Keys to Launching and Exiting An Amazon Business with Robb Green

Andy Splichal:

Welcome to the Make Each Click Count podcast. This is your host, Andy Spleckel, and we are happy to welcome this week's guest to discuss today's topic, which is keys to launching and exiting an Amazon business. Today's guest has owned 17 brands during his career and currently hosts the podcast. I am the one which provides practical guidance on building wealth, maintaining healthy relationships, and achieving well being. A big welcome to Rob Green. Hi Rob.

Robb Green:

Hi. Thanks for having me.

Andy Splichal:

Thanks for being here. We're excited to speak with you, especially since you have launched 17 different brands on Amazon. And for those of you listening that want to launch a brand, this is going to be a really great episode. But Rob, what have you found some of the keys to be when launching and growing your brand on Amazon?

Robb Green:

Yeah, I think the key, Andy, is really understanding the time frame, right. So doing it 5678 years ago is very different than today. So my advice for today in 2024 is really having a differentiated product that you have the ability to meet market demand. Now, I say it's harder to launch a brand now, but some of the tools that we can use are much better than they were a few years ago, right? We used to have to download reviews manually and look at them and sift through them. Now we can use AI to understand a product's reviews and actual sentiment from a product which allows us to make a better product and meet the market's demand. So I think really understanding, you can't just take, typically, you can't take a product and just slap a label on it and sell it in today's market. It's too competitive. So I'd say the key really is understanding where you're going to fit in into the marketplace ahead of time and at what price can you offer that product? Because I've seen so many people make mistakes on product selection when they dive into launching a brand.

Andy Splichal:

Now, what are some of the major mistakes that you see people make when launching, mention product selection.

Robb Green:

Number one, bad unit economics. It's impossible to make up for bad unit economics with more volume. Right. So a lot of people use rough numbers. For example, I think I could sell it for $40, I'm going to buy it for ten. There's some good rules of thumb around that. You typically want three to five x selling price of what you're purchasing it for at a landed cost, especially if you're manufacturing in China. But what I've noticed over the last couple of years, as we've seen more overseas sellers come into the marketplace, that margin is getting decreased and the average selling price is coming down much faster than it did in the past.

Robb Green:

So really getting an understanding of your unit economics, how much profit is going to be left after Amazon fees, which go up? Typically Amazon selling fees, FBA fees, your cogs, your marketing cost, which so many new sellers don't really understand, the amount of marketing dollars they're going to have to be spent to drive organic ranking, to drive visibility, awareness, and I think really understand those. Unit economics is critical because at the end of the day, we all want to make profit and so many people focus on revenue. And I think having your eyes wide open when you go into launching a brand is really critical.

Andy Splichal:

How do you recommend people source the products? I mean, you had mentioned getting a manufacturer in China. You have an idea for a product. Where do you start?

Robb Green:

So the trick that we've always used is we reverse engineer somebody else who's selling a similar product and that's much larger. So an example, we launched hydroflask type water bottles years ago, right back when it first started. We went and found the factory that hydroflask was using in China and I went and visited it. And the idea is, if it's a large company doing tens of millions of dollars at the time, they've already vetted a good supplier. Let's start there, because we're not going to make exactly the same product, but a similar product. Big companies do a good job, typically of vetting their suppliers. You can go the shotgun route and reach out to everybody and their brother, but we start with actual somebody who's been making the product and the reviews are good. That's another way for us to judge the quality of the supplier.

Robb Green:

And we start with that kind of factory. So it's fairly easy to reverse engineer. There's multiple service providers out there in SaaS software because all of the data, of the customs data is public unless you actually block it. Right. So you can actually reverse engineer the supplier for a lot of these companies and then start there by having those discussions and getting an idea of the price and the quality and the lead time.

Andy Splichal:

I had this discussion with somebody the other day and I'm curious on how you're going to answer, but does it matter to the consumer where a product is? Guess. You know, the real question is product being sourced in China versus not China. Does it help one way or the other?

Robb Green:

So my rule of thumb is if it goes on your body or in your body, we don't make it in China. If it's a commoditized product, China is our first resource. I believe people do care, but I don't know how much people care with their pocketbook. I mean, if you look at timu or Xi'in or TikTok shops, people are driven towards lower prices. All the Timu and Xi'in products are made in, right? So people, if you gave someone the same price for the same product and one was made in USA, one was made in China, I believe a majority of the people would shoot made in the USA. The premium that they're willing to pay for that completely depends on the marketing and the product and the sector that you're in.

Andy Splichal:

So once a company decides they have their product, they've sourced their product and they put it on Amazon. What are some of the fees in Amazon? They're going to incur it. And what might they not have thought about?

Robb Green:

So most categories, there are two main fees. There's the selling fee or the referral fee that Amazon charges. It's by category. On Amazon, most categories are 15%. There are a couple of one offs where they're like eight or twelve, but most categories are 15% of the sales price. That's going to be there all the time. Then you've got your FBA fee, which is going to be, think of it like a pick pack fee and a shipping fee from the Amazon FBA fulfillment by Amazon out to the consumer, right? And that is generally 15% to 20% of the selling price. It's very dependent, obviously on weight and dimensions of the product.

Robb Green:

Amazon does a calculation in which they take the actual physical weight of the product and they take something called the dimensional weight of the product, which is height times width times length, and then they do a constant multiplier. Whatever is the higher number is how they calculate your FBA fee. And that FBA fee, typically 15% to 20% of your sales price. That's a good number to use, but obviously a smaller, lighter product is less than a larger big home appliance, for example. So understanding those fees, there's plenty of FBA fee calculators out there, third party and Amazon. But really understanding what are my inputs to my calculations that are going to cause me, what are my fees? Because you've got to understand that, truly understand unit economics.

Andy Splichal:

Now. Those are the fees. What about advertising? Because when you first launch your mean you're, you're not going to be on page one right away.

Robb Green:

Yeah. Amazon has become more of a pay to play platform over the last few years. I very rarely see anybody that doesn't do a significant amount of advertising. So a couple terms that we use, Acos, which is your average cost of sales. That's what's used in understanding the efficiency of your marketing dollars. I like tacos, which is your true or your total average cost of sales. And how you think about this. If you've got a business that does, let's say, a million dollars in revenue annually, and we do $100,000 in ad spend annually, we've got a 10% total cost advertising costs.

Robb Green:

So that is a fair reasonable number depending on the category. There are some third party tools you can understand going in how much each category costs per click. So the difficulty of not having any data or not understanding that market is the cost per click could be anywhere from, I've seen $15 per click. Right? So if you're selling a product, let's say it's use a $20 product and you're paying a dollar per click, and let's say your margin is $10. So we sell a $20 product, our gross margin is $10 in profit. If I pay a dollar per click, I've got to get one out of ten customers, 10% conversion rate to break even on that sale. So some of the factors to think about is what is the cost per click for this subcategory of this niche? What is the conversion rate in this niche? And that's where I'm more of a data guy, to be honest with you, Andy. So that's where looking at like brand analytics, SFR data, and understanding the market ahead of time will indicate.

Robb Green:

Because if you do this wrong and you don't understand that and you're paying, supplements are a great example, very difficult to get economically break even on the first purchase. So you might make $10 per unit, but it's $5 a click. That means you have to get a 50% conversion rate. Borderline impossible, Andy. It's not going to happen. You're going to have to lose money in the beginning. So understanding the data is really critical. And a lot of times people don't know what they don't know.

Robb Green:

And that's where listening to podcasts like this is super valuable.

Andy Splichal:

I mean, you brought up a ton of information there, I guess where to start is there, before you launch your product on Amazon, are there tools that you prefer that'll tell you some of that data?

Robb Green:

Yeah. So Amazon has released more and more data to sellers. And so if you have an Amazon seller account, there's something called brand analytics and you can go in there and see what the click share is, what the purchase share is of the top three products for every search term. That will give you an idea of what that looks like. PPC data is not readily available, I don't believe, on any resources. Amazon will tell you, if you go to create a campaign, what the typical PPC bid is, but it doesn't tell you what the exact number is, but it gives you a reference. There's also a third tool called product Opportunity Explorer inside of Amazon, which you can go and look at. It'll tell you like a market share breakdown.

Robb Green:

Because the reality is you've got to understand, like, you're coming up against somebody who's already entrenched and you need to take their spot from them. So how are you going to do that? Is that going to be price, product quality, better marketing? What is the advantage you're bringing to that product into the marketplace?

Andy Splichal:

And what do you think about driving traffic from off Amazon to your products on Amazon?

Robb Green:

Tremendously helpful from an organic rank perspective. So if you can drive it, cost effective in a cost effective manner. A lot of people are using mean, you know, use YouTube, use Instagram. If you can drive traffic and it converts, it's highly valuable, in my opinion, to the algorithm from an organic ranking perspective.

Andy Splichal:

And will the consumer be loyal to a brand on Amazon or are they always looking for substitutes? I mean, you mentioned supplements, a supplement that does this or that. I mean, there's going to be 17,000 others that do the same thing. Are they going to remain loyal to a brand that they found on Amazon?

Robb Green:

I wish I could say yes. In many cases it's not. So it comes around to the branding, the brand profile. Louis supplements is another example. Subscribe and save. That's why subscribe and save is so valuable, because it automates that decision making process so they don't come in and look for it again next month. If you can capture, subscribe and save in any type of product or category. It's critical to the long term success, which also helps you build value, enterprise value of selling the business later on.

Andy Splichal:

Now, you have done 17 brands. You've launched 17 companies. How did you build your team to run those?

Robb Green:

So in the beginning, I made the typical entrepreneur mistake and wore all the hats by myself until it became overwhelming. And I don't recommend anybody do that. As soon as possible, start building out your team. So we have a local team here in Phoenix, and then we have an overseas team, India, Philippines. And so I would recommend that building out the team. So there's a structure that I got from a friend of mine, Steve Simonson, a few years back, which is one of the best things I've done in my business. We have a core entity which employs all the employees, and then each of the brands pays the core entity a management fee as if it was an agency. They're all my own brands, so we're not an agency for anybody else.

Robb Green:

But that allows me, and this is also I got from the book, built to sell. And there's a podcast around that, too. It allows me to peel off and sell if I want one of the brands without distracting my core team and not losing my core team. So I've done that a handful of times. It allows me to peel them off and sell them. So it gives me the ability to sell, not that you have to sell, but it gives you the ability to sell very easily from a financial perspective, if you choose to do that.

Andy Splichal:

Now, did you create your brands with the intent to sell?

Robb Green:

I make them all sellable. The goal is to make them that I can sell them if I choose to. Sometimes there'll be a situation where you've tapped out a niche, for example, and you don't see any obvious products to launch in that niche. We'll sell the brand. Maybe we've had one. And by the way, not all of them have been successful. I like to tell people that, like, a bunch of these didn't work out or they only worked out for a period of time. We had a patio lights brand a few years ago that we crushed it.

Robb Green:

We were the number two seller of patio lights when that whole fad took off. At some point, the margins got so small, it didn't make sense to continue the business because we had overseas competitors that came in and they were offering the product on Amazon for what our cogs were in China. So it just didn't make sense to compete in that space anymore. So understanding what the lifecycle is of a product or a brand is really important to understand.

Andy Splichal:

Were you able to sell that business?

Robb Green:

That one I was not. That one. I didn't recognize it until too late and the margins already compressed enough. It wasn't a sellable asset at that point.

Andy Splichal:

So what are some of the things that you need to think about when preparing a business to be sold, especially if it's an Amazon only business.

Robb Green:

I'm a finance guy, Andy, so get your financials in order. I can't tell you how many friends I have that have no clue on their financials. Right. Understanding your getting your financials in order that are properly done, and then understanding your financials so you can go through them and make improvements. Because if you go to market or someone contacts you, like we're actively buying right now, someone contacts you and we want to buy. We've identified your brand as something we want to talk to you about selling. Most people I talk to don't have financials and if they do have them, they're outdated. So they really have no idea of what the business looks like financially.

Robb Green:

That makes it really difficult to buy a business because you now have to wait. So prepare ahead of time. If you're saying I want to sell at the end of 2024, get your financials in order now optimize where you can optimize to make more profit so that that business is sellable for a higher dollar amount in the future.

Andy Splichal:

So that's interesting. So you said that you are actively looking for businesses to buy. How do you assess the value? What multiple are you looking at?

Robb Green:

The multiple is a great. It's so tough to say that because every business is different. Obviously, I'm a buyer. We'll pay as little as we possibly can. Right. So we're trying to pay as little as possible. But the reality is it's so indicative. Dependent upon how the business is doing.

Robb Green:

Most of the businesses that we've targeted are not doing as well as they did before. The COVID bump, the 2021 bump, and a lot of them are not doing as well. A business that's declining is a completely different multiple than a business that is growing. A profitably run business is different than a business that doesn't make profit. I would say a vast majority of the people we talk to don't make much profit. Their profit is a very thin margin, or it's zero or they lose money. And those are really difficult. There's no multiple of zero that makes any mean.

Robb Green:

I'll give you infinity times zero, Andy. So it just comes down to what is the business worth. And what is the mindset of the seller? And what is the mindset of the buyer? We look for opportunities that we can do easy and obvious improvements with our team's skill set that the solopreneur or the small business owner doesn't have that we can take to the next level and get a return on our investment.

Andy Splichal:

What type of businesses are you looking at?

Robb Green:

We're looking at e commerce. So we are actively targeting e commerce businesses and a lot of Amazon businesses.

Andy Splichal:

Now, are you looking for people who are producing overseas? You just take over the production, the sourcing and all that.

Robb Green:

We take over everything. So I would prefer somebody that manufactures in North America because it's easier to implement changes than it is overseas. Just the lead time is different, obviously, shipping, ocean freight versus domestically. So we are open to looking at all sorts of businesses, but preferably made in North America, which limits you to a few categories typically. But that's our ideal situation. Somebody who's kind of taken the business to the highest level they can and they don't know what to do with it, right? And they're like, I can't grow this anymore. Or it's now tapered off from where it used to be and I don't know what to do next. Those are our ideal types of sellers.

Andy Splichal:

Now if you'd put yourself in the shoes of a listener right now who is looking to start something, what type of products should they be looking at to launch on Amazon?

Robb Green:

First of all, I would do a self awareness check. So what are you great at? Typically in products, there are people that are more artists and they're product oriented. There are people that are better with the financials. There are people that are more. Their unique ability is more around the creativeness and the marketing. So just first of all, look at what you're great at. And then I hate saying this because I think it's the most overused advice. Be careful on passion.

Robb Green:

It's helpful if you care about the category or passion about it because it's never a straight line. Andy? It's always ups and downs. As being an entrepreneur, the passion will help you through some of those down periods, but the reality is just understanding what you care about and what your goals are and then reverse engineering. If you have any type of context or understanding of a category, it's incredibly helpful. If you've had dogs and you've been breeding dogs your whole life, you're probably better off doing a dog product than electronics made in Shenzhen if you have no experience in that. So understanding where your unique abilities lie. And leaning into those unique abilities is the first step.

Andy Splichal:

How can you tell if certain niche is oversaturated or if it would make a good opportunity?

Robb Green:

I think a couple of characteristics. There's a lot of third party tools. Jungle scout, helium ten, all those guys are out there. What we look for. I built a simple model to understand what we call Amazon penetrability, that we use some different tools, we aggregate them all and we give it a score of whether that's a product we want to launch or not. So that's what we do internally. But easily to look at is can we penetrate that category or subcategory? Because there's not someone with 200,000 reviews. If someone's got 200,000 reviews, that's almost insurmountable.

Robb Green:

Right? So you need to have a more reasonable review count. And I'll say reasonable is 10,000 or less of the best seller to be able to penetrate that secondarily. Has anybody launched in the last year in that subcategory and had success? So if nobody has launched in that subcategory and had success in the last year, you better have a really compelling reason on why you're going to be different.

Andy Splichal:

So you had mentioned Jungle scout and helium ten. Can you get that information from those tools?

Robb Green:

Yeah, it takes a little bit of critical thinking and some expertise, I'd say, to assess that. But those tools are a great starting point to look at. What is the dispersion of revenue? Right. I think for especially people starting out, you would rather have ten people selling well and some of them being more recent than having two people take 80% of the market and everybody else sells very poorly. That is going to be a really difficult market for you to penetrate, especially as a new person. I would rather see for someone new with a wider breadth of sellers, with plenty of volume, because you need to step into something like that and find that niche within that volume for you to capture.

Andy Splichal:

Now, you had also mentioned reviews and the importance of reviews. But how do you encourage somebody who buys from you to leave a review?

Robb Green:

We play this pretty straight and narrow, to be honest with you. So we have used inserts in the know. We ask for an honest review. We do the typical Amazon follow up procedure, but we try to stay by the straight and narrow on this. Amazon is very serious about review manipulation. So we just ask within the terms of service of Amazon. And this goes back a little bit to making a quality product. It's not said enough.

Robb Green:

I've had plenty of friends make let's call them not optimal products. They've just launched products that just kind of worked. I would strongly suggest making a great product that gives you the long term opportunity for quality reviews.

Andy Splichal:

Now, what's the favorite brand you've had and why?

Robb Green:

I'd say that my favorite brand is the one I sold. So I sold one in 2021 called Bean Envy. And it was a combination of physical products to make coffee. In addition to that, it was also supplements that go into coffee. So I had the combination of the manufacturing in China, I had the combination of manufacturing in the US. I had really solid recurring revenue because of subscribe and save. And that allowed me to market that brand fairly effectively and then sell it in 21.

Andy Splichal:

Why did you decide to sell it?

Robb Green:

There wasn't a big roadmap of products. There's only so many ways to make coffee in terms of we had the milk frother, the cold brew, the french press, those kind of products. There was a limited space while we stayed core to the name of being envy. And then the supplement side, we had a few products that went into coffee, but beyond that, there wasn't a lot of supplements that went into that. So we felt like in our space and we had done that. And then also 85% of a business owner's profit or money that they return from the business is typically on the day they sell it. We were able to extract that capital and then use that for other businesses.

Andy Splichal:

Now you had mentioned, what is it built to sell by Jim Collins. Are there any other business books out there that you can attribute to your journey as an entrepreneur?

Robb Green:

Probably so many I couldn't name. It's, I think it's Warnolo that wrote built to sell, I believe.

Andy Splichal:

Oh, was it okay?

Robb Green:

I think Jim Collins wrote good to great, if I recall correctly.

Andy Splichal:

You're right, you're right. The flywheel I got.

Robb Green:

He'S got a podcast around the frame. I think the built to sell framework is really important for somebody who's never sold a business. Most people in their lifetime, if they're fortunate enough to have a good business that they can sell, they sell one business. So they have to think about it ahead of time. And also, if you are considering selling, find somebody who's done this before. Find a great business broker, find a friend who's sold multiple businesses or consulted on businesses. The amount of money that you could make or lose by structuring the deal properly or improperly could be more money than you've ever made from the entire business life that you've had. The business and so I cannot emphasize this enough to really put your time in and plan ahead for selling the business.

Andy Splichal:

Do all the businesses that you run and or have always, are they all just Amazon only or are you using Shopify? Are you on websites as well?

Robb Green:

Shopify, Walmart. We've done the marketplaces. I mean, right now we're heavily exploring TikTok shops. So I believe TikTok Shops is kind of where Amazon was ten years ago. So we've started selling on that and are actively trying to get better at that. I think the amount of volume I've seen some of these sellers on TikTok shops in the past few months has been insane. So it is tremendous. The algorithm just drives tremendous volume, which there is an overflow benefit to Amazon from that, which again then starts the flywheel helps in terms of organic ranking.

Andy Splichal:

So as far as your brands, do you open them on their own website? Amazon, everything at once. And what e commerce platform are you using?

Robb Green:

Shopify.

Andy Splichal:

And how did you get into doing this anyway?

Robb Green:

I worked in corporate America for far too long, Andy, and wanted to find a way out. So happened across a customer who was doing drop shipping and started drop shipping. Started my first site in 2011 and just I'd read Tim Ferriss's four hour work week and figured out how to do drop shipping. Self taught Adwords. I hired a guy in Bangladesh to build the volusion website. That's how long ago this was before Shopify really got going and built a volusion website, ran Adwords, did sales. What I learned quickly is that it was a race to the bottom from margin when I'm selling somebody else's product. So then I started private labeling in 2015.

Andy Splichal:

What was your first product?

Robb Green:

This is the anti passion, by the way. It was a dog booster seat for little dogs. So it pulled the dog up in the front so the dog could look out of the car and through the windows. Keep in mind, did not have a dog at the time and found a gap. Most of the products out there were really poorly made with cardboard and fabric and we made a metal collapsible structure and we sold 40 units a day of that thing for years before. Wow, it was a great fit.

Andy Splichal:

What advice would you give to somebody who's looking to follow that path but now what, 1120, 413 years later?

Robb Green:

I think really understanding what your goals are is the number one situation. So many people think it's so passive. And I'll use Amazon as an example. I've never seen anything in my life change as fast as Amazon changes and so you better have a plan to stay on top of what's happening, to stay on the cutting edge. So really, is it something that you want to partake, or is it something where you want to do more of a passive income stream? But if you're going to go into ecommerce in today's age, it is very competitive and it moves very fast. So really understand what you're willing to give up and what you're willing to commit to being successful in this, because so many people, I find, don't really think about it that way. They think about why it's easy. Like, I want to do that.

Robb Green:

I want to travel in the summer. I want to do this, I want to do that. Well, you need to understand that. What are you doing to get to that level and become an expert in the space? So you really have to commit to it, to becoming an expert.

Andy Splichal:

Well, this has been great. How can an interested listener learn more about you?

Robb Green:

I'd say LinkedIn is the easiest way to do. It's Rob green. It's Robb and then green, like the color. Reach out to me on LinkedIn and then check out the podcast. I'm the one now.

Andy Splichal:

I'm the one. Is that in reference to Amazon's day one philosophy?

Robb Green:

Great question. No, it's actually, I listened to an Ed Milette speech, I guess you'd say that he gave about it, and what it really resonated with me is that every family tree has the one person that came along and changed the direction of the family tree. And for me, I'm the one in my family. Nobody on my mom's side ever gone to college, only one person on my dad's side. And then I changed the entire direction of our family tree with our family and our daughter by becoming an entrepreneur.

Andy Splichal:

Well, this has been absolutely great. Is there anything else you'd like to add before we wrap it up today?

Robb Green:

No, I think this is great information for people to learn and really absorb. And if you are, don't be an entrepreneur, as I call them. Don't just want to be an entrepreneur. Actually take action and start doing things. There's only one way to learn, and that's just taking action every single day. Go try something. And if it doesn't work, which a lot of times it won't, learn from that and do it better the next time.

Andy Splichal:

Great final words. Well, thank you for joining us today.

Robb Green:

Rob, thanks for having me. I appreciate it.

Andy Splichal:

For listeners. Remember, if you like this episode, please go to Apple Podcasts and leave us an honest review. And if you're looking for more information regarding connecting with Rob, you will find the links in the show notes below. In addition, if you're looking for more information on growing your business, check out our all new podcast resource center, available at podcast makeeachclickcount.com. We have compiled all of our different past guests by show topic and included each of their contact information in case you would like more information in the services discussed during previous episodes. Well, that's it for today. Remember to stay safe, keep healthy and happy marketing and I'll talk to you in the next episode.