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Month: May 2020

Facebook Driven Dropshipping Vs Amazon FBA

Facebook driven dropshipping & Amazon FBA are two completely different ways of conducting e-commerce.

So different, that even the choice of products are almost always exactly opposite of each other.

On Amazon, while selecting a product to sell you make your best effort to avoid selling a fad, craze or a trend. You look for years and years of history, up-to 5 years, and only then make a decision if the product is worthy of the launch. You’re looking to keep the review ratings up, returns low, and ideally you want to sell the same products for several years. You spend one time to rank your products, and then rely on getting a return on your investment with organic sales over a long period of time. Due to this, you can often also sell your listing or store for up-to 3 years of net profit.

With dropshipping, most sellers plan to do the exact opposite; selling a fad or a craze. You’re ideally looking for something that has a lot of wow factor. Ideally it shouldn’t be a trend before and is some new kind of gimmickry. You plan to sell $1 million worth of it in the first month, or first the quarter, and once that’s done, no one ever talks about the product again. Fidget spinners could qualify as one of the best-selling dropshipping products and of course they were a fad. Because you make all the money right there, you store often flips for nothing. There’s often no or little lifetime value of the customer outside of the first sale.

Dropshipping needs no inventory and you can make a ton of mistakes. Wrong product selection costs you $100 in Facebook ads. You can test 30 products, lose $3000, and make it all back on your 31st product on your first day. With Amazon FBA, you can’t make any mistakes. You are pre purchasing inventory with hundreds of units to avoid going out of stock and to satisfy minimum order quantity requirements. You’re often risking tens of thousands of dollars with each product launch.

Dropshipping will often better suit those who are cash-strapped and have smaller appetite for risk. Amazon on the other hand is for big boys.

My Mother Made Me Financially Educated Before I Became A Teen

I was reading this wonderful article by MMM and it reminded me how almost everything I know today was taught to me sublimely way before I was a teen.

Like many other kids, I received a small amount of money every month from my parents. It started with 100 Rs a month and grew to 500 Rs a month over the years. I stopped receiving this amount completely when I turned 18.

My mother encouraged me every month that I don’t spend all the money that she was giving me. She further encouraged me that if I am able to save 1000 Rs, I can give the money to her and she will give me an additional 10 Rs a month or roughly 12% gains per year.

Before I became a teenager, I was able to save up to 5000 Rs from the pocket money, Eidi and other cash gifts I received from my relatives. For handing this over to my mother, she gave me an additional 50 Rs every month in pocket money.

In hindsight, if you think about it, I wouldn’t have saved more than $100-$200 through-out my childhood. In addition, I wouldn’t have generated more than $100-$200 in compounded interest. Despite making no significant amount of money, I learnt the number 1 way of getting wealthy. I learnt how the money can do the work for you. That each dollar is an employee that works non-stop 24/7 to get you more employees every day. It’s even better than a pyramid scheme.

This, I think, is the single biggest differentiator between people who are able to get wealthy and those who do not. How much wealth you’ll accumulate over your life is never determined by how much income you make. I’ve known enough broke people in my life who make over $10,000 each month and still struggle to do well financially.

They do every thing in their power to make contributions in the form of “sweat equity” but make no progress whatsoever to make contributions in the form of “financial equity”. Sweat equity can get you a lot of income, but it’s often the financial equity that buys you the financial freedom.

I was lucky to be taught this way early in my life. It breaks my heart to meet people who make it to the top percentile as far as income is concerned, yet fail to buy themselves financial freedom. I hope I’m able to pass the same learnings to the readers of this blog as well as to my child.

Chasing The Perfection Hype

When investing in any kind of asset (blog, e-commerce store, real-estate, stock etc), do not chase the perfect asset. When you chase the perfection hype, you pay top dollar for acquiring the asset. In the days to come, you realize nothing is perfect and so isn’t the asset that you just purchased.

Then you incur costs for repairs, maintenance, improvements etc for the asset to live up to its perfection hype. This makes your purchase very expensive as not only you paid a higher multiple for purchasing perfection, but also spent more money later on once it didn’t live up to it’s hype.

Instead, you could simply go for assets with visible imperfections. Any asset you buy with visible imperfections will have those priced in too which would get you the asset for a more affordable multiple.

As an example, if there is a niche Amazon FBA store with all relevant products it will sell for a higher multiple than a general Amazon FBA store. I understand why niche stores are better positioned in some cases, but in reality both niche and general stores have imperfections.

Niche stores are less diversified and hence positioned badly to weather a storm like COVID-19 when some categories get hit more than the others. General stores in comparison have visible imperfections such as that many products in the store belong to different categories. Although it may seem as an imperfection to some, it’s also a feature; the store is better diversified to weather a storm.

When buying an asset like a general store, the visible imperfection of having products spread across various categories is priced in. It is why it sells for a cheaper multiple. One could take advantage of this when buying assets and get this general store with visible imperfections. Not only the niche store has imperfections as well, it’s also a lot more expensive. Only in rare cases, it would prove to be a more fruitful purchase such as you sell it later as strategic acquisition.

Assets with visible imperfections can also be improved such that they no longer have any visible imperfections. By doing so, you can quickly increase the value of the asset.

The Stupid Simple Scaling Strategy For Your Business

What can you 10x? What can you not? Always ask this question whenever you’re trying to do a ton of different things in your business, which by the way you should all the time.

For Facebook ads strategy, my phase 1 is always trying 10 different ad-sets targeting different interests each with multiple ads inside each ad-set.

The phase 2 is simply finding what you can 10x and what you can’t. You trim the fat, you drop the ones that didn’t work, and double-down on the ones that did. The same dead simple concept should be used in all businesses.

I spoke to a friend who helps businesses initiate email marketing automation, improve delivery rates, create email sequences that work and more. Over the years he grew his customer base to over 1000 businesses but still struggled with making the profit the way he intended. Until he asked himself the 10x question.

He simply looked into his customer-base and identified that bloggers aren’t working at all for him. They simply are churn and burn for his business. All the customer acquisition till date for acquiring bloggers has been a waste of time and money. He also looked into his highest ROI generating subscribers which turned out to be Shopify stores. He cut his spending by 100% on blogger acquisition and doubled down on Shopify stores. A few months later, he found himself making the profit the way he intended.

While it sure is dead simple and almost stupid to highlight the obvious rule, many people actually struggle with identifying the parts that can be 10x’d. It gets easier to spot those when you ask the 10x question more often. In my friends case, he had to manually dig deep into his customer-base to get the information on what type of customers worked for him and what didn’t. He did that because he asked himself that question. He also realized that he should be collecting this information about his customers as part of the on-boarding process so he can fingerprint his customers better.

As a general rule always try a ton of different things in your business, trim the fat, and double down on the rest.

Getting A World Class MBA For Free

I neither have the time nor the money to go through a traditional MBA. Instead, I’ve been doing this new kind of MBA for the past many weeks that I’ve found quite interesting & informative.

I’ve no way to gauge the actual value in comparison to the traditional MBA but since my teacher (Fred Wilson) is a venture capitalist for more than 3 decades, holds a world-class traditional MBA himself from UPenn, and is an early stage investor in many world-class companies including Twitter, I’m more than happy to learn whatever I can at my own schedule and without incurring any cost.

Most entrepreneurs and company founders are never going to need an MBA, but they are going to need to know bare bones of whatever is taught in an MBA.

This is great for that.

The 20% Budget Rule For Facebook Ads

If you’ve previously run Facebook ads, or have watched some of the content to learn to do so, you may know about the 20% rule. If you don’t, here is what it is; many people recommend to bump your budgets by 20% a day in order to scale your ads without ruining or reseting the optimization.

This isn’t broscience as there’s a “last significant edit” column in the ads manager and any bump in budget greater than 50% triggers the last significant edit and resets the optimization. This is even more trouble-some for CBOs which you often really want to scale as they have several ad-sets and audiences that are ready for larger budgets after you’ve proven your original thesis.

Alex from GetNotissed has worked a simple work around for CBO scaling which seems to work in most cases and I’ll explain that in a bit. The 20-50% budget raise without triggering reset is a guideline given directly by Facebook. However, the fact that we associated a time-window with it was how we perceived that guideline. In other words, you can do multiple 20% raises each second to reach your desired budget in a minute instead of doing 20% raise/day.

So you can go from spending $100 per day per CBO to $500 per day per CBO, without triggering a reset, in 1 minute instead of 9 days as long as you do multiple edits of 20% each. Be sure not to directly raise your budget from $100 to $500 which obviously will trigger the reset.

In my personal test, the theory worked great but I’d still not advise making extreme budget raises using the 20% per second rule.

Gearing Up For Q4

It was Eid-ul-Fitr yesterday. We all got together at my parents’ place. My brother came from another town to celebrate Eid with us. We spoke about a lot of things but mainly spoke of e-commerce & the pandemic.

I have never been more bullish on e-commerce than I’m right now. Once the pandemic is over, which I hope happens soon, some of this forced adoption for e-commerce will stick. Which means that e-commerce will be bigger than what it was pre-pandemic.

As we all got together for Eid despite the pandemic, I was reminded that during these tough times we all need each other even more than before. That people would want to spend these times with their families even more than they have wanted to do before because of all the social distancing and isolation we’re all going through.

I believe that 4th quarter, which is always the largest quarter for shopping and pretty much all businesses, will be as large as it has been before despite the pandemic. I believe people would want to cherish their time even more so than they did the previous year. I believe that 2020’s Q4 shopping season will be even bigger than what we’ve seen before. Or may be I’m just an optimist. Although, I assure you it’s better to be an optimist during these crazy times that have surrounded us.

As an e-commerce business owner, I’m gearing up for Q4. I suggest that you do the same.

Making Use of Mobile Deep Linking As A Marketer

One of the common problems all marketers face especially on Facebook is that your ads always open within the Facebook’s native in-app browser. While that works OK for many use-cases e.g an e-commerce landing page, it is an awful friction in many other cases.

For example, if you’re trying to send users from Facebook to your Instagram page, despite the fact that both apps are owned by one parent company, the page would still load in the in-app Facebook browser instead of the Instagram app. Which means if someone had to follow you, he would need to login to Instagram within the native browser, which is never going to happen.

To solve this you can simply use what is known as deep linking. We use URL Genius to do this.

Here’s a regular Instagram link to my page.

Here’s a deep-link to my Instagram.

If you are reading this blog in Facebook’s or Twitter’s in-app browser, you’ll see that the deep-link opens my page in the Instagram app which is how I’d really want this to happen.

Similarly, if you’re a Youtuber and trying to promote yourself on Facebook, a regular Youtube link on Facebook will never get you subscribers because of the in-app browser friction. A deep link however will solve this problem.

There could be a million use-cases. I hope you guys find this helpful.

Breakthroughs Can Break You

Semmelweis made a breakthrough in early 1800s. He came up with what is known as the hand-washing technique today. Because of his discovery, the mortality rate in women giving birth went down from 18% to 0. Despite that, his discovery never was acknowledged. Instead he died in a mental asylum when he was 47 only.

Garry Tan did a vlog on how breakthroughs can break you and what you can do to avoid that from happening. I’ll leave you to it.

How Digital Nomads & Remote Workers Pay $0 In Taxes, Legally

The tax law for majority of the world citizens is defined by the physical presence. If you spend more than 180 days in any country regardless of what citizenship you posses, you’re liable to pay taxes in that country.

However, if you don’t spend more than 180 days in any country in any given year, your legal tax liability is almost always going to be $0. So if you’re spending 4 months in Pakistan, 4 in Thailand and 4 in Turkey, you owe no income taxes to any of these countries.

If you work as a freelancer, in a tech company, in an e-commerce business or anything that can be done remotely, you can travel the world and legally owe $0 in taxes. If you’re feeling a little adventurous you could spend your potential tax liability on your travels, at no added cost really.

This applies to citizens of most countries in the world with a few exceptions such as citizens of US who are liable to pay taxes in US regardless of their residence.

Even the workers in US can take advantage of state taxes by moving to sunny states with 0% taxes. As Twitter, Shopify have already announced going fully remote, and Facebook planning to do so smoothly over the next 5 years, I see a lot of people taking advantage of this. The biggest loser, of course, would be California.