Six-pack abs sell. (Photo: San Diego Shooter)

Once or twice in the past, I have referred to “someone” who has earned $5,000,000-$10,000,000 per year with e-books and cross promotion.

For that, I should apologize, as it’s not accurate: his numbers are now closer to $1,000,000 per month, and “e-book” doesn’t begin to explain what he does. That someone is named Mike Geary. He prefers to keep a low profile, skiing powder and refining his “muse,” or automated business, to a precise science. From strategic customer service in Germany, to testing for trending, it’s all piece of a well-planned puzzle and well-oiled machine.

For the first time, this post will explain how he built his business, some of the key lessons learned, and common mistakes with digital products.

As you read, keep in mind two things:

- He is, without a doubt, considered one of the smartest online marketers and traffic buyers (a key differentiator) in the world.
- He started off knowing nothing and got there through intelligent testing.

As Thomas J. Watson, founder of IBM, is famous for saying: “Nothing happens until someone sells something.” Planning is valuable, but–long-term–it’s your ability to improvise and adjust that makes the difference.

Enjoy…

Enter Mike Geary

Can you describe your muse?

My “muse” (i.e. business) is composed of three main components:

1. I sell a fitness information product called “The Truth about Six-Pack Abs,” which has sold more than 500,000 copies since 2005.
2. I publish a fitness and health newsletter to about 680,000 subscribers (with subscribers in almost every country), and have built a large content based website that goes along with this fitness newsletter.
3. I act as a media buyer, purchasing large amounts of traffic (mostly in the fitness/nutrition niche) that I funnel to a few select partners. This allows me to become integrated into several other large fitness and nutrition businesses (they promote my product extensively on their backend) since I act as a very large source of their overall traffic.

What is the website for your muse?

My main website, which has the sales process for my “Truth About Six Pack Abs” product, is: www.TruthAboutAbs.com

[Click here to see an affiliate landing page, click here to see the standard non-affiliate/PPC landing page]

How much revenue is your muse currently generating per month (on average)?

The business as a whole (all three components listed above) generates just shy of $1 million in revenue per month. Total revenue for last year was approximately $11 million.

While the financial freedom that this business has created has been amazing, it’s also been very rewarding to receive thousands of emails in our support center from customers who have literally changed their lives with the help of my fitness advice. I still get chills when I read a glowing email from a customer that has lost 100 lbs with my program, totally changed their confidence and energy, and just overall changed their life! So cool.

To get to this monthly revenue number, how long did it take after the idea struck?

To be honest, I was a little slow in learning marketing and building the business, so it took me about five years to get to those numbers. About two years into this venture, I was finally making about $50,000 per year with the online business. As I explained above, growth exploded once I quit my corporate job, and my earnings increased about 10x the following year. Growth in following years went to $3.6 million, then $6 million, and finally $11 million in annual revenue.

How did you decide on “Truth About Abs”?

It was simple really… A mentor told me to follow what I’m most passionate about, and that passion was fitness and nutrition. I can talk all day long about fitness and nutrition, so why not do what I love?

I initially bought an information product that was about $300 (a big investment for me at the time) from a marketer named Ryan Lee. The product was all about teaching fitness professionals how to build a more successful business, particularly online. To this day, I still give Ryan credit for being the guy that got me into this career and changed my life. Thanks, Ryan! [Ed: The product Mike is referring to is no longer available. For those interested, this course covers similar content.]

As I studied Ryan’s course, I thought about my ideas for a potential information product. Working as a personal trainer, I knew that about 90% of the questions I got from clients were always about “six pack abs” or getting a flatter stomach. I also knew that there was a load of crap out there on the internet and on TV infomercials for all sorts of garbage like ab machines, belts, and worthless pills. Finally, I’d seen a ton of bad exercise advice floating around online. That was where my initial idea for “The Truth about Six-Pack Abs” came from. Little did I know that the idea would eventually become such a phenomenal success!

What ideas did you consider but reject, and why?

As crazy as it sounds, “The Truth about Six Pack Abs” was my very first idea, and it’s been the product I’ve continued to focus on throughout the years. I haven’t strayed into other businesses or distracted myself from the product that I knew would be a best-seller. I wanted to keep my focus on one main product. With that said, I do have a couple other products that sell okay, such as my skiing fitness product (AvalancheSkiTraining.com), which I produced solely because it was a labor of love. But to this day, the “Truth about Abs” product remains my bread and butter.

How did you get started? What ultimately lead you to your current lifestyle?

I started my internet business in 2004 because I had become fed up with the time and freedom constraints that came with my old 9-5 corporate lifestyle. My main goals in designing my “new life” were:

1. To build more time freedom into my life. I desperately wanted to design my new life with much more free time to enjoy my hobbies, friends, and family. This “time freedom” was actually a higher priority for me than the financial rewards of starting a web-based business. And this may sound funny, but I also had a goal to eventually NEVER have to wake up to an alarm again (aside from traveling). I despise waking up to an alarm!
2. The ability to travel as much as I wanted, to anywhere in the world, with no financial or time constraints.
3. More financial security for myself and my family.

When I set these goals back in 2004, I was basically working three jobs. I worked an engineering consulting job from 9-5 at an office. I also worked 15-20 extra hours per week as a personal trainer at a local gym, and I was attempting to build my online fitness business.

From 2004 to 2006, I made consistent but SLOW progress on my internet business. By the end of 2006, the internet business was making just as much money as my corporate job. I quit my corporate job in January 2007, and never looked back. Quitting my job at that critical point in time was the best decision I could have made as that freed up the time I needed to dedicate solely to my internet business, which started to boom in the months that followed.

Within another year, my internet business grew into a 7-figure annual business and, eventually, an 8-figure annual business in revenue.

It may have taken a few years to achieve, but I eventually successfully reached all three of those goals… time freedom, ability to travel anywhere/anytime, and financial freedom. Oh, and — except for when making flights — I haven’t had to wake up to an alarm clock in over four years now!

What does your daily/weekly routine look like? Where do you live and what does your lifestyle look like?

It has really been a dream come true. After I quit my corporate job in 2007, I moved to the mountains of Colorado and skied almost every day that next winter. I don’t ski every day anymore in the winter (I’m more picky about the ski conditions now), but I never ever miss a powder day. For those who aren’t hard core skiers: a powder day is like the holy grail of skiing. If you love skiing, you never want to miss a powder day!

In the summer, I do a lot of hiking, mountain biking, and other outdoor fun. And because of my time freedom, friends and family can come out to visit me anytime in Colorado, so I love to host friends and act as a tour guide.

As for traveling, my girlfriend and I now travel at least 10-15 days every month. We’ve traveled to dozens of countries and done all sorts of fun stuff, like heli-skiing in Chile, ATVing and ziplining in Costa Rica, dry suit scuba diving in the Silfra Ravine in Iceland, and tropical scuba diving throughout the Carribean. We’ve also traveled extensively throughout Mexico, Central America, South America, and lots of islands! We plan to do more traveling through Europe and Asia soon.

When I travel, I still work on my business about 1-2 hours per day. That’s what I’ve decided personally is a good schedule to allow me to enjoy traveling and still keep up with my business. When I’m not traveling, I basically allow myself complete freedom of schedule. Some days I’ll feel like I’m “in the zone” and just work all day long, maybe 10-12 hours or more. Other days, I might only work two hours and enjoy the rest of the time doing fun outdoorsy stuff, going to a nice dinner, or golfing with friends.

What were some of the main tipping points or”A-ha!” moments? How did they come about?

In the very beginning, I had this foolish idea in my head that this flood of people would automatically rush to my website, buy my product, and I’d be a millionaire within months. Reality struck when I had a whopping 5 visitors to my site in the first month. At the time, I didn’t understand that you actually have to DRIVE traffic to your site, as people won’t just magically find you.

After about six weeks of having my site “live” and still having yet to make a single sale, I started to get discouraged and thought that this whole internet marketing thing just didn’t work. Then I had a tipping point: I got my first sale! But when I looked at the details of the sale, I noticed that the buyer was one of my mom’s good friends. I had to laugh, but at the same time, it gave me the motivation to push forward, as I saw that the website could make sales if I just produced traffic.

The next tipping point came about 18 months later when I started playing with Google Adwords, and learning how to purposely drive traffic instead of just hoping people would find the site. I’m very technically minded, and Adwords is a numbers game, so that fascinated me. Within a couple months, I started learning how to split test ads, find what converted best for my site, and get massive amounts of traffic for reasonable prices (at least reasonable enough to break even, or make a small profit on the front end). Running a massive amount of traffic on Adwords and doing lots of testing taught me how to buy traffic in other places too, beyond Google’s network.

Another big tipping point came in early 2007, when I finally put my product on the affiliate network, Clickbank. The biggest thing that I did was set my affiliate program apart from the crowd. Here’s how…

At the time, I noticed that most vendors on the Clickbank marketplace were only paying affiliates 35-50% commissions. Even the highest paying vendors were paying 55% to 60% commissions max. To some, that might seem very generous. But at the same time, we’re selling digital products, so we don’t have as many overhead costs as with a physical product and can be more generous.

I decided to be OVERLY generous with affiliates and truly set myself apart from the crowd. Instead of the normal 35-60% commissions, I set my commissions at 75% (which is the maximum percentage you can pay to affiliates in Clickbank). Immediately, this made my product more lucrative for most affiliates than other products that were paying lower commissions. I had hundreds of affiliates shift their traffic to my site instead of some of my competitors. Within a couple months, I jumped up to one of the best selling products on the entire Clickbank marketplace, out of more than 10,000 products.

[Tim postscript: As Mike mentions in the comments, this means:

"For a clarification on revenue, the way that Clickbank works is to take the processing fee and the affiliate fee out before the revenue ever flows into my account, so that $11MM 'per year' actually did not include gross sales numbers. With gross sales, it would be more around $20MM-$25MM per year, I’m guessing."]

Within 6-12 months, most other top selling Clickbank vendors followed suit and switched to 75% payouts. Currently, as a vendor (product creator), if you pay affiliates any less than 75% (as that’s now the standard), it’s very hard to be competitive, because most affiliates will only promote products that pay 75% commissions.

Some vendors still have the wrong mindset and can’t stand the idea of the affiliate making more per sale than they make as the creator of their own product. That’s foolish, however, because the math is simple: would you rather get 10 sales and make $30 per sale ($300), or get 1,000 sales at $10 per sale ($10,000)? Better yet, how about 500,000 sales at only $2 per sale in profit ($1,000,000)? The answer should be obvious. The more generous you can be with affiliates and other business partners, the more sales VOLUME they can send you, especially if they’re buying traffic and incurring that cost. Plus, there’s more backend revenue potential with a higher volume of customers.

The above was a huge takeaway for me, and it led to the development of two priorities that are still at the heart of my business today:

1. Treat my customers like gold. Without happy customers, any business will eventually die. I wanted people to get RESULTS! I don’t just want to sell them some fad or gimmick that doesn’t work.
2. Treat my affiliates (and other business partners) like gold. Going above and beyond while being overly generous with business partners and affiliates effectively jumpstarted my business success. In fact, in additon to being one of the first vendors to pay affiliates 75% commissions, I was also one of the first vendors on the Clickbank marketplace that started to reward affiliates that sent over a certain number of sales each month with bonuses up to 85% or even 90% commissions. The additional percentage points had to be paid manually at the end of the month as a bonus.

What resources or tools did you find most helpful when you were getting started?

I remember buying lots of low priced marketing e-books about search engine optimization (SEO) and pay-per-click (PPC marketing). Those e-books that I bought 5-6 years ago are mostly outdated now, given the techniques change so rapidly. Regardless, the benefit was that I learned how to use both SEO and PPC and stumbled onto new discoveries as I worked with both.

What were your biggest mistakes, or biggest wastes of time/money?

A couple that I can think of right off the top of my head…

I got approached once to buy an “email drop” in a list that supposedly had 5 million names. The list was apparently built through credit card surveys or something like that. I think it only cost $600 to run an ad to this list, so I thought it HAD to be a winner, and I tested it. I ended up getting 1 sale ($40) from that $600 test. Even with a list of 5 million names, that list was basically worthless since there was no relationship, and it had been built solely from credit card surveys. Compare that to a JV (joint venture) partner who has a great relationship with their list. We’ve had some affiliates get hundreds of sales from relatively small lists of maybe 10,000 emails.

I know that buying “email drops” can sometimes work (and I’ve made other successful ad buys in newsletters), but you have to know exactly how the list was built, if it’s maintained regularly, and if it has a loyal following. Otherwise, it could be a garbage list.

Another failed test was a direct mail postcard we tested. The whole campaign cost me about $30,000 to implement (postage costs, postcard creation costs, copywriting, list rental, etc). It seemed like a viable test as I had friends that had moderate success with direct mail pieces before. The postcard tried to get the user to go to a website from the postcard and purchase our fitness product. It backfired big time, as we only made back about $3,000 out of the $30,000 investment in the test. A 90% loss to the tune of $27k… No fun.

Now, I’m not saying that a postcard-to-website sales process can’t work. However, in our example, we obviously had a big missing link to the puzzle and it just didn’t produce sales. I think it’s a trickier process than someone who’s  coming to your site after clicking on a PPC ad or banner ad.

What have been your key marketing and/or manufacturing lessons learned?

I haven’t manufactured any products, so I can’t comment on that. As for marketing, my biggest lessons (as mentioned above) were being overly generous with affiliates and paying them every possible penny that I could. This is the only way to be competitive with affiliates: to be the business with the biggest payout to them. Even if you have to pay affiliates 100% of your front end revenue, at least you know that you obtained those customers without incurring a loss (which doesn’t happen with every type of advertising), and now you have the opportunity to build a long term relationship with those customers and sell them your other products in the future.

Another key marketing lesson I learned is that when buying traffic, be prepared to not make any profit on the front end. Sometimes, in order to compete with other advertisers, you need to be willing to take a small loss on your advertising spend in order to bring in lots of customers. You just need to be careful to know your backend numbers (average future revenue amount per customer) well enough to ensure that your front-end losses aren’t so steep that you can’t make back the advertising loss after a certain period of time.

Any key PR wins? Media, well-known users, or company partnerships, etc.? How did they happen?

I’ve had various radio interviews, and had content picked up by popular websites, blogs, etc. However, some of my best relationships have been companies that I’ve partnered with on media buying (think AOL, MSN, etc.) Spending a boatload of money with certain big companies, and building a long term relationship with them by advertising for years has resulted in special deals for cheaper traffic. If you think about it from the publisher’s perspective, it helps to save them administrative costs by dealing with fewer advertisers, so sometimes I’ve been able to get better deals by agreeing to large contracts upfront. Another advertiser might only buy 1-2 ads, instead of the 50 ad placements that I would buy.

Where did you register your domain (URL)?

GoDaddy.com

Where did you decide to host your domain?

I host with a company called Rackco. It was just a referral from a friend at the time, but I’ve stuck with them for years.

If you used a web designer, where did you find them?

The only thing I had “designed” was my cartoon based header graphics. Again, this was simply a referral from a friend, and the guy I used was a talented cartoon designer named Vince Palko. I’ve also heard that 99designs is a great place to get designs.

Do you have any employees?

I have customer service representatives in a few different countries and major markets. Specifically, I have one person in France, one Swiss for German translation help, an English-language affiliate support rep in Trinidad (he also handles Spanish translation), and one German-based woman who handles German affiliates. Finally, I have a webmaster who helps with site maintenance.

If you were to do it all over again, what would you do differently?

Nothing. I’ve learned so much, even from my mistakes, and everything has happened for a reason.

What are some common mistakes when buying media/traffic?

The most common mistake is not letting enough traffic flow to see true trends. Some people shut down their campaigns after only a couple hundred clicks thinking that it won’t be profitable, but they haven’t let it run long enough to see for sure. For example, a newbie might shut down their campaign after only 500 clicks and 1 sale. But what if they would have made 3 sales in the next 500 clicks, for a total of 4 sales in 1,000 clicks? Data can be pretty variable when you’re still under 1,000 clicks. I generally test an ad for at least a couple thousand clicks. However, keep in mind that I deal mostly with the fitness and nutrition niches and they require high volumes of clicks to see true data.

Another big mistake is not split testing enough variations of ads. Many advertisers give up on losing campaigns after testing only a couple ad creatives. However, I’ve found that simple modifications — such as a one word variation in a headline or a slightly different image or background color — can be the difference between a losing campaign and a profitable campaign. In some instances, I’ve used the exact same ad text combined with slightly different pictures and seen DOUBLE the click-through rate (CTR).

The last mistake is also very common: most advertisers aren’t willing to lose money to find what works. I EXPECT to lose money the first time I test a campaign. Then I tweak the ad copy, offer, etc. based on our testing results, and we see if we can restart the campaign a second time and make it profitable based on what we learned [i.e. what lost the least money, etc.] For example, if I do a $10,000 traffic buy test on a new website that we haven’t worked with before, we’ll usually only make back maybe $6,000 to $7,000 for a net loss of about $3,000. But we also usually learn that one of our ad variations performed MUCH better than the others, and we can work with that specific ad from that point forward and possibly negotiate lower rates. Sometimes we find that the numbers are too far off to work in the future, so we just decide to cut all ties with that particular website and not buy traffic from them again if they can’t offer lower rates.

Any tips for Facebook media buying? Common wastes of money or newbie screwups?

The three mistakes that I listed in the previous question apply to buying Facebook traffic, as well. I’ve found that the most important aspect of Facebook ads is the image, so it’s necessary to test at least 6-10 variations of images for each ad. The image attracts the eyeballs first, then your headline needs to finish the job and get the person to click your ad. One thing I’ve found is that images that have done well for ads on other sites may not always be effective on Facebook. Each site is unique with its style, colors, and layout, and I’ve been surprised by some images that work well on Facebook and others that don’t.

One common mistake I’ve seen with people buying ads on Facebook is paying WAY too much per click. In my experience, you almost NEVER need to pay the recommended bid amount that Facebook displays when you set up your ad. For example, I’ve set up ads where the recommended bid amount was $1.12 per click. I’d bid $0.30 cents instead, and would still be able to get large amounts of traffic (assuming that I was able to get a high enough click through rate on the ad). In order to pay a lot less than the recommended bid price per click, you need to get an above average click through rate, so it takes good ad copy, good images, and the right targeting.

If you had $5K to start media buying, what would you do right now, assuming all sites/platforms (e.g. AdWords) were available to you?

The best quality and cheapest traffic is available on Google’s content network. That’s easier said than done, as Google is currently very picky about what offers they will allow to run. In certain industries, it’s not even worth trying anymore, because Google won’t allow some types of websites to advertise at all. But if you are advertising in an industry that Google still accepts, the content network is wide open, and it’s the cheapest source of quality traffic available in most cases. It’s also one of the highest volume traffic sources available (along with Facebook), but in some industries, the Google content network can be easier to advertise profitably compared to Facebook.

Sometimes you’ll hear marketing “gurus” say that the search network is better quality traffic than the content network. This is false, as it’s industry specific. In my case, I spent over $5 million advertising on Google over the years with fitness and nutrition products, and I can say without a doubt that content network traffic is MUCH cheaper than search traffic, and converts even higher than search traffic in many cases.

What would you do if you had $20K to start media buying?

At this spend level, you can do test campaigns on nearly any major website, as most major sites require test campaigns of around $5k to $10k minimum to get started. We’re talking about big news websites, politics sites, weather sites, and major sites like Yahoo, MSN, and AOL. From my experience with media buying, testing is all that matters as it’s hard to compare CPM rates from one site to another, since placement locations, sizes, etc. are all different. For instance, I’ve had CPM campaigns that were profitable on some sites at super high rates of $6.00 CPM or more, and on other sites, a price as low as $0.50 CPM resulted in a loss. You never know how an individual site will perform until you test.

The usual steps for a media buy on a large site are:

1. Run $5-10k test campaign (most times, initial test loses money). Smaller sites accept much lower test amounts.
2. Optimize the ads that performed best and delete the ads that performed worst.
3. Negotiate a lower CPM rate if the publisher can go any lower (sometimes they can, and sometimes they can’t go lower — depends what other advertisers are paying on average and how much inventory they have available).
4. Re-launch campaign when you’re confident that you will be able to profit.

What are your recommendations for developing information products?

Sell the customers what they want, but give them what they NEED. In my market, what people want are six-pack abs exercises. But that’s not what I give them, because that’s not what they need. They need the right nutrition, the right full body training program, and the right mindset to be dedicated to their goal. Basically, I sell six pack abs, but I teach them how to live healthier and adopt a fitness lifestyle in order to lower their body fat for life.

What have you learned about price points?

It’s been really interesting to see some of the testing for pricing. We’ve tested price points for various fitness info products at $29.95, $39.95, $47.00, $67.00, $77.00, $79.00, and $97.00. I’ve found a sweet spot in the $47.00 price point for most online fitness info products that seems to maximize front end revenue and the total number of customers. Lower price points can sometimes bring in more customers on the front end, but the backend marketing plan needs to be solid in order to make up for the lower price (especially if you’re buying traffic and need that front-end revenue to come close to break even on your ad buys).

How have you tried to minimize requests for refunds?

Truthfully, I’ve just focused on producing a great quality product, which goes a long way to reduce refunds. I know that some people are dishonest and will request refunds even though they liked the product. But I feel that, overall, most people are honest and won’t take advantage of someone on purpose.

A surprisingly common scenario for requesting a refund is when people don’t understand that the program is downloadable, even though it’s spelled out on the site. They think they’re getting something in the mail, then request a refund when they don’t. It’s best to be as clear as possible to make sure people understand that this is a downloadable program. This can prevent loads of customer service requests from confused customers. Of course, if you sell a physical product, this isn’t a problem, though shipping and delivery time may be more of an issue.

How do you test for your content pages?

At this point, it’s fairly easy to test the interest in content pages. I simply come up with an idea, prepare the article, and send it to my email list of about 680,000 readers. The open rates of the email give a good representation of how interesting that topic (email subject line) was to most people.

Also, on each content page, I have the social media sharing buttons (Facebook, Twitter, and Stumbleupon). I can guage how much people like a particular topic based on how much social media sharing occurs. I have some pages with over 40,000 Facebook likes and others with only a couple dozen likes.

Best and worst performers? Most unexpected winners or losers?

My best content pages are typically topics that surprise or shock people in some way, or clear up a confusing topic. Take note of the amount of Facebook likes, tweets, etc. on some of these pages below:

Successful example #1: “Are Whole Eggs or Egg Whites Better for You?”

In this article, I surprise people with my arguments as to why egg yolks are actually the healthiest part of the egg, and anybody eating only egg whites is making a foolish decision. This is a great example of the type of information that goes against the grain and shows how people have been misinformed by the media.

Successful example #2: “The Salad Dressing You Should NEVER Eat.”

This is another good example of a content page that shocks people. Before reading this article, a lot of people had no idea that most salad dressings at the grocery store are a health disaster, full of additives like corn syrup, unhealthy soybean and canola oils, etc. People want to share articles like this.

Successful example #3: “Does Canned Food and Bottled Water Increase Your Abdominal Fat Through Hidden Chemicals?”

This is another article that shocks most people, as it teaches them about a rather unknown chemical that they might be exposed to in canned foods and plastics. These types of surprising articles help people to want to share the article with their friends to help protect their health.

And now for an example of a content page that didn’t seem to work that well:

“The Nutrition Benefits of Kale.”

You can see this page got less than 100 Facebook likes, compared to the examples above that have thousands, or even tens of thousands of “likes.” What’s the difference? Well, I think the main difference is that kale is just not a “sexy” topic. People already know that kale is good for you, so there’s nothing shocking in this article. Compare that to the egg yolks article, where most people think egg yolks are horrible for you, and I give an argument to show why that’s wrong. It’s more shocking and therefore something people want to share with friends.

Most common mistakes and/or easy fixes for content pages?

Assuming the content is interesting and well-written, one mistake I see is that people don’t always make it easy for people to share things on their website. For example, they might just have a Facebook like button at the top of the page, but not the bottom. I like to have sharing buttons at the top and the bottom so that people see the buttons right as they finish the article. I think it’s important to have the social media buttons at the top of the page too so that people see that the page has social proof and is popular right at the beginning.

I also think some site owners can use too many sharing buttons, even more than a dozen total. I like to use the “Big 3″ (Facebook, Twitter, and Stumbleupon) to keep things uncluttered.

What’s next for you?

Honestly, I just want to continue simplifying my business more and more as time goes on.

I have plans for a couple new small projects, one of which is an upcoming healthy fat-burning recipe book that I’m working on with a co-author. Other than that, one of my main goals is to maintain my current lifestyle without getting bogged down by too many business projects. I want to continue pumping out great fitness and nutrition content that helps my readers live healthier lives.

###

Related and Suggested Posts:
Engineering the “Muse”: Case Studies, Volume 1
Engineering the “Muse”: Case Studies, Volume 2
Engineering the “Muse”: Case Studies, Volume 3
Engineering the “Muse”: Case Studies, Volume 4

Odds and Ends: Noah Kagan competition results

Thank you so much to everyone who participated in Noah Kagan’s contest! For those who haven’t read his post, Noah made a simple offer: The reader who generated the most profit in two weeks with their new business or product would win $1,000 of AppSumo credit and RT airfare for a romantic candlelit taco dinner in Austin, Texas.

We had some truly amazing entries, and ended up having to split the prizes. Here were the results:

WINNER: Tom from RaceCrowds.com, who made $600 profit in 4 days. Tom ran a sale on his site over the weekend, using many of the tips Noah suggested in the post:

“I basically did a Motorsports version of AppSumo. I did a 50/50 split with my promotional partner and Chompon takes 10%.

Stats from Chompon.com

Total Views: 981
Total Shares: 23
Total Purchases: 6
Total Revenue: $1,350.00″

Runner-ups: Adam Nolan and Russell Ruffino from ultimatesalesfunnel.net. These two made $17,867.64 in profit… “WTF?!” Yes, they did. However, according to the rules in the post, each competing business/product had to be brand new. Their product, while new, was created four days before the contest was announced. Either way: BIG congrats, guys!

All entrants: For everyone who made an attempt at starting up their million dollar business: Be sure to check your inbox for complimentary credit to AppSumo :)

I first met Chase Jarvis at a Summit Series dinner in Washington, DC.

It was sensory overload from the beginning: Olivia Munn was seated on my left, Mark Cuban was across the table, and everyone was drinking too much wine. Then, a Polaroid camera appeared in my hand (thank you, time travel) — in fact, multiple cameras were placed at every table — and creative chaos ensued.

Chase, as creative MC of that dinner, knew exactly what he was doing when he architected the bonding exercise. He’s become a superstar in the world of professional photography by showcasing his mastery of the craft (best known for sports and lifestyle pics), while using PR and branding to further his art instead of compromise it. He’ll go off-the-grid indie one week, and the next week, he’ll be the only person besides Lady Gaga to join the Polaroid creative team.

How does he do it?

How do you balance — nay, OPTIMIZE — artistic purity and commercial success as a “creative,” whether a photographer or otherwise? “Optimize,” in this context, for the best combination of lifestyle, integrity, and income?

Chase and I explore this topic and many others in his beautiful studio… and don’t miss his very Punk’d-like surprise for me at the end. It’s related to my first-ever photo shoot as photographer, which he walks me through.

Hint #1: Sweaty palms. Hint #2:

I hope you enjoy the conversation as much as I did. Here are some more of the pics from our little experiment.

Whom should Chase interview next, or whom should I interview next? Let us know in the comments.

###

Odds and Ends: Room to Read library names

I’m still blown away that you all helped raise more than $30,000 for a $20,000 project, which has therefore become $60,000 after matching. As promised, 30 of you will be thanked by name on plaques, 10 names on each of three schools. Here are the “winners” — generous contributors and fundraisers:

From the fundraising competition:
Grand prize: Melissa Rachel Black = Grand-prize winner of RT ticket anywhere in the world (watch your e-mail, Melissa!)
Second place: Rachel Rofe
Third place: David Turnbull

Thanks to all who competed! Every person made a difference, and you should be proud of your real-world karmic capitalism.

The top-30 most generous donors, in no particular order:

Ami Grimes
Tom Cronin
Kenny Tomasian
Wesley Butler
Benjamin Johnson
Angela Johnson
Hrag Richard Toutikian
Charlton Locke
Chris Camillo
Damian Hehir
Rosane Oliveira
Damien Forsythe
Spiderhost, Inc – Dale Frohman
Michael Gridley
Cathy Baker
David Turnbull
John Bracco
Caroline Sdano
Jay Vinsel
Kevin Pavlish
William Schwalbe
Kelley Bieringer
Jason Hauck
Justin Smith
Paul Kearns
Eric Aber

You all rock. More coming as soon as I start to get status updates on the school construction in Cambodia, Laos, and Nepal :)

The following is an interview with Daymond John, CEO of the clothing brand FUBU, whom I’ve come to know and respect. If there were one mantra I’d associate with him, it’s “where there’s a will, there’s a way.”

Can’t afford billboards? No problem — just pay retail store owners in key areas to let you spraypaint “FUBU” on their overnight roll-down security walls. His drive and improvisation has led him from sewing cloth in his kitchen to #15 on Details magazine’s list of “50 Most Influential Men.”

It would seem he’s just getting started, but I’ll let him tell the story…

TIM: Many entrepreneurs launch their companies in addition to working a full-time job. How did you manage your time when launching FUBU to get the company going? When did you decide to quit the day job and make this a full-time operation?

DAYMOND: It was incredibly tough, but the passion for the project pushed me through. If your project doesn’t do that for you, well, maybe you need to sit down and revaluate. Even though I had placed our product in the hottest music videos out there, I was still working full-time at Red Lobster. To the public, FUBU was a huge company. Little did they know that I was still serving them shrimp and biscuits!

After a couple years of seeing FUBU as a hobby, I decided to get serious and stick to a standard daily schedule. I would wake up at about 7 or 8 in the morning, and I would sew the hats by myself, tag them, answer a couple of orders that came in overnight. Then I’d take the hats, package them, and begin to ship them out. I took care of all of that until about Noon or 1 PM. Then I’d hit up Red Lobster around 4, work there until midnight, come back home, make more hats, and tally up any orders until about 1 or 2 in the morning. I’d start the routine all over again the next day. I did this for about two years straight.

After my three friends joined the company, the business really started to take shape. With the extra hands, I was able to focus on growing the business at a much faster rate. At the point where I had enough money to quit (I didn’t really have enough to quit the job, because I had taken out this $100,000 loan), I decided that I had to give the business all of my attention and effort. So I quit Red Lobster around ’95-’96, and went completely full-time with FUBU.

In entrepreneurship, you decide to give up your day job at the point where either (A) the hobby/new business is at least making some form of ends meet, or (B) you feel that you need to dedicate yourself for a certain amount of time to it and give yourself the last hoorah.

What were your initial struggles with launching FUBU and how did you overcome them?

Like most entrepreneurs, the initial struggle was to go past the point of imagination and make it a point of conception, where I was actually putting together a product and producing it. Everyone has an idea, but it’s taking those first steps toward turning that idea into a reality that are always the toughest.

However, once you take those first steps you will be confronted with another obstacle, and I don’t think there’s just one tipping point for a company, but a string of them. For example, once I decided to put my idea on paper, I had to find a local screen printer. Then, I faced the challenge of increasing sales. Since I knew the stores wouldn’t buy it, I put my product in them on consignment. After I got to the level of making more goods on a consistent basis, I had to figure out how to create a sustainable structure for manufacturing the product, so I mortgaged my house, moved sewing machines into my home, and hired seamstresses.

It’s this string of obstacles that separate the people that truly want their company to succeed from everyone else, because so many questions hit you so fast. It’s just a matter of not letting these challenges keep you down and finding solutions no matter what. It can be overwhelming at times but just be prepared for it. The more forward-thinking you are and the better plan of attack you have to grow the company, the easier these questions will be to answer.

What were some of your first big marketing wins to promote FUBU?

The first big break was when we went down to Virginia and met up with Ralph McDaniels, who had a video show like MTV and VH1, and he fell in love with our product. At the time, Ralph was throwing a big weekend event for Teddy Riley, a producer and musician that really shaped Hip-Hop and R&B. He came back to New York and decided to put us on a local video channel for an interview about FUBU. We all knew the FUBU brand was closely associated with music, but this hit created some immediate buzz and showed us the way to market our product unlike any fashion company out there yet.

We then concentrated in getting our product into music videos. We would sit on video sets all day trying to get the artists to wear it. First it started with Brand Nubian in one of their videos, then Ol’ Dirty Bastard wore it in a Mariah Carey video, then Busta Rhymes wore it on one of his videos, and LL Cool J decided to wear FUBU on the “Hey Lover” video with Boyz II Men. Our product was front and center on the biggest and most influential personalities for our core consumers.

One of the most well-known hits we had with LL was during a Gap commercial. He was wearing a pair of Gap jeans and a Gap shirt, but he was somehow able to sport one of our hats during the commercial. Then during his thirty-second freestyle rap, he looks directly into the camera and says, “For Us, By Us, on the low.” No one at Gap nor any of their ad execs thought anything of it. It wasn’t until a month later that someone at the Gap found out, pulled the commercial, and fired a whole bunch of people after they had spent about $30 million running this campaign.

Historically, the Gap commercial is one of the biggest coups known to date in the advertising world. But in Gap’s defense, they were smart enough to realize a year later that, because FUBU had limited distribution, African-Americans, Latinos, and the hip kids of all colors thought that FUBU was actually available at the Gap. So they saw their numbers spike during the LL Cool J campaign. Gap repackaged the same commercial and committed two times the amount of money in advertising that commercial in the following year. If you look back at Gap’s numbers, that was around the time where they had some of their highest returns.

How did you take FUBU from a t-shirt and jeans company to a global brand?

This wasn’t easy, and the best way to say this is that I ended up finding a great strategic partner in Samsung America, who understood global distribution. It’s the basic lesson of starting a company: If you don’t know how to do something, find someone who does. I could not have done this alone, whether it was by having the knowledge or financing it myself. Samsung directed me, guided me, and assisted me in my global expansion. Also, with a huge international company like Samsung on our side, we instantly had an incredible amount of clout with all the retailers.

How important is social media for your various fashion brands? How do you best utilize it?

Extremely important. Even if you aren’t putting out a message, the first thing that you can do with social media is find out and understand why people like or dislike your brand. This is like having a focus group—a focus group that’s not sitting in your office, getting paid by you while you’re looking in their face for them to give you an answer. You actually get to see the reality of what people think about you. And at that point, you have enough knowledge to make the proper adjustments. It’s very hard to cure something if you don’t know the ailment. Social media is a great acid test.

When I first started my brand before all this technology was available, it was just putting it out in people’s faces and talking to them. But the good thing is, before you go and mortgage a house like I did, or sell the farm, you can push your brand out in the market and see how many orders you get on your website, how many people follow you on Twitter or friend you on Facebook, and request your product. This info will let you know if you have a winner or if you should go back to the drawing board and reconsider.

How have the fashion and soft goods business worlds changed since you started FUBU?

When I started FUBU, practically no one was directly addressing the young hip music/African-American, Latino market. Now there are many people addressing them. It’s similar to how TV, at first, only had a couple of channels. Now there’s a station for every topic, catering to every niche.

The fashion world has changed in that there’s nothing new to target for a certain segment. Or at least, there isn’t one on my radar. Maybe just how people didn’t see FUBU’s segment as an opportunity, it just isn’t as apparent right now.

The most recent challenge is the increased price of cotton, which has dramatically increased the price to make goods. So you’re going to start seeing one of two things. You’re either going to see very clean, inexpensive goods where the products are basically white t-shirts, jeans, or things along those lines. Or you’ll see it go in the complete opposite direction, where the luxury brands go overboard and bring in bigger numbers because they have the free retail stores. When you have retail stores, you can set up the goods the way you’d like them to be seen. The benefit of having a retail store is that there’s no competition with other brands to slash prices, and you become ‘one of very few,’ instead of getting lost in the mix of other clothing lines that compete for space in the Macy’s, the Burlington’s, and all other department stores. So, it’s a very challenging time for clothing companies right now.

Did you know much about manufacturing when launching FUBU? If not, how did you learn about it so quickly and effectively?

I did not know much about manufacturing—I did know how to sew, but that’s different than manufacturing. Sewing is an ability; manufacturing is a knowledge. Manufacturing is about how much per square yard you are using and how to do technical packages. For example, you need the knowledge of how to interpret your designs for overseas, how to be cost effective, how much embroidery machines may cost per hour to run, how much it costs to ship the product back to the States, etc.

Luckily, one of my partners went to FIT [Fashion Institute of Technology] and he knew that side of the business. Also, working with Samsung, they were able to pass on that knowledge to me. It worked out well having that part of the company focus on that aspect, because it allowed me to focus on our marketing initiatives and how to keep the brand fresh.

If you don’t have the partnerships available or you can’t find a team member with that knowledge, try to intern or shadow for someone who does. It gives you a lot of hands-on experience and it’s less expensive than paying for that education. Although you don’t get compensated for it, at least you don’t have to pay for it. If I had that internship experience before starting FUBU, it would have accelerated even quicker than it did. It probably would have cut the time I spent learning it on the fly in half. Education and knowledge is key. And I always say, the only thing more expensive than education is ignorance.

On your show Shark Tank, you must look at hundreds of companies. What’s the first thing you look for when deciding whether or not to invest in a company? Do the other Sharks and investors you work with share the same approach?

After the first season, I realized that the first thing all investors look at is the person. When we’re being pitched live, we always look at the person who is pitching and cast our judgment based on whether or not we would want to do business with them. After that, our ears are tuned to the things that will confirm whether our assessment is accurate—that they are a good or a bad person to be in business with.

This actually inspired me to write my book The Brand Within where I mention how we build upon our brand from the moment we were born; we also, inevitably, tend to make immediate judgment about others. And it’s because of this, that we should always be conscious of our self-image, our brand, in order to maintain a desired reputation. It’s something most entrepreneurs seem to forget when pitching me.

After measuring the person, you have to look at it from a totally business standpoint. I look at the product and ask a couple questions to myself. I focus on:

- What void in the marketplace does this product fill?

- Who are the core consumers? Has this company correctly marketed to them?

- What are the sales?

- What are the distribution channels?

- How much does this entrepreneur know about his own industry? (Note: HUGE pet peeve if he doesn’t)

- Is the business on an upswing? Or has it peaked?

- Is there room for profit and growth?

- What is that plan for growth? Is it laid out or simply another idea in the entrepreneur’s head?

- Is the evaluation of the company fair?

- How can I best help this company?

The answers to these questions are key and the entrepreneur should always be ready for these. If you don’t have rapid-fire answers to these questions, there’s a problem.

My favorite thing to look for is whether or not the product is proprietary or patented, and whether he/she can prove it. Not only do you have a documented competitive advantage, but it also means that in the event he or she is a bad business partner, you can potentially buy him or her out totally. However, at this point in the game, the evaluation of the company could be a little obstructed because of the potential inherited value that the patent holds.

Do you think Shark Tank can educate entrepreneurs looking to take his or her company to the next stage of personal or financial growth?

I believe the educational aspect of the show is one of the best things for all entrepreneurs. I know undergraduate and MBA professors use the show as a tutorial for their entrepreneurship classes. It gives them something beyond text to show their students.

Members of the VC community love the show because it gives entrepreneurs a checklist of things they need to have in order to be taken seriously, such as sales numbers, how many stores they’re currently in, patent info, can they pitch the product efficiently, etc.

When I started my business, I had no understanding of what investors were looking for and why they would want it. A lot of entrepreneurs just do not understand how to evaluate their product and make it attractive for others.

If people study the pitches to see what caught our attention and what completely lost us, you’ll definitely be a lot more prepared. On my own site, I’m going to do commentaries with top professors, marketing strategists, and business executives to show viewers the real business lessons you can easily learn from the show.

In your opinion, should the entrepreneur focus primarily on promoting his company or promoting himself or herself?

Generally, I’d say that every penny and ounce of hardwork should be focused on the latter. I believe that in any business (or in anything in life), if you do not have a strong foundation, the rest will crumble. If you aren’t 100% completely focused on your company, you can easily lose motivation or focus.

With all that said, I recognized when launching FUBU that “For us, by us” was such a powerful statement, and I knew that the world needed to see we actually meant it. That’s why my three business partners and I were at the front of a lot of our advertising and media. It communicated to our community that we were authentic and so was our brand. You always need to keep in mind that people are constantly looking at you and your legitimacy to see if the company itself is legitimate.

What books, people, or media inspire your inner entrepreneur or teach you new lessons about business?

I love Think and Grow Rich. I think that it inspired more people because of its methods for setting goals to become a person of wealth. I also love Robert Kiyosaki’s Rich Dad, Poor Dad because of its focus on financial intelligence.

Those who inspire me are the people all around me. I’m inspired by the people on Shark Tank—not just by my fellow sharks, but the people that pitch on the show, too. When I see the challenges they’ve had to overcome in life, and the crazy and ingenious things that they’ve developed, I’m humbled and amazed.

On the flip side, people who have failed and people who are currently failing also inspire me. I will always understand that I, too, could be one of those people if I don’t take heat and learn lessons everyday.

What’s next for you?

There’s a lot coming up that I’m extremely excited about. Obviously, I’m still very involved in the fashion world. I’m working on some Shark Tank products that I’ve acquired during this new season. There are two companies in particular that I think are going to be huge. And I mean HUGE, so you’ll have to check out the show this season to see what I’m talking about.

I’ve been doing a lot of keynote speaking at conferences, schools, and company functions. I used to do it sporadically, but now it’s a major focus of mine. Whether I’m speaking about motivation, entrepreneurship, business negotiations, or marketing, it’s extremely rewarding to speak to thousands of people at a time and share simple lessons I’ve learned that will make their own careers a bit easier or help them see life in a different way.

Another big project is a company I’m starting that shows a new marketing approach for what I see as the new age of media.

I believe there is a shift happening as to who actually controls the media (and will continue to hold it) that is very different from what everyone else is saying. I see the top-level celebrities out there as the new media vehicle. Consumers watch their every move in reality shows, social media, music videos, magazines, etc. They’re the masters of both old and new media, and if brands want to stick out from their competitors, they need to align themselves with these celebrities. So I’m acting as a facilitator between brands and celebrities, and showing companies how their brand cannot only just be part of pop culture, but rather engrained throughout pop culture. The way I did that with FUBU was not just a random occurrence, and I know how to emulate that for any type of company.

For this project, I’m in the process of teaming up with the best possible strategic partners. As I said before, this is always key. On the celebrity side, I can’t say exactly who I’m working with yet, but they’re all A-list, household names. They’re all looking forward to working with brands in ways that celebrities haven’t been utilized before. One person I can say is on our roster is the music superstar Pitbull. Not only is he a huge international star, but the guy is incredibly sharp and savvy. He crosses so many genres and resonates with so many people, it’s amazing.

On the business side, I’m already working with Jeff Hayzlett on a project for the Miss Universe Organization, which is very exciting because of the brand’s huge global presence and I love working with incredibly intelligent people like Jeff. I’d love to team up with an advertising agency to give them access to our celebrity roster and our marketing insights.

I just need to find the right one that sees the true value in this direction.

###

AFTERWORD:

To download a free e-book copy of Daymond’s book, Display of Power, follow the directions below:

1. Click this link: http://bit.ly/avAW4B
2. Fill out your name then use the following info to download:

- Referrer: Daymond John
- Password: theshark

Enjoy!

This pre-China trip includes the below:

- Personal experiences with Y-Combinator, demo days, and pitching new ideas through avenues like YC.

- Five things you can do as a new startup to get your ideas, app, or product in front of influencers.

- Tweaking your website: per-user metrics, cost per acquisition, lifetime value of the customer, etc..

- The iPhone 3GS, talking some about the new updates and then a short comparison with the Palm Pre.

- Learning new languages and reactivating old ones (in this case, Mandarin Chinese).

The above list is taken from Glenn McElhose’s blog, where you can also find links to all of the sites and products mentioned in the show.

###

Want to get Random episodes delivered to your iPhone or iPad? Now you can! Just subscribe to the podcast in iTunes (or get the audio-only version here).

Up to no (coherent) good once again, The Random Show returns.

In episode 3, Kevin Rose and I discuss our top 5 must-read books, how we use them, and who should read them.

The 10 books are…

The 22 Immutable Laws of Marketing
Getting Real
Vagabonding: An Uncommon Guide to the Art of Long-term World Travel
Seneca: Letters from a Stoic
Leaving Microsoft to Change the World

Envisioning Information
The Tipping Point
8 Weeks to Optimum Health
Zen Mind, Beginner’s Mind
The Intelligent Investor

Others mentioned:
Surely You’re Joking, Mr. Feynman! (Adventures of a Curious Character)
Motherless Brooklyn

If you missed them, check out Episode 1 and Episode 2. From functional MRIs and knives to angel investing and naming companies, it’s as random as the name implies.

Related Odds and Ends:
Tim Ferriss on Twitter
Kevin Rose on Twitter
Fireside Chat with Tim Ferriss at Google
Tim Ferriss presentation at TED: Smash Fear, Learn Anything

###

Want to get Random episodes delivered to your iPhone or iPad? Now you can! Just subscribe to the podcast in iTunes (or get the audio-only version here).