuff going to Amazon. These are individual orders and Amazon boxes. So, you know, you find out that Amazon at least then was somewhat drop shipping themselves. So, um, you know, all this has happened in Steven and uh, my expenses are more now than our revenue and that’s bad math. That’s not good. And thank God for retained earnings. The old Dave Ramsey school, uh, we, uh, we stuck a lot of. I had, I had a lot of money in the bank so much that, you know, people were like, you should be investing this or something else, but it was there for these types of things.

Stephen:                             [00:25:56]               You invested it in risk, right? Risk Mitigation, critical.

Fred:                                     [00:26:02]               And we would have, uh, I, I would have either violated some contracts or are gone bankrupt. One of the two would have happened, but in February of 2018, in February of 2018, the contract with my it providers. So I’d mentioned channel advisor, hat channel advisor and one other large one that managed some other things. That contract came up for renewal. And at this point, Stephen, I’m really burned out on the whole mass drop ship model. Uh, we weren’t really making the money that we were making before. It had to the point where weekly, if not multiple times per week, we were getting policy violations from Amazon, from brand management owners. Well, could you explain that a little bit? Can you walk us through, because if somebody who doesn’t, who’s new to that doesn’t understand that they haven’t received them yet, we all have. But when you’re there for a little while, you’ll start to get these.

Fred:                                     [00:27:03]               Explain what, why you would get that notification. Well, it’s part of, it’s the way that Amazon works. Uh, if you have historically sold on an ace in, on a product, whether you’re actively selling, they’re not, you can still be deemed by their performance team if a brand owner makes the complaint. Um, so as you can imagine, I said I had a half a million active products in the catalog, so, uh, accompany might file a trademark infringement against a set of a sense. And if we were selling that or even if we weren’t actively selling it anymore, but we had been selling it. The Way Amazon system works is every seller of record on that Asian kids a performance violation, which is, you know, huge risk, enough of those you get your account permanently suspended and with the huge catalog of products that we had it, it brought massive exposure to us with liability and it was a weekly occurrence when we would get a policy violation for a copyrighted image or unauthorized not supposed to sell or people that we had sold for years that had good relationships with, with just decide we don’t want anyone selling on Amazon anymore.

Fred:                                     [00:28:26]               And rather than just send you a courtesy email and say, hey, you got 30 days to take down your listings. They just take the easy route and go to Amazon compliance and file a complaint. We were literally getting those nonstop. We were shut down. We were suspended for almost the entire month of July because trademark complaints from one company and uh, and did you have an agreement with one of their distributors so that it was legit? Listen, not only did we have a legit distribution agreement, we were platinum partners of that brand’s on, on program. So like, you know, we’re authorized to buy it wholesale from distribution and resell it, but also on that brand’s website, at their corporate website, they have like a, a reseller alliance program that you can join. We were like a platinum member of that, so we’re completely allowed to sell the product.

Fred:                                     [00:29:28]               And when they first started filing all of these trademark infringement cases at Amazon, I reached out and I said, hey, there’s a mistake here, you know, um, not only are we buying authorized product from your authorized distributor that you have authorized us to buy from, but we’re a part of your actual partner program at the brand level. And their response back to me was, yeah, yeah, we realized that you’re not violating our trademark at all, but we’ve got multiple product detail pages showing up for the same products on Amazon and we’ve asked Amazon to merge them but they won’t merge them. So the only way we can clean up the listings is to file this so that Amazon will delete the Vac.

Stephen:                             [00:30:14]               No, but thinking about that, because you told me that it was thinking about this to get a, an authorization letter from them, like a lot of the brands that I have, you have to tell you know your store name and your blah blah, blah, give away all your stuff and then you get that authorization letter and then you put that in. Um, can’t you do that or wouldn’t, couldn’t you have done that in this scenario? You couldn’t,

Fred:                                     [00:30:36]               we tried everything. We sent receipts. We sent distribution receipts. I sent a screenshot of myself logged in as an alliance reseller and I got the same frustrating response at anyone who sold on Amazon for very long will understand will you read your appeal? But we can’t, we can’t reinstate you because the brand owner has to do it. Right? So it had to come from the person filing the complaint. They had to ask for the complainant to be removed and they refused to do it. Um, so all of that to say, um, I could talk about that.

Stephen:                             [00:31:18]               Well, it’s pylon. I mean, to me it’s this, this stuff’s piling on your shoulders, Fred,

Fred:                                     [00:31:22]               right shoulders. And so in February 2018, I took a big deep breath. I looked at the trends, I met with a business mentor who looked in the books and looked at the trends and the trends were all down and I made the plunge and sadly I, I laid off and let go all of my employees and I terminated the it agreement with our it company. So on March the first of 2018, I sorta rebooted my company and I deleted. I purged and replaced all of the listings out of Amazon, Walmart, all those marketplaces. I wiped out everything and listed about a dozen skew of my private label and, and the, uh, a handful of, of wholesale flips, you know, that I might buy clearance items or wholesale opportunity

Stephen:                             [00:32:17]               stuff you don’t have to worry about like you worried about. So. So let’s just pause for a second. You go from half a million listings to virtually 25 listings at most. Now, how do you not, I mean, and I mean this is maybe this is where the faith comes in. How do you not give up? How do you not just say, you know what, this is a clue. This is a hint, this is a. and you don’t just give up and move on to another thing. I mean, how do you get through that friend?

Fred:                                     [00:32:49]               Well, because I had, I saw the potential. Okay. I saw, I saw the potential of the private label

Stephen:                             [00:32:55]               because you were dabbling in it.

Fred:                                     [00:32:57]               Yeah. Well it was doing well. So it was actually the profits of the firm. The private label were being absorbed into the failing profits of the mass drop ship model. And I was like, you know, this isn’t, this doesn’t make sense anymore. And one of the hardest things for an entrepreneur to do is let go. Yeah. Uh, we tend to clean and hold on too long and that’s one of always been one of my weaknesses is that I’ve held a property too long, um, or I’ve, I’ve held a venture too long and not passed, passed it on to the next level soon enough. So that’s the, could you,

Stephen:                             [00:33:41]               well, for something here, can you go back and think about earlier, were there clues and signs that you could have, should have listened to earlier? Where did it have to get that far along? I mean, I hate to see you when you ate through your retained earnings, obviously. That’s terrible. What, are there any other clues that looking back and being honest that you should have paid attention to?

Fred:                                     [00:34:03]               Yeah, there were. And uh, but I still don’t know if I would’ve done it differently. Okay. Because I just could not have predicted how awful 2017 was going to be. Um, so many things came together that just made that, you know, I just, it really, it really started nose diving in 2017 and at the end of the day the biggest blow, ironically, the biggest blessing and all of that is that the sale of my business had failed us.

Stephen:                             [00:34:42]               Oh, could you imagine putting it on somebody else? Oh my gosh, gosh,

Fred:                                     [00:34:45]               it would have been dead and they’re local and they’re their brother in Christ and in our church, uh, it just, it would have devastated me to see this happen. And I, at the end of the day, I think that’s why the sale didn’t happen. Both of us were people of faith and um, both of us were praying that if it were meant to be that would work and that we, I wanted him protected as much as he wanted me protected and that’s the way we went into the whole thing. So I’m so glad that that fell apart. So yeah, we kicked that off, kicked that off in 27, uh, in February, March of 2018. And so I began to slowly scale and build my private label business. And some wholesale, um, and I wish that were where everything, where the rain stopped.

Stephen:                             [00:35:44]               Well, there is another store. I mean there’s a big storm, but I just want to stop here a second. The fact that you’ve been able to pivot, uh, the fact that, because Andy slammings always says this, if you’re doing ra, don’t stop doing ra developing pml because pml takes a while to build up, right? You’re going to try a whole bunch of things. It’ll bunch of, it’s not gonna work. And so you’ve really got to get through all that. Don’t stop what you’re doing. So your lesson to me, I mean about drop shipping, uh, cause again, 100 percent outside of your control, all these changes, right? Not For me doing anything wrong. These other businesses are trying to survive. They’ve changed their model. Change are usually CEO change, whatever. All that stuff can change tomorrow regardless of your relationships. But take those proceeds, invest in a long play, right?

Stephen:                             [00:36:28]               Drop shipping wasn’t a long play. What could it be? And you did that and look at the place that you least, you had an option, I guess, right? So I don’t want to miss that, I just think that there’s something so powerful in that part of the story. And then let’s say everything goes rosie from here on out, right? Just nice and easy. Life stays. No, no. So I’m sorry I didn’t want to cut you off. I just don’t want people to miss that. You were smart enough to have retained earnings. You knew it was going to rain. So you had an umbrella and then you invested in something else because you saw the writing on the wall. You heard something somewhere. Whatever it was that made you do that, you did it and found some footing. So I think that that’s powerful stuff for people to hear.

Fred:                                     [00:37:14]               I agree. Let me just throw this in there as a PS. Um, hearing my story,

Fred:                                     [00:37:24]               what tend to make people and already has made some people who have taught to me proclaim that drop shipping is not a viable ecommerce model and I would beg to differ there. It is completely viable in the right parameters. So what would I encourage someone to do it? I did not, if, unless they really could stomach the stress and the risks, but I do believe that there’s immense potential there when when you work with some more niche manufacturers who don’t have 50 people trying to sell it all at the same time where you can control inventory and the relationship, but you don’t have to take physical possession of the product. I think there’s huge opportunity there and that’s still drop shipping. So what I count you know as as I do now, is I do consulting with others what I consult them to hook up. FTP feeds to 25 national well known drop shippers and a bladder. Their Amazon account with a million active listings. Never would I consult them to do that, but I would not say that that whole drop shipping a principal in itself is a dead business model at all.

Stephen:                             [00:38:38]               Would you. Would you say that you’re seeing more companies, especially distributors moving into there to using Amazon as a distribution network, kind of almost drop shipping themselves? Absolutely, and so that to me, that’s what I see. You know, it’s interesting. A whole bunch of people had trouble this year with toys, right? Selling toys, the hot toys, the price goes up and the price didn’t go up as much as people thought because the demand was high, but the supply was able to keep track and I always say that’s just companies getting better and better at had been Tory management because they’re forced to write. They’re forced to will. The same thing happens with these distributors. They’re forced to get that sophistication as their inventory systems get more sophisticated, that gives them capacity and is Amazon makes it easier to, to link up. Um, I just see, I see more of that and that’s definitely something to be cautious. But your advice is, hey, go to the smaller guys because they’re not going to do that. That’s not likely. They’re not going to invest in the resources it would take to do that. Hm. Interesting. Okay. So the pss good and I think it’s really solid and you know, Fred does consulting for a drop shipping if anybody’s interested in that, especially brands. But let’s talk about the next challenge in your life because it just doesn’t end there. You said it. When it rains, it pours.

Fred:                                     [00:40:02]               Yeah. Yeah. So, you know, during this, during this whole season, um, in November of 2017, my getting my dates right. Yeah. November of 2017.

Fred:                                     [00:40:22]               Um,

Fred:                                     [00:40:24]               wow. All this is happening. I get an interesting a call from the leadership at the church where I’m working, where I’ve been serving for you at that point about 10 and a half years. And in a nutshell, I’m pretty much out of nowhere. They let me know in the most gracious possible way that they could, that a, they’re not sure that I’m the right fit as, as their music guy there at the church and they’re thinking about maybe making a change. They want to go another direction. They want to go another direction. I’m basically, you know, uh, just, just some philosophical differences and, and uh,

Fred:                                     [00:41:05]               um,

Fred:                                     [00:41:07]               how, how things would be handled, uh, what they’re looking to, what they’re looking for in their, in their music guy, which was different than what I was providing. So,

Fred:                                     [00:41:18]               um,

Fred:                                     [00:41:20]               at this point, now I’m a, I’m having this massive decision to make because the big it contract that I keep talking about, it’s an annual contract and so when it comes up for renewal, I’m basically committing myself to that mass drop ship model for another year or not. It’s all in, you know, our bust. Um, and I know that that contract renewal is coming up march the first of 2018, so it’s November 2017 and I just find out that the job that I have hope that I would have until I retired again. And keeping in mind to your listeners, that was my full time job. And you had already pointed out that’s where your heart was. That’s where you gave 100 percent, right? That never got cut at the cost of your Amazon business. That is, that is a good, you know, 70 percent of my overall revenue take home, pay and benefits.

Fred:                                     [00:42:24]               I have four kids, a wife, a pretty, pretty, uh, monster responsibility, a lot of responsibility. So now that’s in jeopardy. And so not only do I have to make this massive decision about a business model change and I have that weight weighing over me. Uh, and so, uh, I went with the Council of my business mentor and my wife, uh, who heard thought it was the whole drop ship model, she was so ready for me to be done with it. She’s like, it’s a no brainer. We don’t even need to discuss it, kill it, kill it to your mind. So, you know, we’ve already lost all our retained earnings. Get out while you still can. So, um, I got out and, and then, uh, went through a pretty, pretty awkward year of my life working for the church, knowing that I wasn’t really wanted there and everyday going to work, wondering if that was the week that they were going to let me go.

Fred:                                     [00:43:26]               Um, and so in September of this year, September 2018, that’s when they, you know, almost a year later, 10 months later, after initially telling me that they thought maybe they might make a change, uh, they called me in and said, today’s the day we’re going to make the change. Thanks for your service. Uh, which was pretty brutal. Um, you know, seeing how that, other than my little side hustles and ecommerce and whatnot, that was the only job that I had had since college. It was my life. It was my identity. That’s hard for guys, especially because you defined yourself by that, right? You were the guy. Everybody knew you, like you said, you probably didn’t know everybody, but they all knew you. Right? And, and, and they made it abundantly clear that there was no negligence. There was nothing immoral or wrong. I hadn’t had a matter of fact, all of my employee evaluations had been meets or exceeds expectations every year. Um, it was, it was just a, a philosophical change in direction musically. And I would say probably culturally and even appearance wise, uh, that they wanted to take a. and you know, so

Fred:                                     [00:44:47]               that was tough. That was tough to recover. My thought when all this happened is because at this point I know the timeline gets confusing, but you think that I let all the employees go and I, and I restarted my business in March 2018. Okay. Well to do that I had to lower my business salary dramatically because I went from doing a half a million in sales a month to do an 15,000 sales. All right? So I lowered my salary a lot. We made some, some pretty drastic cuts in our personal budget, but I still had the church salary and I’m thinking, you know, I’m going to build this up back to, to the level of salary that I had before I cut everything. I just need time. Yeah. I just need time. And, and then to make that even worse, my, you know, it wasn’t happening fast enough. And then my real safety net, which was the job the church got snatched out from under me and September. Uh, so at this point, you know, you’re, you’ve got a whole lot of trust and a whole lot of prayer and, and a whole lot of grit too.

Stephen:                             [00:46:02]               You said something to me in Atlanta that really struck me and stuck with me is that you really had to make a go of it. Yeah. You had no choice but you had to make a go of it. Do you think, I mean, because you had fire in it, you, you, you were trying to outrun the drop ship business. I get that, you know, with the private label. But if the church didn’t make this change, do you think you’d be as far along as you are now because you’re having really a lot of success and it’s clearly you are driven. I mean, I, I, I saw it in your eyes.

Fred:                                     [00:46:34]               You’re 100 percent driven. You have to be driven man. Right.

Stephen:                             [00:46:38]               Do you think if that had not changed, do you think you would be?

Fred:                                     [00:46:41]               No, not at all. Okay. Now, no way. I’m at the end of the day, I was comfortable and uh, I, I was comfortable.

Stephen:                             [00:46:50]               You were comfortable. Were you complacent?

Fred:                                     [00:46:52]               Yes, absolutely. I was comfortable. I was complacent. I’m somewhat on autopilot a so I’m not faulting anyone.

Stephen:                             [00:47:01]               No, no, no. I get it.

Fred:                                     [00:47:04]               Um, and uh, uh, I would have never, I would, I would have never been able to. I’ve been able to double my business in three months and now that’s still not quite enough. I need to, I need to double it again to get to the place where I, I’m covered. Blackout was in the beginning. I want to get back to the place revenue wise where, uh, the amount of salary I had working at the church combined with the salary that I was taking as the owner of the company prior to changing the business model. Um, that, that’s my goal and I hope to be there within a few months.

Stephen:                             [00:47:47]               Well, you know, that this is where the story goes to some uplifting stuff. All right, so we, we really took it down there and I appreciate you. I know this is all very sensitive to you and like you said though, there’s an all outside of your control. You did nothing wrong. And the church is going a different direction. They’re under challenges, let’s face it. They’ve got massive challenge every church does. And so they’re trying to figure it out themselves just like that company is. Absolutely. But what’s so cool to me is that the optimism in your voice, the encouragement that I think you would offer to others, there is life after change if you do the work.

Fred:                                     [00:48:28]               Exactly. Yeah. You can’t sit sit in the corner and suck your thumb. And I think I was telling you and honestly I meant to look this up and I just dropped the ball there. I didn’t do it. But, uh, Ryan after this happened, right after it happened, maybe a few weeks after it all happened. And Man, am I ever going through the stages of grief. Um, and that’s the best way. There are. Counselors will say there are very defined. I’m predictable stages of grief for someone that goes through a deeply grieving experience like losing a spouse or a child. Um, and man am I ever going through that, I’m still going through it. But it was with the help of some counseling, I was able to identify and really see very clearly I was in the middle of that and in the end just so fresh raw into it.

Fred:                                     [00:49:23]               Um, I was listening to Pat Flynn, smart passive income podcast, and he had a guest on, I just wish I had looked it up. It wasn’t, it was in December, I believe, or maybe November. He had on a guest who went through an equally challenging situation. He was a very, very, very well known radio personality, podcasts, radio personality, and through some crazy set of circumstances, his own business partners kicked him out of his own company and he was the brand. He was the brand. Um, and they kicked him out of his own company. Somehow they had the controlling interest to make that happen. I don’t know the whole story, but it was, it was pretty devastating. And this is something he built. That was his baby. And uh, he was kicked out of it pretty much overnight. Um, and, and he was so inspiring and he basically sucked his thumb in the corner for a couple of days. And then he got his button here and he’s killing it. He’s just crushing it. Jordan harbinger’s isn’t him that looked it up. I had to look it up because he got me intrigued. Jordan harbinger, you gotta listen to that episode. I’m going to make a note in the book market because it’s not. When it’s changed coming. I mean it’s not. That’s when change comes.

Stephen:                             [00:50:52]               Well, let me ask you this because I think this is important. You liked me, Steve, you defined yourself by your job. That’s a normal man thing to do. First Time you meet you. Hey, what do you do for a living?

Fred:                                     [00:51:03]               Right? Right. Do you, did you,

Stephen:                             [00:51:07]               do you define yourself by your failings? If some people do.

Fred:                                     [00:51:16]               What’s so hard about this is it’s outside of your control. I’m trying to learn not to define myself at all. Yeah, yeah. No, but

Fred:                                     [00:51:26]               I would say that these failings have had immense value. Is it a John Maxwell, I think called the tools. You said that failing forward. I think this John Maxwell, I’m a book called failing forward, you know, and you set yourself up for failure now and then you, you don’t want fail fairy failure, you know, never try to put yourself in a position where you’re going to have fatal failure, but failing forward, making those mistakes, skinning up the mne and learning from it, you know, you think about a, played a little guitar every now and then and I don’t play consistently enough and when you win, you don’t play enough. You lose the callouses on your fingertips and when you start playing the guitar again, um, it hurts. It’s painful and, and you get these groups and these, these raw marks on the end of your fingertips. But if you stay with it, they call us over so that you can just play and play and play. And that little bit of pain actually brings value so that you can push the strings down against the fretboard harder when you need to. Um, and that’s part of failing and failing forward, do I, do I identify myself? I try not to do it by what I do for a living anymore, and I try not to do it by my failure. I try to do it by who I am, you know, who I am and what I’m passionate about and who I try to be on a daily basis. And uh,

Stephen:                             [00:53:00]               it’s not about money, it’s about love, you know, it’s funny and it’s weird for guys to say that and it’s hard for guys to say that, but 100 percent that family have for your wife who stuck with you and supported you and did all those things, that community, that church you’re still probably a member of because he lived there. Right? And I mean, all those people, um, that’s, that’s who you are. Right? And uh, you know, I’m reading his John Maxwell’s quote, fail early, fail often, but always fail forward. Yeah. Sorry, you were saying something. I apologize.

Fred:                                     [00:53:34]               Uh, no, I, I don’t remember what I was saying. It, it just, uh, yeah. I want to be remembered. You think about, you think about the eulogies. You hear when you go to a funeral as a music minister. Believe me, I’ve done hundreds of funerals and they never go on and on and on about your business success. They just don’t. You just don’t hear it. You might have mentioned, but what you hear is what kind of husband they were, what kind of dad they were, what kind of grandfather they were. You hear the memories, you know, as clergy. When we would meet with a grieving family and prepare for a memorial service, one of the things we would do is tell me stories, tell me stories about your loved one because you wanted to lighten up the mood and tell some of those stories in the service and it was never a. He worked until [10:00] and built a seven figure business. That was never the story. It was always, you’re a member of that time. It was always memories spaced about those good times and that’s how I think we should strive to define ourselves so that we’ll have more of those on the board than any of our success or failure in business.

Stephen:                             [00:54:48]               Oh my goodness. You know, I was sitting here thinking about this because usually I close with, you know, let me give advice in this and that, but I think I want to ask a different way this time and I’ll put Fred’s contact in there and you really should go listen to his previous episode. It’s episode one 74 a couple of years ago and I remember you talking about challenges that were coming up outside of your control then and look at what it’s done now. And so it’s very interesting. But I think the thing that I’d like to close with is this, you know, designing a business now you’re designing with a desired profit in mind regardless of sales. Correct? Correct. Where in the past you might design it, revenue, revenue, revenue, revenue, period. And so I guess could you talk a little bit, just a verse or two about that and how that’s so different for you now and your approach to it maybe, and maybe others could too.

Fred:                                     [00:55:47]               Yeah, absolutely. Um, I’ve always known this, we, anyone knows this, but we forget quickly that the allure of big sales numbers is deceiving. Um, I’m married to a very grounded, practical, call it like it, his wife, I love her. It was her birthday this week. Have you burned happy birthday? Um, and when I’d come home and say, baby, we did $220,000 on jet this week. She like, well, how much of that are you keeping the voice of reason, right, right. She always thought that way and I didn’t think that way enough. And uh, so I think that it’s more important than ever for people in business and especially in ecommerce business to know their numbers. I like watching the reality show, the profit. Marcus Lemonis, he, you know, he always gets onto the people when they don’t know their numbers, know your numbers. I mean don’t just know what your sales figures are, really know your numbers and your margins. And the thing that I would tack on top of that is multiple streams of income, multiple streams of income, multiple streams of income. Don’t just rely on Amazon. I wouldn’t even say don’t necessarily even relies solely on private label or if it is private label, don’t just have. I’m consulting with a client who has one product, one product and it’s, it’s crushing it, crushing it on Amazon, right? But, but it’s just one product. If someone for some reason comes and shuts down that one product, it’s all over.

Stephen:                             [00:57:36]               And the reason it could be is something so arbitrary. They find arsenic in it, you know what I mean? Whatever. I mean something outside of your control.

Fred:                                     [00:57:44]               So, so for me, you know, I’m looking at a bottom line. I’m like, I’m looking at, you know, for, for us to live the lifestyle that we want to live. That includes providing for the basic needs of my family and then above that, you know, having some luxuries and then more as important as any of that is I always want to give back. I always always want to give again, I’m a person of faith. I think when you give, it opens that door of blessing so that more will be given to you. A parable in the Bible about the one, the ones that have some more will be given to them and the ones that don’t, they want. So, uh, I take a look at that and I try to form a strategy on how am I going to get here and man, when I’m drawing that out on the board right now, it’s multiple streams of income. It’s private label, it’s consulting, it’s some wholesale flip. I’m really, uh, still I don’t work for the church anymore, but I still designate a certain schedule of hours of my most creative time early in the mornings as a piano artist, musician, uh, putting out recordings and a podcast. All of that is revenue generating and in this day and age that we live in, it’s just if you had the mains and the capacity to pursue your, your gifts and your passions to create as many income streams as possible, it’s just safer that way.

Stephen:                             [00:59:09]               So we’re gonna end it here. Um, what, to me, a couple of little takeaways I’m going to take is that you’re still involved in your calling, which is music ministry and you’re still able do it. You’re just doing it in a different way, digitally smart. You still get to do it on your terms. You get to decide, I think that that’s phenomenal and you’re not getting somebody else’s, you know, it’s, you. Second is the rebirth done though, kind of strategically, and maybe you didn’t know it. Maybe. Maybe it was just a nudge, a gentle nudge as we like to say and faith, but you had it and look at what it’s been able to do for you and there’s no doubt in my mind that you’re going to have the success. And I, I applaud you as a guy, um, and as a dad, um, you know, for putting your family first and making sure that you know, you provide in the right way and not given up. And so man, Oh man, that’s a tough one and I appreciate you being so honest and open because that’s just can’t be tough to tell. So I wish you nothing but success. The best year of your life is this year and I can’t wait to hear how well it goes. Thank you.

Fred:                                     [01:00:18]               Thank you so much man. You’re a your podcast as an inspiration and it is at the top of my list of podcast that I listened to ecommerce podcast. So keep me episodes coming on.

Stephen:                             [01:00:29]               Take care. So that was a tough story. But man, what a great guy. What a phenomenal guy. And how could you not be inspired after hearing that? How could you not work a little harder? How can you not stay an extra half an hour? Get into half an hour earlier? How could you not have a b plan? Have a c plan. Do you have a beat plan? If you do not, you really need to address it. Now is the time. Don’t risk it all. And seven, you know, don’t throw it out there because you’ll get it. You’ll hit it seven. But then when you don’t, you don’t. So please, you know, take heart in this and listen again. Um, you know, you can do everything right? And then something will happen to you and you don’t want to be in that position. So hope yours is byard is I am. Reach out to me if I can help you in any way. ECOMMERCE momentum.com. Take care.

Cool voice guy:                  [01:01:16]               Thanks for listening to the momentum podcast. All the links mentioned today can be found at incomers momentum. Doug, come under this episode number. Please remember to subscribe and like us on itunes.

 

Stephen-Peterson

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