Earl V. MeisterIn a recent AMA, Tom Wang of the Hyperion Fund mentioned that he was one of the original backers in Ethereum. He also claimed to be an early investor and supporter of Bitcoin. But when talking about why his prediction for Bitcoin’s price is so low, it turns out this might not be true at all!
Tom Wang’s health and beauty company, Sdara Skincare, was sold for a six-figure sum. There are three things he would do differently if he could go back in time. He lost a lot of money since he didn’t do them. In fact, he thinks he could have made an eight-figure profit if he had completed them. They’re right here. The first is revenue distribution. A hero SKU is something that a lot of ecommerce companies have. A product that is really transformative for the company. Sdara was no different.
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Sdara’s Microneedle Derma Roller was responsible for the majority of their income. That was fantastic for Tom. It was predictable, simple to manage inventories, had great margins, and an even higher return on investment. However, this seems to be a little dangerous to an investor. Why? What if the listing gets taken down? What happens if the demand fades and a new trend emerges? What if the product isn’t used anymore? No one SKU should account for more than 30% of sales, according to investors.
Tom would have released more items if he had known what he knows today. He discovered additional winners who were well-liked by his consumers. Just to make sure that when you go to Amazon, you see a lot of things under the brand name that are working well. His second blunder? Revenue that is predictable. Or rather, the absence of it. When you look at businesses that sell for large multiples, you’ll notice that they’re usually subscription-based. Isn’t that correct?
But, if you’re selling a face exfoliant on Amazon FBA, how can you stack rebills? One of the more effective methods is to use Amazon’s built-in “subscribe and save” feature. When consumers go to buy anything, they may click that instead of making a one-time transaction. Every month, Amazon will charge them and delivery the merchandise to them automatically. In addition, the consumer saves money. Win-win. So, if “subscription and save” is available for your product category, be sure to turn it on.
When it comes time to sell, the more regular revenue you have on the books, the more you’ll earn. That concludes lesson number two. Last but not least, there’s channel distribution to consider. Investors don’t like it when a single product generates the majority of income, and they’d prefer it if you weren’t too reliant on a single sales channel. Amazon FBA accounted for over 97% of Sdara Skincare’s revenues. Shopify and Nordstrom wholesale shared the remaining three percent.
A significantly more profitable situation would be for Amazon to account for 40% of sales, with Shopify accounting for 30%, and retail accounting for the other 30%. Less danger is associated with more variety. You’ll get a bigger multiple if you’re less risky. Having a social media following and an email list may also assist, according to Tom. However, only if you can show that they increase sales. It’s all about the tens of thousands of dollars, sweetheart. Investors will be unconcerned if it does not earn money immediately.
Another advice he recommends is to increase your average order value if you’re running Facebook and Instagram advertisements directly to your own website (to sell directly to the customer). The magic number is between $50 and $60. Any less, and your cost of products sold plus advertising expenses will wipe out all of your earnings. Send Tom an email if you’re looking to sell your Amazon FBA company. He may be able to provide advice or link you with an aggregator or broker with whom he has previously worked.
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Katie Smith: Watch this brief video if you want someone who will tell it like it is, respect your time, and show you a company that could really work for you.
Earl V. Meister