How Adam Feinberg grew his 2nd Amazon FBA business to 25 Million in Revenue

Episode 168

Welcome everyone to the FiringTheMan Podcast, on today’s episode we are joined by Adam Feinberg, an eCommerce entrepreneur and the most popular guest of the FiringTheMan Podcast in the last three years.  For those of you who are not familiar with Adam, we encourage you to tune into episode 91 where Adam details his story of growing and scaling a brand leading to an incredible exit.  Welcome back to the show Adam!

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🤔 What Is Firing The Man Podcast? 😃

Serial Entrepreneur’s David Schomer and Ken Wilson share tips, advice, and insider knowledge about all things Amazon FBA and E-Commerce.

Discover how you can create multiple passive income streams by selling physical products online so that you can have the time and freedom to do what you love – whether that is spending more time with family or traveling the world.

Ken and David have successfully created several six and seven figure online business ventures.

During the journey, they have had major wins, losses, and lessons learned.

This podcast will teach you about selling physical products online through platforms such as Fulfillment by Amazon, building a team, outsourcing, listing optimization, pay per click (PPC) advertising, driving traffic to your listings, and productivity tips / life hacks that will provide a path to be successful in building your online business.

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00;00;00;01 – 00;00;24;01
Speaker 1
Welcome everyone to the Firing the Men podcast, a story for anyone who wants to be their own boss. If you sit in a cubicle every day and know you are capable of more, then join us. This show will help you build a business and grow your passive income stream in just a few short hours per day. And now your host serial entrepreneur is David Schomer and Ken Wilson.

00;00;24;03 – 00;00;44;24
Speaker 2
Welcome, everyone, to the Firing the Man podcast. On today’s episode, we are joined by Adam Feinberg in e-commerce entrepreneur and the most popular guests of the Firing the Man podcast in the last three years. For those of you who are not familiar with Adam, we encourage you to tune in to episode 91, where Adam tells his story of growing and scaling a brand leading to an incredible exit.

00;00;44;25 – 00;00;46;04
Speaker 2
Welcome back to the show, Adam.

00;00;46;07 – 00;00;57;20
Speaker 3
Oh, thank and glad to be back again. It’s definitely a different world than it was when we shot it, I think in like summer 2021. So yeah, we’re looking for an e-commerce market and since the economy is much different.

00;00;57;27 – 00;01;08;19
Speaker 2
It certainly is. And we’re looking forward to digging into that. So for those of our listeners who are not familiar with you, can you give some background on your path to becoming an e-commerce entrepreneur?

00;01;08;20 – 00;01;29;27
Speaker 3
Sure. I had a pretty unlikely path. I worked at a company called Accenture doing I.T. consulting for about four years, and my wife was a physician. She always wanted to have her own office. That was a dream the first. So she opened her own office. She needed help. So I became like the everything go to manager person from marketing to like running the office.

00;01;29;27 – 00;01;53;12
Speaker 3
And one of the main things that I did was it was very competitive. There’s too many doctors in the D.C. metro area, so actually getting patients in Toronto was a big deal. So I got involved with like making websites and Google ads and search engine optimization and stuff like that. Like way back in 2009 and I became pretty good at search engine optimization and mostly stuff I picked up like in forums and stuff like that because we couldn’t pay anybody.

00;01;53;12 – 00;02;17;15
Speaker 3
It was like we went out agencies, they want two or $3,000 a month and we were barely scraping by to have this office. So I started picking up like clients on the side, like who wanted to like, help with their websites. I wanted to show up in Google and I kept doing like my I.T. job and then I was struggling between my kids who at the time were like in kindergarten ish and like, up like early elementary school and helping with this office and doing this demanding consulting job.

00;02;17;15 – 00;02;35;27
Speaker 3
And I started to tick off my client and my client, like, knew that I was like not putting in all the effort that I was before. And it became kind of an ugly situation and it kind of like forced me out. So I have a pretty cool dad and he was a pretty successful engineer entrepreneur. So I went to him and I said, I have this cool idea to start a search engine optimization company.

00;02;35;27 – 00;02;53;27
Speaker 3
Can you help me out for like a year and like, pay my salary? So he’d cut my salary and his business. And like, the proudest moment was about nine months later, I was able to tell him that, like, he could stop, like paying me and I’d break a website and Google me using some pretty aggressive, like blackout type methods, like really at the top of Google for all these terms.

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00;02;53;27 – 00;03;18;20
Speaker 3
Like Ezio Company CEO Services, stuff like that. And we ended up like building the business up to like two or 300 clients at one point. And I met my partner because one of my clients in the UK named Richard Bell wanted to like expanded into the UK and like at the height of it, like maybe like 2012, this we were doing like about three or $4 million in revenue and the margins on a world that great because Google kept changing things.

00;03;18;20 – 00;03;40;04
Speaker 3
We kept up into like cut money into like fix things and like we do clients. When they made an update and I started doing affiliate marketing as a result and then Richard came up to me, he said one of his really good friends was signing on Amazon in like 20 1213 and he was doing so well that he was going to closes his chiropractic practice and do this full time designed swim goggles and swim caps.

00;03;40;04 – 00;03;59;02
Speaker 3
And he was making like 30, $40,000 like a month profit. I was like, That’s phenomenal. What’s go try this? So we started selling on Amazon and like 2014 is very small. Like we ordered like a thousand units of our first use. We didn’t even try selling them in the US because like, I didn’t think we had enough money to really go into that market seriously.

00;03;59;02 – 00;04;13;26
Speaker 3
So we started selling in the UK, which is where his friend was making majority of his money and we launched a nail lamp and we were trying to sell like 1012 units a day and make $10 profit on each one. It’s a lot easier to make like more profit on an item with like add cost being way less.

00;04;13;26 – 00;04;28;06
Speaker 3
Back then we did a couple of those in our plan were just like, if we could do $100 a day per SKU and we had like 20 of them and then like we’re each making like 350,000 bucks a year, like we’re golden. That’s fantastic. I never had dreams of like making like millions of dollars or anything like that.

00;04;28;06 – 00;04;43;10
Speaker 3
I just, like, wanted to, like, like, be able to help my wife out, be like a stay at home dad, be the one to take my kids and stuff and do that. And then like the third or fourth product we launched was a vacuum storage bag, which we ended up branding and getting the trademark for by super law called Space Saver.

00;04;43;10 – 00;05;00;18
Speaker 3
That became at the high tackle that maybe like a $30 million brand. And I mean, to give you an idea of how small was our first, we started with a thousand units. They said like we were going to have to pay like a one time fee for a poly bag print if, like we wanted to get fancy packaging, sort of like now we’ll just do a generic bag and like a cardboard insert.

00;05;00;25 – 00;05;21;28
Speaker 3
So I was like a really crappy product and their product giveaways were allowed then. And first we started selling in the UK and we were like the third best seller. We were making like 200, $300 profit a day. So let’s try selling this in the U.S. So we started like be making some decent money out of this and we did a product giveaway on on this network called like AMC Review Trader.

00;05;21;28 – 00;05;37;07
Speaker 3
We got a thousand reviews like in one week and we became like the number one seller, like immediately in like eight days on Amazon. And all of a sudden we had like a listing. I was selling like 100 3050 units a day. We were making like ten bucks a unit and like, that’s what we became addicted to Amazon.

00;05;37;07 – 00;06;04;07
Speaker 3
I said, like, I’m not taking any Mauricio clients anymore. We’re just going to like, take every dollar that we. But yes, your business and Amazon and draw it into Amazon. And we grew the business like the second year. I think we did like the first the first year was just like learning, but the first son year really long what we were doing, I think we did like over $10 million sales and then over a couple of years we grew before COVID to like 40 million with like $6 million profit.

00;06;04;07 – 00;06;32;06
Speaker 3
And we had a warehouse, we had some issues with our IT with some three parcels, like in 20 1718 where they didn’t deliver what they were supposed to do. And we got really nervous. So we started doing our own warehousing. So we had basically like almost a year of inventory in our warehouse in COVID hit. And though competition was really while we were able to like barely run ads increase our prices maybe like 25% and like our IB, it all went to like $18 million when we sold the business.

00;06;32;06 – 00;06;50;14
Speaker 3
I didn’t really want to sell it. I really liked what I was doing. I really I had like 20 something people working for us. I liked everyone, you know, I was in my late forties. I didn’t want to retire, but it just like, seemed too good. And I kind of pictured the situation going back to like 2019, like after COVID ended.

00;06;50;14 – 00;07;11;25
Speaker 3
And it actually is like F for sellers. It’s actually ended up way worse. The market’s way harder. I think like the market volume is still much higher than 2018, but like all the things that have happened with Amazon and logistics and competition, it just become a lot more challenging, which is like a lot of the reason why a lot of the aggregators have just like gotten totally chewed up.

00;07;11;25 – 00;07;46;01
Speaker 3
They like expected like the business to continue to grow. They were the only people to like, make this decision, which was a mistake. I mean, all these big, you know, tech companies like Google, Facebook, Amazon were laying off people. They all kind of did like the same thing. So like what’s going on for trends and an Amazon? Like, I think these are all obvious, but I’ll just bring them up like first of all, Amazon second biggest area of growth besides like their, their beer and hosting businesses ads and the way they burn a lot of ads is they basically made a lot more of the landscape as when I started selling on Amazon.

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00;07;46;01 – 00;08;08;02
Speaker 3
They had to sponsor products, which I don’t even think they called it then because I was the only type of ad. Now there’s watch brands and display and and they have like all these areas that are on the page that are sneaky words like highly rated brands, but the really ads and stuff like that and video ads. And so like we went from like in 2019, probably like 25% of our sales were by ads and we were a huge ads vendor at the time.

00;08;08;02 – 00;08;25;13
Speaker 3
And now, like I have two new Amazon stores and probably like 50, 55% of our sales were buy outs. And then before the other really big sneaky is, I mean, Amazon says this is related to demand but I’m sure it’s not really and they didn’t launch this like like across 0 hours or whatever you want to call it.

00;08;25;13 – 00;08;41;15
Speaker 3
All of a sudden in about May of 2021, just got way, way worse all of a sudden, like a one month. So like at a store, like our store web deals direct the one that I sold, I was doing like 80, $90 million in sales. All right. Costs like one month went for the whole store, went from like 20 to 27 or 28.

00;08;41;15 – 00;09;07;11
Speaker 3
And then like, probably trend into like into the thirties. And now basically the model of Amazon from like the way I see it and I have two new stores which I’ll talk about is basically like you’re going to sell a product on Amazon, basically with ads hoping that you could break even. If you can break even after returns, that’s basically good, so that you could develop organic traffic and hopefully you can build your organic traffic up to like the same amount of sales as like your ad traffic over time because Amazon rewards you for running the ads.

00;09;07;11 – 00;09;31;12
Speaker 3
So like, you’re like a typical product will have like a margin, let’s say gross margin, like 35%, a 5% return rate. And if you’re good with ads, you can get to like a 38 cost. And with the return rate that basically gets you to like about breakeven. And then so margins like Web deals, direct had margins that were like before payroll in the warehouse, probably like in the thirties and now like the new stores we have and they’re pretty big.

00;09;31;12 – 00;09;55;12
Speaker 3
We have this store called Classpass. I started with my friend Doug in and something like 25 million last year. This year probably 3540 million. Our margins are probably like 12, 13% because basically like 55% of the cells are ads and you factor in the return rate and you have an account of 30 and that’s basically like where you get to and if we start like raising the price like any more or lower in the ads, we’re going to end up making less based on like on all the testing we did.

00;09;55;12 – 00;10;13;27
Speaker 3
So that’s like the type of business we had. I have I sit on the board of a another Amazon store very similar to what Bill’s direct. I have some friends that in the SEO space I commence to start an Amazon store like six months after I did and they still own half of it. They sold the other after to private equity and they’re like, I can’t give you a specific numbers.

00;10;13;27 – 00;10;29;13
Speaker 3
I don’t want to say their name, but they’re basically like $120 million seller and they’re all our sales are still the same as like during COVID, but our margins have gone down like six or seven points and they have like products that have like 5000 thousand views on like not new star stuff because they’ve been selling for a really long time.

00;10;29;13 – 00;10;37;28
Speaker 3
That’s just kind of like the trend in the marketplace. So you can ask me like questions about like my new business and watching and stuff. I’ll be glad to answer any of them.

00;10;37;28 – 00;11;02;01
Speaker 2
I’d like to dive into this PPC dilemma that you’re talking about, and we’re feeling the same thing in our business where we look at PPC spend and ask ourselves, Gosh, if we were to put those dollars elsewhere, you know, what could we do? Maybe into building an email list? There’s hiring a huge team. Who knows? There’s there’s a lot of places we could put those dollars, but one thing I like about talking to entrepreneurs is you’re presented with a problem and generally they’ll find a solution.

00;11;02;01 – 00;11;10;13
Speaker 2
And so I’m curious, with compressed margins, with the PPC going up, how are you responding to that? What are some things you’re doing?

00;11;10;13 – 00;11;24;12
Speaker 3
I mean, first of all, I just want to say that I’m managing my own PPC. I used to manage it for both stores. We rolled out car space to like about 67 lines and I got a pretty stable. The acres I won and docking took it over. So I’m doing it like hands on and I like working with the third party.

00;11;24;12 – 00;11;56;25
Speaker 3
I’ve tried three or four different third parties, like ones that are really big that the aggregators still use like the radio and stuff. And I like doing it myself. I feel I can do a better job, but here are some suggestions. One, we started doing day partying and offline I can get you can email these like day partying options like we noticed the ads like before 8:00 in the morning or like after like 11:00 Eastern at night, like perform particularly bad and basically like, wait, like the cost between 11:00 at night to like 8:00 in the morning is probably like 50%.

00;11;56;25 – 00;12;12;17
Speaker 3
And then it costs the rest of the time is like 30%. So we basically turn off ads like for like 12 hours a day. Other things that we’ve tried doing that have worked for some of our products is if you stop running ads like on your stuff, it seems like you’ll like you’ll lose like organic traffic, like Amazon are rewarding you for it.

00;12;12;17 – 00;12;32;21
Speaker 3
So we started for some of our products, like only running ads, sometimes like running ads, like we figured out like what days do the best on ads? Because we noticed like Sunday, for example, people are better serve shopping and our cost was better on Sunday than like it overnight. And like we like we would accept some days for commercial operations, like not running on the ads at all and only running them on like Thursday, Sunday and Monday.

00;12;32;24 – 00;12;50;08
Speaker 3
And that’s been effective on like keeping our organic traffic from falling off, but then like keeping our cost down. I can, I can I’ll send you a list of stuff like after the call. But we also started doing like more offsite Amazon stuff. So like, are you familiar with like, are you familiar with like Amazon attribution bonus? Like where you like Amazon?

00;12;50;09 – 00;13;13;25
Speaker 3
Amazon has a program called Amazon Attribution where if you get traffic off of Amazon from like a Google advertisement, you can generate like a special URL and then track like the conversion rates on Amazon. And starting like in October they will give you 10% bonus for yourself for your sale. So if you have a $100 item and you generated an ad like off of Amazon and you get a sale, you get ten bucks.

00;13;13;26 – 00;13;35;23
Speaker 3
So it covers like from your ad costs. So we started doing like more off Amazon advertising. Like in Google, we joined some more affiliate networks reviews sites imploring servers, other stuff to like generate traffic. There’s lots of different sites where you can. It’s like kind of like a carousel cards up where you give like you get what you pay like 15 to 20, like a commission like sale.

00;13;35;23 – 00;13;57;07
Speaker 3
Some of them will allow you to use your attribution link so you can get like some of your money back. And I would say like 20% of our sales now are like coming like up like off of Amazon totally. Also the Amazon advertising and Canada in particular is a lot less competitive than United States. So I would I think the U.K. market’s pretty good.

00;13;57;07 – 00;14;17;09
Speaker 3
Similar. I’m not really hot on Europe because the dollar’s been pretty strong there and it’s been making the margins pretty compressed. And it’s also harder to market like really while like in non-English markets. But we’re having products be more successful in the U.K. and in Canada than they are like in the U.S. And for Webisode Direct, I have that a lot of a product.

00;14;17;09 – 00;14;33;25
Speaker 3
It was no longer a successful product in the U.S. like in Canada. It made $500 forthat, like a night. Those are like different areas we’re doing. And I’ve also become like a much more sophisticated ad manager than like I was before. So before I was just like sending up ads. I didn’t really pay that much attention to match types.

00;14;33;25 – 00;14;54;26
Speaker 3
I didn’t really do anything with like negative keywords. I didn’t do anything with display ads. I do like search reports, figuring out like keyword shouldn’t be big ad bidding on and getting them out and like writing down rate costs, like doing stuff like that, if that makes sense. Like I would, I would just look at like campaign manager and say like, this word has like a 48 cost I need to bid last.

00;14;54;26 – 00;15;16;16
Speaker 3
I didn’t look like okay this is a brought you were see like what search terms are actually generated from that. Let’s see if any of them convert crappy to negative them out the ones that are bidding good let’s turn them into like into like Kickstarter campaign and then bid like the appropriate amount for it. So like between, like getting rid of junk results that are coming in from like our phrase and broad and like de parting and like not running ads like at certain times.

00;15;16;16 – 00;15;42;23
Speaker 3
The other thing I started doing in like right texture, I noticed during like a bunch of different holidays, our ad before, like people were just looking and like we would get like a horrible cost on like Mother’s Day, Father’s Day, 4th of July, stuff like that. So I just like started like put a 20% coupon on my products like those days across the entire Staunton all ads off and like doing great and I had like the best profit being like I had like an entire month because people actually buy because they see a coupon and then like the redemption rates.

00;15;42;23 – 00;16;00;09
Speaker 3
Yeah, the redemption rates on the coupon are only like 50%. So if you have like a 20% coupon on after the coupon fee and everything, it’s probably going to cost you like 11% or 12% because 45% of people don’t click like the coupon actually. So I don’t know. Those are those are kind of different strategies that we’re doing available.

00;16;00;12 – 00;16;19;14
Speaker 4
The single holiday is is something we haven’t done. I think we’re going to we’re going to test that out. We’ll we’re taking notes on that one. We did holiday this year. We did. I think it was like the 23rd through the 3rd of January. We shut ads off because we had seen historically last two or three years, ACOs was like 50 to 70% because of window shoppers, like you said.

00;16;19;14 – 00;16;38;29
Speaker 4
So I think a couple comments. One, I think like what you mentioned, Adam, is you’re just kind of like honing your skills on ads, getting better and better at ads. I think that’s just going to be the name of the game as Amazon moves forward. I know on their books they released their books last few quarters and they’re advertising revenue comparable to the rest of their net income is just skyrocketing over the last year or two years.

00;16;38;29 – 00;16;50;20
Speaker 4
I think they’re realizing that it’s an easy revenue stream for them just to dial up the ads, you know, and it used to be on page one, it was like three or six slots for ads. Now I think it’s half the page is advertising. And so.

00;16;50;20 – 00;17;08;08
Speaker 3
Yeah, definitely. I actually we have a couple different ad reps if you spend a pretty good amount that are from Amazon and I actually found the Amazon ad reps to be more helpful for us than like the agencies that we like hired and tried. And they can run ads for you or like set up campaigns and like you can approve them.

00;17;08;09 – 00;17;23;02
Speaker 3
And we’ve gotten like a lot of value with down there pretty good too. I think people are generally weak with like display and branded. So like we had them like set up all our display and branded and then like the one so that they did a really good job on. We counted the ones that didn’t perform. We like turned off.

00;17;23;04 – 00;17;39;29
Speaker 3
We ended up like with a bunch of campaigns that like you need council like 50 that we’re spending like a couple thousand dollars a day in our store. So I thought that that was valuable. So like, I would, I would refrain away from like if you get the opportunity to work with Amazon and their ads for typically, I know a lot of people delete those emails, but we’ve had a good experience.

00;17;39;29 – 00;17;50;10
Speaker 4
Yeah, I was just going to say that I need to stop deleting those emails and actually take a take a meeting with them and see because I think we get those every, every month for, for each brand and I’ve always just deleted them.

00;17;50;10 – 00;18;08;15
Speaker 3
Yeah. The things that I would be like apprehensive to try is like anything that they give you. If you really become a big spender, they’ll try to do stuff like get get my you to advertise with like Amazon Live or like on their, their fire powered things or whatever. And if it’s not like really measurable and you can show a course on it, like I wouldn’t do it.

00;18;08;16 – 00;18;28;24
Speaker 3
Like they’re going to talk to you a lot about building up your brand and stuff like that, but most people just don’t have enough margin to build up your brand. I mean, if you’re a shark vacuum and you’re making 70% margin on your rack, you you can invest money building your brand. If you’re breaking back here, which is my best category, bright and you’re making 37% margin on your back, you you don’t have you have to just have return on your out.

00;18;28;24 – 00;18;32;24
Speaker 3
You know there’s a big, huge leap to becoming a shark. You know what I mean?

00;18;32;24 – 00;18;51;22
Speaker 4
Yeah. Other follow up question I have for you is right in that same space. So if you’re running a large store, do you manage and specifically PBC Last question I have on BBC before I move on, but if you’re managing a large, you know, revenues upwards of 20 million, do you have a strategy on the amount you spend for PPC or do you unlock it if it’s under as say, echoes of.

00;18;51;22 – 00;19;06;07
Speaker 3
30, we spend as much as you can that keeps the acres up because we’ve noticed in niches like I could be, I’m going to go back to vacuums. We have a vacuum that’s like maybe like the 25th, the 30th best seller. Just to give you an idea of depth that’s like maybe 100 shells a day. It’s a pretty competitive, huge net.

00;19;06;07 – 00;19;25;25
Speaker 3
So I noticed like our sales up to a certain Malaga organic grows a lot and like we’re making like $65 on an organic sale. So we want organic sales. So if our sales volume of our daily sales dropped from like 100 to like 60, our inorganic sales like all the clips. So that’s why that’s like why you want to do it.

00;19;25;25 – 00;19;42;08
Speaker 3
It’s not, it’s not. So you can get like all these sales and then if you have a good product you like want to get like as many reviews. So you basically like want to run more ads, but you don’t want to run them like unprofitable. I’m not a big proponent anymore of unprofitable ads. I don’t even run a lot of unprofitable ads on new launches.

00;19;42;08 – 00;19;59;03
Speaker 3
And I generally for new launches will like divine. So we have some reviews will be patient. So we have like our 2530 reviews and then we’ll start running ads. And I try to get to like a cost of like 45 to 50 by like week two or three. I’m not really I don’t really see the benefit of like a short run blast.

00;19;59;03 – 00;20;19;23
Speaker 3
If it doesn’t sustainable, it’s not going to sustain your organic traffic and it’s going to spend a lot of money. So I just like you don’t want to go into like advertising with like no reviews because I was like one or two bad reviews to like ruin the whole rating and momentum on it. But we’ll go in with, with like a completed Vine campaign and we’ll just send the, you know, the units and wait for it to be over and then we’ll start running from there.

00;20;19;23 – 00;20;37;09
Speaker 3
That makes sense. I used to like totally try to blast it, but I’ve just noticed like the results are not sustainable. All that like you got in the blast, like once you use off. So you didn’t really get like a huge benefit from it. And the margins are just so much thinner. What the percentage of sales that are ads that I don’t think you want to throw that much money away on ads.

00;20;37;09 – 00;20;52;23
Speaker 4
Yeah, absolutely. The last question I had is so I get this right at that value, then you’re not managing for tacos. You’re saying, hey, any, any, any ads, I can buy a 30% echo. So we’re going to unlock budgets and that’s going to push organic sales up, which are way more profitable. To balance that out.

00;20;52;23 – 00;21;11;20
Speaker 3
We’re looking at tacos as as a tool, but we’re we’re pushing out as much break even advertisements like as we can like on every single product. So in general, based on our products in our store, our A target is like 20 to 30%. And that’s basically like the average product as a 35% margin and a 5% return rate for us.

00;21;11;21 – 00;21;24;13
Speaker 3
This stuff all make sense to me, but I don’t see like a lot of people say that I’m just saying that’s like, dude, that’s like the rationale why we’re doing we’re not coming up with exciting profits. I don’t want to like I came on here the like two years ago and I was like, we have like 35% margin and all this stuff.

00;21;24;13 – 00;21;45;09
Speaker 3
If like after storage costs and everything you’re at like in the teens for margin in this business, it’s pretty good. I think in Canada, the UK could probably do better, but in the U.S., if you want to be competitive, that’s where you want to be. And then like we had some listings and my friend who I served on the board did some listings, have like tens of thousands of reviews or a pretty good listing.

00;21;45;09 – 00;22;02;15
Speaker 3
And they and they were like, number one bestseller tags. If you didn’t lower the prices on them, like in the last year, they like somebody else came in and like, took over being number one because you can’t sit there forever no matter how great you think your listing is. And I have like an oversize 50, 60% margin and think it’s going to last forever.

00;22;02;15 – 00;22;22;00
Speaker 3
I mean, basically if it was the number one seller of space ever bags on Amazon for five, six, seven years in a row and it’s not anymore. It’s because I was selling a space ever bags on our best days on a 2599 pre-COVID we went to 3999 and COVID and I mean, I don’t know the store anymore, but the last time I looked, it was being sold at some more price to what we were selling it out.

00;22;22;00 – 00;22;41;04
Speaker 3
So that’s just not a competitive price. If we’re making 50, 60% more than somebody is going to come in and a Chinese seller and take 25% margin and they’re going to take number one. So then you got to decide like you want to have less, you want to keep up a losing market share or not in general, I think unfortunate that if you accept losing market share, like eventually your listings are going to become less and less real.

00;22;41;04 – 00;23;04;12
Speaker 3
And that’s basically Amazon. And why is it become more commoditization unless you have like a real super like, you know, like a real super brand, like a shard vacuum or brick or whatever. Yeah. Which nobody, nobody that you’re going to get on of Call has a brand. I mean we had some really good brands like Zap it for Bug Zapper that sounds like a real corporate brand in that it would get, you know, because it was zapping and a look at some cool graphics.

00;23;04;12 – 00;23;08;05
Speaker 3
It would get a premium. But it’s not it’s not shard or Coca-Cola or whatever.

00;23;08;09 – 00;23;39;05
Speaker 2
Awesome. Well this has been really, really good conversation. I think we could we could spend another couple of hours just focused on PPC. But let’s turn the corner and talk a little bit about product selection and identifying products. That’s something that as people that have existing businesses, obviously that’s the lifeblood of your company, is introducing more products and when you’re just getting started, it can be overwhelming and so curious if when you’re looking for new products to sell, are there any price points or categories or sizes that you’re focused on or use as criteria?

00;23;39;05 – 00;23;54;16
Speaker 3
We tried to do the strategy for broad tech. Actually, I just came off of this huge, you know, huge windfall sale of web deals. And I actually didn’t even go to project of my own money. We had a really good relationship with our bank. They warned us millions of dollars to start like this new store, which they would never do, like in the startups.

00;23;54;16 – 00;24;10;18
Speaker 3
I was like, Let’s go sell more expensive higher end items, oversize items, because they’re going to be more they’re going to be like less competitive, higher margin, stuff like that. And I think that’s really been a mixed bag. I just give you a few examples of it. So I met a guy, a purge used to work on Drugstore.com.

00;24;10;18 – 00;24;27;16
Speaker 3
Drugstore.com has a brand called New Loom on Amazon. They’re like the 10,000 ton gorilla on the site. He was doing like work for them. They’re making tens of millions of dollars on it. Let’s go. And right there’s this huge barrier to entry. It’s massively expensive. We’re importing a lot of product from Turkey and India, a little bit from China.

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00;24;27;17 – 00;24;49;07
Speaker 3
That’s really complicated and nobody really knows how to do that. There’s going to be great and then we’re going to do it. We’re going to sell it three points or one PPI. So we want to introduce Turkish rugs. And we were really cautious. We made design very similar to something were popular. I didn’t try to pick like remit, you know, reinvent something, jute rugs, which are like a thinner, like single color, like brownish rug and then like a plush rugs which came from China.

00;24;49;07 – 00;25;19;28
Speaker 3
And the Turkish rugs is the best quality product of ever. It’s like should be so much more on Amazon, but they’re just like people that are selling it through New Loom about like margins that are only like 30%, 30, 35% and like really pushed on the market. But we’ve been getting killed on it because the reason why the big rug sellers are selling on one page is because on Amazon, on the faces of them, like rejecting our inventory, like left and right, you would just like randomly send in a truck of rugs that way, like £50 each and they just like don’t feel like accepting the rugs.

00;25;19;28 – 00;25;36;01
Speaker 3
And then like you got you have your delivery canceled. You know, all these are fees associated with it and then have to redo it. And the math of like the entire business were everything. And the fact we had 50% of our rug shipments in the Amazon rejected like made the whole thing like a colossal failure for Turkish rugs.

00;25;36;02 – 00;25;53;25
Speaker 3
Now do rugs happen away while less and and the plush rugs and the Turkish rugs. So we’re able to make those work, but we’re basically selling off like a million and a million and a half dollars of the other product. And then like other ideas that we tried to give you an idea, vacuum Stick argues end up being really successful for us.

00;25;53;26 – 00;26;13;08
Speaker 3
I was going to make like over $1,000,000 profit this year, and we tried canopies like pop up canopies, and I think that would have worked and we spent a lot of time sourcing it and our product hovered around the 4.2. And if your product wasn’t 4.3 on Amazon, 4.5 visible, like you couldn’t charge any margin on it at all, like because no one would buy it.

00;26;13;08 – 00;26;33;25
Speaker 3
So it’s basically like you could get like 35, 40% margin and get 4.5 visible and a good looking listing and it was a 4.2 list and you’re just basically like skipping by with like almost no margin. So that that was a failure for us. Like, I think like in general we’ve been more successful on selling stuff that cost less money, more like 5 to $15 for a unit.

00;26;33;25 – 00;26;52;16
Speaker 3
And I mean, our success rate has never been like super duper awesome, great. I would say like if we launched three things now, like one thing would be a loser. One thing would be like, minorly successful. Like maybe we can make it make $200 profit a day after like a year. And the other thing would go like, colossally great, like it makes $1,000 or more day profit.

00;26;52;16 – 00;27;10;08
Speaker 3
And then like, we notice things that we made $1,000 or more a profit on that if you did related things in that niche variations, different sizes, similar product that the chances of that being successful was way higher and class based. As an example that our store that did 25 million last year, we launched a couple of different plastic containers and they did well.

00;27;10;08 – 00;27;27;23
Speaker 3
So then we launched different sizes to pack for about six packs, a pack, one to top Baublebar and you know, we went from selling, you know, $10,000 a day like a year and a half ago in January, we did $150,000. They all come out and it’s just like it’s just like doubling, tripling, quadrupling down, like I what work.

00;27;27;23 – 00;27;47;19
Speaker 3
But in general, like, what we try to do is we try to pick niches with depth. So like in the example of like the vacuum niche, you could be like the 100th bestseller on vacuums and stick back in category and still sell like 50 a day. And the gross margin on a vacuum is like 50, 60, $70. So you can see, like if you can get anywhere on the top 100 in that category, you’re going to make some money.

00;27;47;19 – 00;28;03;11
Speaker 3
And then if you’re fortunate enough that you could get in the top ten, you’re going to like a multimillion like product. It’s more competitive, but there’s a lot there’s a lot of winners in it. Like mostly like if you look at kitchen storage, which is like class based, very similar, like a top 100 seller, still selling like 50 units, number one seller or something like number 2 to 3 unit.

00;28;03;18 – 00;28;32;13
Speaker 3
Think we have we’re the number two best seller in the category, selling like five 600 units without SKU like a day. Joey The type of stuff. So like people usually shy away from niches like that. We’ve got after like vacuums kitchen storage space, paper bags, you know, hoses, roll covers. They’re like really competitive, huge niches. But then like some of them, we ended up in the middle where even like you do really mediocre and end up like 80th best seller and you to just making, you know, like 200 bucks a day.

00;28;32;13 – 00;29;00;29
Speaker 3
But then you get some that’s like 20/30 mass already of apartments making several hundred thousand dollars and then like once in a while, if you’re product like maybe like one every 3 to 6 categories, you join where it becomes like, well, I consider a big winner. Now with today’s market, if it makes over $1,000 profit and then like you have your profitable items and you’re doubling and tripling down, and then you’re also at least putting them in like the UK and Canada markets, because those are easy to implement because they’re English based and they have a lot less barriers than like the European market.

00;29;00;29 – 00;29;25;06
Speaker 3
And like I personally have never tried like Japan or India or anything like that, but I don’t know anyone who’s an American seller who’s ever make good money in any of those markets. So I’m really reluctant to try and basically sticking with those three. When I had Web deals direct, we tried to, you know, go outside of Amazon, try Walmart, eBay, Shopify, retail, and we brought in a lot of staff and made a business a lot more complicated to do all those things.

00;29;25;06 – 00;29;42;17
Speaker 3
And at the end of the day, when you looked at our $18 million of even I we sold 17 and a half millions of dollars came from Amazon and $500,000 of it. But I came from this other stuff. So when we started to like the new businesses, we decided just to stick to like the brand border and like, keep it simple, stupid.

00;29;42;17 – 00;30;01;16
Speaker 3
So like, we have like the easiest smallest headcount business that you’ve ever seen. So basically have three guys, me, Duncan, Charles, you have two stores, class based brand tech. We have one VA that supports like both stores for customer service. Now I’ve been tasked and then everything else is like outsourced and we use like flax or AGL and stuff like that.

00;30;01;16 – 00;30;22;00
Speaker 3
And we’re talking about just to give you volume between both stores this year, we’ll probably do like 45, 50 million sales with basically like basically like three staff. That’s, that’s, that’s because we’re not trying it, we’re not trying to do too many things. We’re just trying to keep it really simple. We’re not doing it. We’re not on eBay, we’re not on Walmart, not on Shopify, not doing retail.

00;30;22;02 – 00;30;40;25
Speaker 3
We have to do something that’s related to graphics or design or photography. We’re just outsourcing it. Or we are like, there’s really good three piles out there that there weren’t before. The problem with them is there are such a demand for them that they don’t even want the small fish anymore. So like you talk to a company like flax, we’ll say like a lesser bill to us is $100,000 a month.

00;30;40;28 – 00;31;08;05
Speaker 3
At some point, like we were told, they wouldn’t even take you as a customer that was like resold. So just like if you want to have like a like a full service, like really good three people, like the whole entire marketplace is just not geared for like the guy your neighbor wants to keep his job and have a side gig and put 25,000 bucks down and turn it into like a $50,000 income, like the way it was like in 2015, 16, 17, 18, maybe 19 of the last year.

00;31;08;05 – 00;31;27;09
Speaker 3
It’s really it’s a much more professional cost, you know, costly endeavor to like, get on to Amazon. People come up to me and say, I want to get on the Amazon. I’m like, You need hundreds of thousands of dollars or you need access to like hundreds of thousands of dollars to try to or like an art. And if you don’t have that, your chances of succeeding are very, very, very low.

00;31;27;09 – 00;31;42;22
Speaker 3
And you’re like, before that, I used to have a whole bunch of friends in like 16 and 17. They got an Amazon and like I was so confident that they were going to succeed on Amazon with me helping them a little bit. I actually like posted on Facebook. I think it’s 2017. Anyone who wants to get into Facebook, I’ll teach you how to sell on Amazon.

00;31;42;22 – 00;31;57;19
Speaker 3
And then I had like one or two people go badly out of like maybe like ten and like, I basically, like, help them out financially because I didn’t want like them to take a loss, but like, I would never, ever, like, go on to like Facebook right now and say, like, and say like, I’m going to go help You saw an Amazon.

00;31;57;19 – 00;32;01;18
Speaker 3
It’s just not the same. It’s it’s very, very difficult now. Sure, it’s good for.

00;32;01;20 – 00;32;18;26
Speaker 4
The landscape has definitely changed over the last several years just to kind of round out the product selection based so out of it sounds like you’ve kind of cleaned it up from your web deals direct to now. I’ve got two new brands and see so you’re launch and you’re trying like oversize, you know, trying a bunch of different things, launch you like, say, three products at a time.

00;32;18;26 – 00;32;31;22
Speaker 4
One crushes it, one does medium and one is a dud. So are you phasing out those duds and then the other ones that are not doing okay and just keeping the really good ones and then launching three more? Or are you building a brand around the one that does well or.

00;32;31;28 – 00;32;53;19
Speaker 3
How do you know? No, I mean, like the ones that are doing well, you’re trying to build a brand around, especially if are like if there’s like related stuff, unless unless there’s a special reason why that one is doing well, that’s like not repeatable. I’ll give you an example of that. We have one stick vacuum that was doing really well, so we decided to launch two more and we were getting a good percentage of our sales from some affiliate sites and and some of them being review sites.

00;32;53;19 – 00;33;16;21
Speaker 3
And we found out that like one vacuum on like the review sites would just like overshadow the other one. So like you couldn’t like make all three of them succeed. So if it wasn’t if you weren’t if it wasn’t successful on Amazon without like the off Amazon traffic, like, I wouldn’t do it. But in general, like in a space, like clear space where we’re having containers that work or making debris, different sized containers or one look dividers, ones tops and stuff like that.

00;33;16;21 – 00;33;36;18
Speaker 3
Yeah, doubling or tripling down makes sense. Or even with their existing listings, like adding on to it, we saw a jute rug and we started in like the main colored garages brought and then we picked like all the popular sizes to start off maybe like eight or ten. So that started to do well. So then we added runners and then runners made an extra $500 like the ones you put in your hallway and so like that.

00;33;36;18 – 00;34;04;00
Speaker 3
Sure. Well, like when we first launched, we did launch black ones and white ones because like, so now we’re adding black ones and we’re adding white ones. And like every time we incrementally like, add something like that for a listing that like already has organic rags, 4.4 rating, 700 reviews or whatever now, like, it’s like easier to get traffic in sales to it where it grows mentally adding something to it, which you see other more mature listings like already have and then like we have like four or $500 of revenue from adding runners and I mean a profit.

00;34;04;00 – 00;34;20;24
Speaker 3
And then we’re adding about to that black. I think black will make like three or $400 and we’ll have like two things like very targeted ad campaigns, like we’re only targeting we already have ones that are really optimized for like Girod Gibran Pride, myself and Junebug, some of by nine workshop campaigns that are like black Jerrod, broad black crap like that.

00;34;20;24 – 00;34;36;00
Speaker 3
And then we’ll get some people that are looking for regular gym rugs or just like black, and then the other ads will come in. We’ll be like really targeted. So the cost should be good. Also benefiting from the fact that my listing, Brad, of this very variation already has four or five visible and already has like 700 reviews.

00;34;36;00 – 00;34;36;19
Speaker 3
Does that make sense?

00;34;36;20 – 00;34;37;20
Speaker 4
Oh, yeah, absolutely.

00;34;37;23 – 00;34;59;11
Speaker 3
So. So you really want to bid on your winner. So then you have a winner, then go check. Does this type of niche to all Canada and you know, all the data is there from Jungle Scout and all that kind of stuff, and that’s what you should do next, if that makes sense. Or the UK. But we spend a lot of time in Europe and web goes direct and I, when looked at my margin in Europe and like the year we sold the business we did like in Europe like 6 million and sales and our margins are like 5%.

00;34;59;11 – 00;35;09;07
Speaker 3
So that’s why have, that’s why I’ve avoided Europe but actually Europe and UK differently, especially since Brexit, because you have to like import them separately and they have a whole different set of rules.

00;35;09;07 – 00;35;16;09
Speaker 4
Yeah, for sure. So we’re coming up on time. But David, we probably have time for another two questions. I know you had a couple of on your mind were out of, let’s.

00;35;16;09 – 00;35;34;02
Speaker 2
See, inventory storage and these new capacity. So how are you handling these? And just to our listeners, Amazon has thrown us a series of curveballs as it relates to inventory capacity and storage limits. And as we record this yesterday, March 1st, there is another big change in. So how have you been navigating this?

00;35;34;03 – 00;35;53;16
Speaker 3
Okay, this has been particularly frustrating and it’s been extremely frustrating, like opening new stores because like Web deals, correct? When we first started talking about deals, direct like storage space was not an issue. Go work, You have a new town. It went to like like 1 million units you could have. So one of the things we did was like clear space existed before Bride Tech.

00;35;53;17 – 00;36;11;21
Speaker 3
So we took a bunch of class based products that had some friends who had sold oversize stuff and they got the you and I bought their inventory that when sold it in my other store for like two months before I started selling and Bright Act. So that like moved up my inventory based on their stuff that like already moved really, really well and that like enabled me to like go in to the, like project instead of other thousand units.

00;36;11;21 – 00;36;32;05
Speaker 3
Like the first day my first shipment went in, had like 30,000. I thought that was particularly smart. I think that you had to do stuff like that a real challenges we had is we decided to sell some items that were first was branded, so they moved like awesome, but they only moved awesome like for for Christmas. So it was challenging because we wanted to send in like 40, 50,000 units and they had like no history of on order.

00;36;32;05 – 00;36;51;16
Speaker 3
We sent them all in and then we got into a situation where then Amazon lowers your storage like, like once it gets in the holiday season and then we couldn’t send in our other stuff. It’s really and then the storage fees in the fourth quarter are really expensive. So it’s very, very challenging. What to figure out what to do, especially if you’re trying to grow like in that example or a new category.

00;36;51;16 – 00;37;04;25
Speaker 3
A lot of it’s like, what? Because you can’t even time it the way you want. Like there’s a lot of like you want to send stuff in during holiday and like, it takes weeks and weeks to get in, or it could just like go in nice and smooth, like when you’re planning it out, like you just never know.

00;37;04;25 – 00;37;20;24
Speaker 3
So like your example, like where you have your warehouse, where you have like a backup option, like FBM and stuff like that. We’re doing like that type of stuff. Like it. This doesn’t go in like FBM is not as good as FBA, but it’s better than like not selling the item at all. So like, will prepare for things like that, It’s pretty hard.

00;37;20;24 – 00;37;39;21
Speaker 3
But I think the new changes that Amazon made are better. That went in March 1st. But I can’t tell you because it’s been like one day. But our store and both of our stores, the amount of available units went up by 40 like 40% versus like February 28. I like the idea that they can allow you to pay more, to send in something to bid against somebody else.

00;37;39;21 – 00;37;56;09
Speaker 3
Because if I want to make a decision, I really need to get these like toys in for Christmas because like, people are only going to buy toys like in December. I would rather like, accept a lesser margin, be able to get them in. Then I have to go do MFP or get someone to do FBM on it. When everyone’s doing up here because it’s Christmas.

00;37;56;09 – 00;38;14;03
Speaker 3
So I think like gives you like more options than like what you had before. But yeah, we’re in general having way more problems with Amazon overseas stuff that like I would never have thought of like a couple of years ago, just like your stuff getting rejected we were sending in. This was new to me from last week. We’re sending in our best days in from Crunchbase.

00;38;14;03 – 00;38;27;24
Speaker 3
We had like a full container of it because we’re selling like 600 units a day and they literally accepted like half the container and they said, You don’t need any more of that. And then they just said, and they just rejected like six or 7000 units in the container and then sent it back and we had to make another appointment.

00;38;27;24 – 00;38;42;11
Speaker 3
So I don’t even know what’s going to happen, but I open up a case. We’re like, we want to be reimbursed because like they didn’t send the units on. It’s particularly hard. And then like, we don’t definitely don’t do everything right. Biggest mistake we know, like, especially when you’re selling something for like the first year, you don’t know how it’s going to do.

00;38;42;11 – 00;38;59;08
Speaker 3
You’re going to make some dumb decision class based. I mean, we sold in 2020 Wamba or like $10,000 a day, and then it was like tenfold. We didn’t realize that like fourth quarter plastic storage containers don’t do that well because people like to spend their money on gifts. And that’s really a gift. And then it explodes again in January.

00;38;59;09 – 00;39;22;09
Speaker 3
So we just had way too much stuff at Amazon. It’s extremely big and bulky people and our sales dropped from the third quarter in the fourth quarter only 30%. And as a result, we incurred storage fees for the fourth quarter at an average of $350,000 a month. And it wiped out like almost all of our entire profits from the fourth quarter we made like we were going to make like 400,000 a month profit.

00;39;22;09 – 00;39;38;10
Speaker 3
And so we made like zero because of that. Now we’re going to know for like next year that like people will buy as many storage containers in November, December as they do like in October for some reason. So don’t have that many there. It was a big, ugly million dollar loss. So, I mean, that’s that’s part of it.

00;39;38;10 – 00;39;52;19
Speaker 3
I mean, like I was saying, especially over bags and there’s a lot of seasonality to that, too. And I never would have thought it. And I made a lot of mistakes, but never any of that bad because of it. Just the class base ended up being really bad because like plastic bags were like flat and small in the biggest storage building ever had.

00;39;52;19 – 00;40;10;17
Speaker 3
Four models Iraq was like 130,000 for a month, like in the fourth quarter. I never even heard of a $350,000 storage board. Never met anybody who’s at a storage bowl like that. But yeah, that there’s a lot of unfortunate lessons that you have to learn being an entrepreneur and going into a niche and trying to grow and be successful.

00;40;10;17 – 00;40;12;26
Speaker 3
And you have to use your best judgment and sometimes you’re wrong.

00;40;12;26 – 00;40;28;05
Speaker 4
We had a similar situation, much smaller, but a similar situation last year. One of our brands for the winter time storage fee and that was not fun. We’re coming up on time adeptly. Like I think we probably talked for another hour, but and maybe out of maybe we bring John back next year and kind of see see what’s what’s going on there.

00;40;28;05 – 00;40;33;19
Speaker 4
But I definitely want to get into the fire rounds. It’ll be an abbreviated round because this is your second time. Are you ready?

00;40;33;20 – 00;40;52;27
Speaker 3
I’m ready. But don’t ask me about books this time. All right? What are your hobbies? What are my hobbies? I love tennis and I love boating. And I’m starting to like golf a lot. And I didn’t want to retire, but I wanted to kind of expand those hobbies. So typically, I usually work until about now, like about 2:00 in the afternoon.

00;40;52;27 – 00;41;06;25
Speaker 3
And then I take like the second half of the afternoon off and I do one of those type of activities, like pretty much like every day. And that’s something I wasn’t really able to do with Web girls. Correct? My wife’s a she doesn’t want to quit being a doctor for another ten years. So like, people are like, why do you do nothing?

00;41;06;25 – 00;41;24;06
Speaker 3
I’m like, Go do nothing by herself. Like all day. Pretty boring and up top of yourself, like in a restroom, top of your phone. But yeah, I started playing a bunch of other tennis leagues, and I really like that a lot. I’m not a great athlete, but I’m good enough that I can give some middle aged men some competition and yeah, that’s like the stuff that I like to do.

00;41;24;06 – 00;41;33;04
Speaker 3
And if I wasn’t an entrepreneur, I wouldn’t be able to like go play tennis at 2:00 in the afternoon or go on my boat or something like that. And that’s one of the things I’m super thankful about.

00;41;33;04 – 00;41;36;02
Speaker 4
What is one thing that you do not miss about working for the man?

00;41;36;02 – 00;41;56;04
Speaker 3
I really like to be able to like, make my own decisions about like what I’m doing and not have to be in an organization where you like, have to go get everything approved. And that’s probably like the biggest thing is you’re just able to it’s great. But then if you’re not, if you’re not an entrepreneur, it’s like paralyzing for people who don’t want to like, make their own decisions and have to live with that for the business.

00;41;56;06 – 00;42;11;22
Speaker 3
I’ve felt a lot of times like when I was working in consulting that I could be a partner, but I wasn’t allowed to be a partner and they didn’t give me a chance. And like, I mean, I only made it, like to middle management and I was working there for 14 years and I just felt like I was pigeonholed by it.

00;42;11;22 – 00;42;31;02
Speaker 3
I could go be like a great salesman and bring on like these huge contracts for, like my company. But they just I like it was in a system where I wouldn’t be given the chance and to grow and change kind of where I was at. And like if you’re an entrepreneur or even someone like me who’s a guy trying to mostly be at home, raising their kids can grow a business that makes $18 profit in a year.

00;42;31;02 – 00;42;39;21
Speaker 3
You can really you can really grow things beyond your wildest dreams. I mean, I never even intended to do that. You know, my dream was to make $350,000 a year later that was all.

00;42;39;23 – 00;42;45;12
Speaker 4
Yeah, that’s yeah, it’s it’s a remarkable story. It’s very inspiring. David, over to you to close out the show.

00;42;45;12 – 00;42;56;13
Speaker 2
Yeah. What? Dad, I want to thank you for being a guest on the Firing Man podcast and I do feel like we just scratched the surface on some of these topics. So definitely going to have to have you back on. But thank you so much for your time.

00;42;56;13 – 00;42;59;17
Speaker 3
Yeah, anytime. If you want to bring me back next year, I’ll be glad to show up.

00;42;59;17 – 00;43;02;04
Speaker 2
We we’d love to have you. All right. Thank you, Adam.

Sale
Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game
  • Deibel, Walker (Author)
  • English (Publication Language)
  • 310 Pages - 10/20/2018 (Publication Date) - Lioncrest Publishing (Publisher)