Interview with Jacob Erdei – Entrepreneur and Google Ads Expert

Episode 158

Welcome everyone to the Firing The Man Podcast, on today’s episode, we are joined by Jacob Erdei.  Jacob Erdei  has 20+ years being self employed. In the early 2000’s after leaving a computer manufacturing company he went on to start his own in-home computer repair business and has been forced to pivot several times.  Currently his focus is on acquiring ecommerce businesses through a vertical acquisition strategy.  Ken met Jacob in the Rhodium mastermind and we have the pleasure to share Jacobs vast experience with you today.   Welcome to the show Jacob!

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David Schomer

Welcome everyone to the Firing Demand podcast. On today’s episode, we are joined by Jacob Purdy. Jacob has 20 plus years of experience being self-employed in the early 2000s after leaving a computer manufacturing company. He went on to start his own in-home computer repair business and has been forced to pivot several times. Currently, his focus is on acquiring eCommerce businesses. Three Vertical Acquisition Strategy. Ken met Jacob in the Rhodium Mastermind and we have had the pleasure to share Jacob’s best experience with you today. Welcome to the show, Jacob.

00;00;31;25 – 00;00;34;01
Jacob Erdie

Hey, thank you. Great being here. A fan of the show.

00;00;34;02 – 00;00;40;21
David Schomer

Thank you. So first things first. Can you give the audience a snapshot of your background? Previous jobs and experiences?

00;00;40;27 – 00;01;16;20
Jacob Erdie

Yeah, and I’ll kind of start, but I’ll call my first real business. And so I just graduated from college and it was associate’s degree in computer networking information technology. With that degree, I did nothing the first year. And so essentially right after graduating though, roommate of mine, his parents owned janitorial business and kind of we were talking about businesses in general and starting something up together and we ended up starting up a janitorial and maintenance company that also did construction cleanup and that company, it only lasted for about six months, but that was like my first real iron type company started up and it ended in flames.

In terms of, yeah, we had some sales numbers and weren’t necessarily bad there, but ultimately it was a very bad partnership or some drug use in there and you know, other things that come about from that. That was my first experience, having a real business and partnering with somebody. And after that I was like, I just swore off doing any business partnerships. I was like, I’ll never do a business partnership again. And ended up moving on. I ended up getting a job leaving that company, and I ended up getting a job at Compaq and Compact computer manufacturer then bought out by Hewlett-Packard. HP and HP outsources all of their all their manufacturing. And so when I found out that HP bought Compaq, he had somebody coming in that day from Foxconn.

And Foxconn at that time wasn’t really known. It’s one of the largest companies in the world. At that time, nobody really knew of them. And, you know, it was clear that that’s who they were going to be contracting to. So I kind of just knocked on the guy’s door, said, hey, I heard you’re hiring. He’s like, Yes, we are.

And I jumped ship right away from HP over over to Foxconn. And from there, I ended up having to move out to Indiana for about a year and a half. I was a computer engineer over there, did a bit of work for them during that time. My wife got accepted to a veterinary school in Fort Collins, Colorado, so I ended up moving to Fort Collins, Colorado.

I got a job there, only lasted me 30 or 45 days. I was a supervisor to a computer repair company. It’s a big, big electronics store chain that’s very popular in the U.S. and for me it was the corporate life, and I dealt with a lot of that already with inner fighting in Compaq and HP and people stealing each other’s work and trying to justify their job to stay employed.

There’s just so much politics that go in into, you know, corporate America in general. And it just wasn’t for me. It was the only job I ever really walked out on. I just I ended up walking out. I was just like, you know, I’m just going to start my own company. So I went home. I started my own company bringing Xbox Computer Solutions, you know, got a ad in the Yellow book.

It was going to come out like three months later. And then my my wife comes home and I tell my wife like, hey, I just started my own computer repair company and I quit my job. And, you know, her response was, well, can you get your job back? So it was like, well, no, but that’s when we sat down.

We talked about as long as I could pay the bills. I was good to go. As long as I could pay and meet my commitments to help support our family were good. So, you know, once I had that blessing, I was able to move forward. And, you know, whenever you start a company, I wouldn’t recommend just quitting a job and having no income and starting a company.

I much prefer like the chicken entrepreneur approach where you keep your job, but then you start something on the side and let that income build up a far easier way of doing it. But I was kind of thrown in there and so ended up getting a job. Carpet cleaning was a contract job. So I’d go out and I’d carpet clean and I clean at home and then, you know, I’d go into the truck, I’d switch out from my scrubs.

I kind of like Superman, right? But on, you know, something semi nice and then go do an in-home computer repair job and then switch back into scrubs, do carpet cleaning. I did that for close to a year. In roughly about that point, all my computer repair business was slowly gaining more and more steam and all I really needed it was just 400 more dollars, just 400 more dollars.

And I’d be able to quit carpet cleaning because cleans a lot of hard work. It is. And little pay, hard work. And and, you know, I just need 400 more dollars. And ultimately, that’s where I discovered digital marketing, affiliate marketing, I should say, promoting other people’s products and services and getting paid to do that and did AdSense and things like that.

It didn’t take too long. About a few courses. Some are good, some are bad. But over the following six months, ultimately like month six, I ended up earning $100 and then month seven I earn 208, I earned 400 and I was able to fully quit the carpet cleaning gig. And slowly over the course of the next year or two, the digital marketing aspect of the business started earning more than my in-home computer repair business, which was taking up full time work for me at that point, with my wife closer to graduating from college, I knew we’d be moving and so I ended up selling off the in-home computer repair business and just focusing full time on doing affiliate marketing. And there I built up over over several years, I built up a really, really nice income and had had nice income coming in. I had a few different tech start ups in between on that too, that I tried my hand at. Overall, at the very peak, I had close to like 30 K net. That would have been the actual cash flow.

Now keep in mind most of the money that I made, I ended up putting back into the business. I did buy a number of content businesses as well, or content websites, I should say, and then ultimately one day I woke up and even though I had, you know, 100 different niches, 150 different websites, you know, I woke up and Google said, Jacob, we hate you and we hate all your websites.

And over the course of about six months, I saw all my all my income, you know, from 30 k net to about two K net. And keep in mind, I didn’t stack a lot of funds either. I was putting a lot, most of it back into the business. I was living really frugal and you know, that was, that was a really hard lesson because I thought I was diversified.

I thought, No, look, I’m in all these different niches. I have these these websites and different hosts. I thought I was doing what was what Google wanted as well. That was the other real shock. And yeah, I was gaming the system a little bit like everybody does. There’s always gaming the system if you’re doing any kind of SEO.

But you know, ultimately the tables turned and I learned that, Oh no, I really only had one customer and that was Google. And when Google said, Jacob, we don’t like you anymore, my business was gone. And with that I kind of swore off doing just organic traffic. I said, No, you have to be able to run paid traffic to the offers.

That way it won’t die on you, right? If I can make money by running, pay traffic to something and arbitrage that difference, then then it’s a business. And so I kept doing what I was doing there. Yeah, some content, but focusing more on affiliate offers and running affiliate business. But over time, you know, I kind of quickly realized I say quickly, but it was like a three or four year journey and I had multiple different start ups again that I tried, you know, some bigger swings for the fences.

I kind of learned that everything I was doing, I was building on quicksand. And so no matter what, you always get kicked off of affiliate offers, they always go down. You don’t control it. You don’t own the customer, you don’t own any of that. And so essentially what I was doing is I was building income and it was good lifestyle.

Don’t get me wrong. I you know, I had zero customers. I had zero issues really to deal with. And so that lifestyle aspect was nice, but there was nothing that I could sell at the end of the day. For me it was important and this is roughly about, you know, four or five years ago I realized after after another start up, I had went under.

I kind of realized that, no, I need to find something else. And ultimately that’s when I turned to just focusing more on ecommerce and starting e-commerce or purchasing e-commerce websites. And to go down that path was kind of a big round about way to where I’m at now.

00;08;12;03 – 00;08;33;00
Ken Wilson

Sure. So no, thanks for sharing all that. And I think David and I always chat about all of the times we have to make pivots and lessons learned and we learned, I think, the most in in our failures. And but if you’re never taken at bats, you’re never you’re never going to have those lessons learned. So I saw some signs that, you know, you’ve had a wealth of experience with pivots and lessons learned.

And so, Jacob, I know that you’re a Google ads expert, so I’d like to pivot into this a little bit, specifically for ecommerce. Can you speak to like what’s working regarding Google ads for eCommerce in 2022?

00;08;45;06 – 00;09;05;21
Jacob Erdie

Yeah. And, and absolutely the biggest thing that’s working for most is going to be Platts or product label ads. So absolutely, especially on the ecommerce end. And so that’s where a lot of my focus goes into is, is just ensuring that, hey, you know, is my merchant feed how, how do those products look? Are they presentable, are they good? And then running a play ads and ultimately the play is going to get you a lot cheaper CPC than let’s say, and a keyword search ad is going to get you.

00;09;14;22 – 00;09;16;20
Ken Wilson

Okay in what is a play ad?

00;09;16;26 – 00;09;30;06
Jacob Erdie

Yeah. So the product label ads are going to be the product ads that you see. So if you were to type in, let’s say, you know, red violins or something like that and Google, you’re going to see those six or seven ads that are up on top are showing products. And those are going to be the play ads.

00;09;30;08 – 00;09;41;21
David Schomer

Now, have you found any trends in terms of like either types of products or price points or maybe sizes of products that tend to perform better with Google ads than than others?

00;09;41;23 – 00;10;02;00
Jacob Erdie

Not necessarily there, but the more margin you have on the product that you’re promoting, the more you can take stabs at doing different things. And so a great example would be, you know, a recent website that we purchased, Waiters Ecom, so think fishing waiters and hunting waiters and stuff like that. There we have really, really good margins on it and it’s a higher price point.

But I could also spend 30, 40, $50 to acquire a customer, whereas another website that I have, model, great example. So that’s a website that we acquired here not too long ago. And on that one, the margins are horrendous. I can’t make it profitable except for I found one little niche inside there that I’ve been able to make profitable and make some money on.

But because there just isn’t a whole lot of profit margin, it’s really, really hard. So I can’t necessarily say that there’s a certain price point of prices that work better. But one thing for sure that I see a lot on Google is, is if it’s one of those products or services that people absolutely need, then they’re more likely to buy.

So your conversion rate in general is tends to be a little bit higher. And so if you have a product or service that people pretty much have to buy for one reason or another, then your conversion rates in general are going to be better.

00;10;53;16 – 00;11;03;01
David Schomer

Okay, I’m looking forward to 2023. Are there any strategies that you think will kind of persist as the Google machine is tends to be ever changing?

00;11;03;01 – 00;11;24;20
Jacob Erdie

Yeah, it’s always evolving and new new ad things come up. You know, we had expanded ads take over from regular text ads and then responsive ads because expanded ads are now retired. And and so, you know, it’s always going to be an evolving ecosystem. But the one thing is is clear and that’s the you know, Google’s always, always taking over is giving you less and less control.

And they’re putting more and more control into their own hands. And so I think, you know, one of the things to really look at for when you’re running Google ads is not just Google ads, but ensuring that your entire funnel is functional. So, you know, ensuring that, okay, when somebody lands on your website, you’re there to capture their email or that your product page, you know, so many e-commerce descriptions for products are really, really, you know, piss poor at the end of the day.

In the end, you know, I’ll use the waiter’s dot com example again there. It’s a recent acquisition for us, very, very recent. But on a lot of the waiters they didn’t have sizing charts like sizing charts weren’t there people you know, there’s already high return rate in there per field in general. But if you don’t have a sizing chart like, you know, people are always going to buy the wrong size and then you’re going to end up with all kinds of problems.

So just ensuring that your funnel itself, not just Google ads page, does your landing page convert? Does it look good? Does it answer the the individual’s questions? Are you capturing their email? Are you then remarketing to them? That’s very important. And then are you following up with emails, you know, band and car emails and, and things like that.

So ensuring that your full funnel is there is really important. And then Google as well, if you can niche down let’s say you are running search ads specifically if you can niche down and ensure okay I’m going to set Skaggs level ad groups which are single keyword ad groups and, and so ensuring that you’re going after and theming and sending people not to your homepage, but to a search page on your site or the product page on your site, that closest matches the keyword, the search intent that people are doing.

So sending people to the right destination and then customizing those ads for those specific keywords is going to help give you a higher click through rate, which is also going to give you a better quality score, which is going to help lower your CPC overall. And you know, through kind of all that together, you’ll have a better chance of performing.

The other thing is ensuring that you’re spending enough money over a long enough period of time. And so by that I mean, hey, don’t just say, okay, I’m going to set my budget to $100 a day for this campaign, and then three days later you’re not making money and shutting it off in frustration. It’s like, well, maybe, maybe start with $10 on that campaign, see what the keywords are coming in, add in the negative keywords, refine it a little bit, and over time increase their daily budget and kind of keep those lower CPCs and just kind of figure out, Hey, what’s my ROAS return on ad spend and kind of go from there?

So it’s starting smaller and then trying to scale out is an approach and getting very, very granular overall. That’s an approach. It that’s, that’s been very successful for me.

00;14;04;28 – 00;14;25;23
Ken Wilson

A couple of follow up questions, Jacob. One is you had mentioned earlier like you were struggling with one of your portfolio companies to run profitable ads now, and you had mentioned having enough margin to run paid ads. Now, is it enough margin or is it pricing like so let’s say you’re selling a $10 product versus a $100 product and you have a 30% margin on each.

Now, have you in your experience, like when you bought businesses and you’re looking for more, do you have a criteria on price of the products in the catalog or is it just margin?

00;14;34;24 – 00;14;58;27
Jacob Erdie

No, it’s not necessarily all just margin, but it’s more margin than price. And a really good example of it is like as an affiliate, I used to push a lot of automotive paint and there as an affiliate in general, I’m used to like 10% commissions, 5% commissions, you know, like really low margins. And so getting that stuff profitable can be really, really hard.

But if you’re honing in and there’s a lot of buyer intent and you’re going to have a higher conversion rate on it, you just you don’t necessarily know. And so a great example would be one of the companies that we own as a quilt company. We sell a lot of quilt patterns. We’re one of the largest quilt pattern companies around and are getting there anyways.

We got a few competitors we got to knock off still. But you know, there the average quilt pattern is going to send any sell for anywhere from 10 to $12. But we make some good money. We make some good money because we have a lot of repeat customers because we have that full funnel in place so we can pay a little bit more to acquire a customer.

And then even there, because we have good margins on the product and people don’t just buy one quilt pattern, they might buy three or four. You know, our average order value, for instance, on Google ads is right around $26. And so with that, we have enough margins for our campaigns to to reach, you know, a five, six, seven ROAS there, which is return on ad spend, which clearly makes us money.

And so that’s a low, low cost dollar item. And, you know, I’ll I’ll spend all day long on that.

00;16;02;08 – 00;16;24;00
Ken Wilson

Yeah, you kind of highlighted that how that full funnel makes an impact on on everything, whether you’re, you know, your post-purchase follow up, your upselling at checkout, all of those other things combined with it. So makes sense. Next question I’ve got is I know you’re deep into Google ads have been for a long time. Do you guys test any other ad platforms like Instagram, TikTok, Facebook, Pinterest? And if you do, do you guys see any gems out there or are they just all noise?

00;16;28;29 – 00;16;46;05
Jacob Erdie

I know every business is going to be different. And, you know, one thing I learned from pushing so many different affiliate offers was you just don’t know what’s going to work until you try it to kind of test throughout and you know, whatever you get good signs of life on focus a little bit more of that and keep building it up.

Pinterest, for instance, it’s it’s taken a while, but for Pinterest, for the quilting company that’s working really well for us now, we’ve put some effort in on the organic since we had the organic sales going, but we also have paid sales going to on the paid ads, which if you use the Pinterest attribution model and site Pinterest itself, it’s it’s pure crap.

It’s 100% baloney. The the row is that you they say you’re getting is false. It’s not true. It’s based upon people seeing your ad never clicking or interacting with it. And I know that because we have, you know, we use Google Analytics and we have UTM codes. And so we can actually see, hey, what’s working, what isn’t working there on Pinterest?

But yeah, for for Pinterest we have that working on a quilting site. Same with Facebook, Facebook, the, the demographic is really, really good. It fits in well with with that niche and, and it does really, really well then for other businesses can work it but oftentimes people give up way too early. They spend way too much on the front end and just don’t give it enough time.

I’d rather say, Hey, you know what, Start at $10, start at $5, start smaller, keep testing different campaigns, keep testing different audiences. Also feed Facebook. You know, do some like campaigns of people who are already like it and then similar to audiences to your existing customers and your existing customers let you know feed Facebook that data of the people that who are already visiting your website and who like your ads.

And that Facebook will will kind of learn, hey, this is who who, you know, interacts with these ads. And then over time you’ll probably discover an audience or to that works well and it just it just takes time. Very, very similar to what I said with model cars where we don’t have huge margins to work with. But still on Google ads, we have some winning campaigns.

They’re never going to scale all that big at this point in time. But, you know, through testing, we’re able to find some some gems. And, you know, I can’t speak to tip talk at all just because I don’t understand Tic TAC. I try the app a few times. It’s on my phone now. I just it just not me.

But I’m sure there’s I know there’s people out there crushing it, you know, like you just got tests. You don’t know what’s going to work until till you test.

00;18;56;18 – 00;19;07;22
David Schomer

Very nice. Now, let’s pivot a little bit into e-commerce. How has 2022 been for you and your portfolio companies? It’s been a good year, bad year. What would you say?

00;19;07;26 – 00;19;34;08
Jacob Erdie

Overall? I’d say it’s been a really, really good year. And so the quilting website, for instance, we’ve had that now for 15 months going on 15 months and we were able to triple sales there largely throughout 2022. And so that’s been really, really good and that’s been a major focus of mine. I try to spend 80% of our time on what’s working best and focusing on that, and that one has definitely been more of a runaway success for us.

But you know, the other sites I have, I have a fantastic home decor website, so think dragons and fairies and mermaids, you know, all that fun stuff. And that one like Google ads, completely got gutted in in 2022, the CPCs doubled, the conversion rates went down. It just it just didn’t work. There was a lot more competition that entered into the field.

And in there I haven’t haven’t had nearly the growth that I would have wanted. In fact, this holiday season, my sales are down like 30% in in Q4 currently on that. And, you know, so that’s that’s, you know, disheartening. But at the same time, all my eggs in one basket and we did buy with Fairy Glen and the quilting business very Glen’s the fantasy themed home decor company with both those ones were bought with the SBA loans.

With the quilting one, we put a lot more money down, so we put, you know, 50% down on that one. And there we have a lot more margins because our cash flow or our cash flow is a lot better because we have less debt. And so I’m able to take that capital, put it back into the quilting company to get that super hypergrowth.

Whereas with the other one with Fairy Glen, we leverage that one to the max. So we put the 10% down. We extend it the loan as far out as we could for inventory to get capital operating expenses. And there especially with interest rates going up, you know, I’m able to service the debt on that company, but not much else.

I’m not getting a paycheck this year from the company. Or if I do, it’s going to be really, really small. I’m still able to pay the debt just fine. But, you know, it just speaks to, hey, if you leverage, there’s a cost to that. And the cost ultimately is is growth. Because if I had a lot more inventory on offer, Glenn, I’d be selling a lot more, too.But we’re already a lot of our top sellers, which is really, really sad. You know, lately, Q4, this is where you make money.

00;21;22;25 – 00;21;36;23
David Schomer

So right now on the on the quote income you mentioned that you tripled sales was that if you were to pick like three reasons for that happening, was it was it product launches, was it refining the current catalog? What what would you say led to.

00;21;36;23 – 00;21;56;08
Jacob Erdie

That not killed income? I’ll stress that. I wish. So maybe in the future, if you’re out there and you own that domain, you willing to sell it at a reasonable price? Please hit me up. But I know there are several things, and a lot of it is when we when we purchase a company, you know, one of the things we look for is where’s the win, what value we bring to the table where we know we can grow this company.

And it was already a really good company. The woman who started it was a fantastic person who had 30 years of experience in the field shops and she set up a really, really good business. But ultimately she was capped because she could only handle so much. She’d have some part time people coming in to help out ship items out.

But she was running operations out of her home. She couldn’t keep the items in stock, so customer would order it. Then she’d order it from the manufacturer, they’d ship it to her. And for us, a lot of it was, okay, well, let’s start holding more inventory. Let’s build up the inventory. And that way we can ship stuff out a lot faster and, you know, keep at least all the top sellers in stock then.

So we did that. Let’s say she mailed out two times a week to her customer list and it wasn’t religiously mailed out because she was like, No, if I’m too busy, then I won’t email. And it’s just like, wow. And so for us just, you know, doing those two emails a week, can we do we do technically two emails, and then every other week we throw another one in there, like new products.

And then just ensuring that we’re pushing out a lot of new products. We’re always adding on more product to the website because there’s a lot of new patterns that come out weekly. And so we continuously just keep adding more and more product onto the website, whereas, you know, she didn’t religiously do that, but we do. It’s part of our process.

And then on the marketing end, there wasn’t any any big sophistication going on there. And I was able to to look at the key pieces that other people were paying in that niche cost per click and determine that, oh, we could do really well on the paid marketing end. And so we’ve been able to set up very, very successful Google ad campaigns and Facebook campaigns and target those towards individuals and all that has been just slowly feeding into growing the business.

And then along with the repeat customer rate, just fantastic repeat customer. These are fantastic people who buy and there’s zero fraud. There’s zero fraud in that industry. So you can ship pretty much anywhere in the world. Nobody’s trying to steal your quilt patterns for free, which is. Which is awesome.

00;23;56;19 – 00;24;21;20
Ken Wilson

Yeah, that’s that’s kind of funny how you how you highlighted there is zero fraud and that comes from experience. I’m sure that, you know, a lot of people listening to this podcast have probably experience, you know, you know, a competitor attacking them or, you know, or whatever. Who knows? But no, it sounds awesome. And just to reiterate, the company that you’re of primarily the last several years year, you’ve been focusing on acquisitions, correct?

00;24;21;22 – 00;24;40;26
Jacob Erdie

Yeah. Yeah. And so starting about four, four, four plus years ago is where I determined that that because I had a lot of success with the acquiring companies when I was affiliate of acquiring some affiliate content websites like the first website end up buying it was for I want to see like a 16 month revenue and that one.

Yeah yeah. Well that’s what the way it was. You know if you go back, you know 12, 14 years, 15 years, you know, the multiples were a lot lower. You know, I did fantastic on a number of those. And so, so my thought was, well, let’s just buy an existing business because start ups are hard. They take a lot of work, a lot of effort and a lot of time.

And if I can cut that in half and just already buy something that’s operationally already working and then utilize my skill sets and my my business partner, his name is Tim, he’s my tech partner, I’ll never start another business without a tech partner. That’s that’s a lesson I learned from a previous startup. And so it’s like I kind of have a tech partner.

And so he was, you know, I networked with him for over a year. He was a Rhodium member and he was in a mastermind of mine. I knew him for over a year before he ended up doing a business partnership together. And yeah, that’s worked out really, really well. It’s it’s a good model if you know what to look for.

00;25;33;22 – 00;25;45;06
Ken Wilson

Awesome. Looking into 2023, you know your portfolio of companies, are there one or two things that you guys are looking to improve on or tech or opportunities? What does the landscape look like for 23 for growth?

00;25;45;06 – 00;26;07;03
Jacob Erdie

Yeah, so we have the existing companies. We’re we’re going to be able throw more money out and slowly grow them. As far as the acquisitions go, we’re not in an acquire or die mode anymore. So so we’ve reached enough capital and enough earnings where we don’t have to absolutely acquire something or die. And I say that because we started a three PL So a third party logistics facility.

We bought a warehouse, we store all of our own inventory and we ship out for ourselves. And that operation was negative. You know, when I started that company, I started that one with an SBA loan and I had enough cash in the company to run for 18 months. I had 18 month run rate. We’re now like 20 months into it.

And just like this, this last month, which was the 19th month where we’re running out of cash, was our first profitable month. And so, so so now we’re we’re large enough to be able to cover those costs and hopefully we can going forward. And so we don’t have to acquire a die. One thing I am looking at on the asset purchase end is, is to really take our time and find the right company that’s a good fit for our wheelhouse.

That might be a, you know, a company that’s already doing really good or it might be more of a distressed asset. So waders, for instance, was a little bit more of a distressed asset that we purchased all in cash with a little bit of a seller’s now, but it’s already almost paid off. You know, we’re I’m looking at potentially buying more distressed assets because the more I’m seeing how a lot of these e-commerce companies are written, there’s there’s a lot of opportunity, especially on ones that are failing because we already have examples of companies that are successful in what we’re doing there.

And a lot of those tactics can just be applied to the new ones. And it’s nothing revolutionary in any way whatsoever. You know, running a business is running a business that just, you know, ensuring you have sales and cash flow and and in manage manage your balance sheet appropriately.

00;27;34;20 – 00;27;52;03
David Schomer

Absolutely. So as we’ve gone through this conversation, it’s become abundantly clear that you’re an entrepreneur and you have a lot of experiences within this space. And so I’m curious, what advice would you give to your younger self? Say, say, Jacob at 21, just, just getting into things.

00;27;52;09 – 00;28;12;21
Jacob Erdie

The first thing I’d probably say is, hey, diversify out of organic traffic because Google is going to kill you. But really it’s it’s more about owning the customer and then understanding the risks you’re taking better. And so so, you know, I don’t feel I had a good grasp of the risks. I was taking. And I fully didn’t understand like, oh, no, if I lose Google, I lose everything.

That’s sadly a lesson that I’ve had to repeat multiple times building in other people’s sandboxes. They changed their API and now your code is dead. Business is non-operational now. And and just, you know, understanding that a lot better. And in really focusing like I said, on your own customer and building an asset, something that you can actually sell down the road, something that’s sellable because then you’re actually building equity and you’re actually building something of worth.

And so you’re putting all your time into something that you can then later sell down the road. And so that’s that’s where I would have told a young Jacob to focus more on.

00;28;46;27 – 00;29;07;10
Ken Wilson

Excellent. I like that a lot. The last question I’ve got here is more on the acquisition piece of it. So as you’re like looking, you had mentioned some of the assets that you’ve acquired were distressed, some of them were decent. You know, as you’re as you evaluate businesses to buy, what are some things that you’re looking at in terms of how you can add value, how you can grow them?

This maybe at a high level, not specifically for you, but maybe a list of, you know, 3 to 5 things that you’re that you’re looking forward to that you can add value.

00;29;14;28 – 00;29;30;19
Jacob Erdie

Yeah. For in general, some of the some of the criteria and of course everything’s going to change depending upon the price in which the site is selling for. So, you know, waiters, we got that at a fantastic price. A lot of cars that again we got a really good price and that one our clear win for that was the SEO is messed up.

So they transfer the site from another site to Shopify. They didn’t do like three or one redirects properly. It didn’t do a lot of like really easy stuff. You know, most people on in the content or ecommerce world would know like, Oh, that’s a big no no. And so, you know, we just saw where we could add in our value.

But ideally, you know, if I was looking at a company today to purchase, you know, I’d want them to be, you know, ten years old. You know, that way they have an established customer list, you know, continual growth. So year over year growth, you know, might be affected there by COVID a little bit. You know, operationally, it has to be a good fit for us.

So it has to be within our wheelhouse, you know, a product or service that we’re comfortable promoting and just, you know, clearly identifying what when do we add to this? Where’s the meat on the bone? You know, understanding that he is it a diversified sales channel. So if if somebody like I will avoid with the plague, if the only businesses I won’t touch an FBA business, the reasoning there is because will FBA is only Amazon.

If Amazon cuts you off your dead. And so it comes back to that, you know, understanding your risks. Amazon says Jacob, we heard Google hates you. Well, guess what? We hate you now too. And then you’re done and there’s nothing you can do. And Amazon’s a big company and they won’t bat an eye. You hear a lot of this horror story.

So ensuring that’s a diversified sales channels, is it is it a website? Do they have a customer list that you can email as an email list? Actually do they purchase, you know, hey, what’s their organic profile look like, things along those lines? And then within that you can take a look at, Okay, well, they only send out an email once a month.

You know, is this something where no people would appreciate getting emailed every week? Like right there, You could do a lot better in sales or, you know, hey, do they not have shopping cart abandonment emails going out or are their product listings very, very vague and they’re not answering basic customer questions. Coming back to like waiters website, well, they don’t even have a sizing chart.

Pretty obvious things that you can do. You know, if you can find that meat on the bone or where you can add value. Amazingly enough, a lot of companies don’t even answer the phone. You know, some of those can have a drastic increase in sales if you just answer the phone, because a lot of those people just want to make sure you’re legit or they want to place an order over the phone model cars.

Great example of that. We did several thousand sales this last year just by answering the phone. It’s a big deal.

00;31;42;02 – 00;31;44;07
Ken Wilson

Okay. Yeah. No. Excellent. David, any follow up?

00;31;44;13 – 00;32;02;15
David Schomer

One more follow up on the acquisition model. So I know I’ve got to get the email from the brokers that has a company. It’ll give some details, maybe some revenue numbers, which is kind of like their teaser, right? So I’m assuming that you received those. And I would assume that there’s probably if you see something that piques your interest, there’s probably a follow on request.

I want to look under the hood, learn more about this company. So when you are looking under the hood pre acquisition, what steps are you taking and what types of information are you asking for?

00;32;11;00 – 00;32;26;21
Jacob Erdie

Look at the prospectus and the prospectus is going to tell you, you know, a number of things like how many suppliers do they have? So if it’s just one supplier, well that that’s kind of a red flag because what if that supplier cut you off? Do you do you have access to another supplier? Where is it that I could save money or add money?

You know, in my case, I have my own three people now. So if they’re paying, you know, $5,000 a month in warehouse costs, like touching like that’s five grand, that could be going to my three PR company, you know, just looking over predominantly. Yes. The prospectus, which is going to give you information on how the company is ran, the products that they sell, but also understanding the PNL, the balance sheet and the cash flow statement.

With those three things, you’ll be able to re-engineer that true seller discretionary earnings, for instance, if it’s a husband and wife that are running the company and they have no employees, they might claim, Oh, we have 200,000 sold discretionary earnings, okay, you got to replace two employees. Like that’s not that much money that they’re actually doing. So I’m going to remove, you know, maybe 90,000 off that and recalculate.

But what my offer would be and, you know, the the unfortunate thing is, is and fortunate now is, you know, multiples are starting to come down again. Interest rates are up, multiples are coming down. You know, it’s just ensuring you don’t overpay. You make your money when you buy. So just like in real estate, don’t overpay. You know, that’s that’s the bigger one and making sure it’s within your wheelhouse and that you can add value onto the business.

Yeah, of course there’s a lot more you can go into like there’s, there’s a ho ho indepth my due diligence document is I think 40 pages long. So it’s you 40 page board documents. So there’s a lot of stuff that I check off and I look at to get that I built that a lot off of if anybody’s not subscribed to quite like brokerage emails, they do the best intake forms, period.

So just request one to our company, sign up to the list or request one and you can see like their prospectus that they give out, which is really, really in-depth and they’ll get you a lot of understanding of, okay, these are really good questions that are asked and it gives you a lot of insight into into the businesses.

00;34;10;08 – 00;34;13;02
Ken Wilson

Anything else we want to cover before we head into the fire round?

00;34;13;05 – 00;34;14;16
Jacob Erdie

No, I’m good. Let’s go.

00;34;14;18 – 00;34;15;19
Ken Wilson

What is your favorite book?

00;34;15;22 – 00;34;32;06
Jacob Erdie

My favorite book because I do a bit of fiction reading and I so I’m not even going to give you a business book. It’s it’s King Killer Chronicles and that’s Patrick Rutherford. Think I’m saying that name wrong. And so even if you don’t like fantasy, like kings and magic and stuff like that, read it. Anyways, get the audiobook.

The audio book is fantastic. King Killer Chronicles book one, book two, Book three will be out someday. I don’t know when, but you know, it’s my favorite book. Otherwise, if you’re interested in actual acquisitions through buying a business, through acquisition, the Harvard Business Review, the Harvard Business Review, buying a small business is a really good read that has a lot of stuff in there as far as doing due diligence and other stuff.

That’s a book I’d recommend, even if you’re going to buy something small. It’s a really good book to go through.

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00;35;01;08 – 00;35;03;05
Ken Wilson

Okay, awesome. What are your hobbies?

00;35;03;09 – 00;35;22;18
Jacob Erdie

So I like, you know, hiking. I do walks. I have a daughter, like spending time with her overall and I really like investing in general. So I read a lot about investments and, you know, different companies and, you know, different ways of making money. And overall, it’s kind of kind of what I focus on. I’m big currently into the junior mining space.

It’s a it’s not an area of investing I would recommend anybody ever go into and it’s understanding your risks and your risk tolerance level. And you have to have a really, really good risk tolerance level  to be able to do that.

00;35;35;03 – 00;35;36;23
Ken Wilson

Did you say crypto mining or.

00;35;36;23 – 00;36;00;24
Jacob Erdie

Junior junior mining? What is you think gold mines and gold mines and resource sector? So companies that are on like the Canadian TSX Exchange, So So no crypto mining. Yeah, Yeah, crypto crypto mining and crypto in general. I again, I was very, very early in that field. I am the worst crypto investor in the world. When I say I have a lot of failures, it’s beyond belief like, like my experiences in the crypto world.

It’s just just yeah. So I avoid it like a, like the plague. I’m a pariah. They’re not to say don’t own anything and stuff to say, don’t buy here and there, but I’m a, I’m a perma bear in general. It’s it’s largely a solution in search of a problem.  All right.

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00;36;14;04 – 00;36;20;17
Ken Wilson

So next question. What is the one thing that you do not miss about working for the man a lot?

00;36;20;19 – 00;36;35;25
Jacob Erdie

You know, the politicking, that would probably be the biggest thing that really turn me off to the politicking. And then, you know, when you’re on your own boss and you’re actually making a little bit of money, you can outsource the things you hate. And so if you don’t want to do it, you don’t have to do it. You find somebody else to do it for you.

00;36;35;28 – 00;36;43;01
Ken Wilson

Absolutely. Last one. What do you think sets apart successful e-commerce entrepreneurs from those who give up, fail or never get started?

00;36;43;04 – 00;37;00;20
Jacob Erdie

There’s there’s a lot there. I’ll come back to some of that risk tolerance understanding risk tolerance, not necessarily putting your eggs in all basket, not necessarily going all in. I really, really like the chicken entrepreneur approach. You know, don’t quit your day job, start something off to the side and then persistence, knowing that you’re going to fail and you’re going to have to pivot.

That’s just the way it is. But you’re gaining experience along the way. And as you gain more and more experience, you gain more and more confidence. As you gain more and more confidence, your experience level is going to meet opportunity. And at some point in time, those two will will meet and you’ll have the right experience level with the right opportunity and you’ll be able to take advantage of that, whereas other people won’t be able to.

00;37;21;17 – 00;37;23;08
Ken Wilson

Excellent answers over to you, David.

00;37;23;08 – 00;37;27;00
David Schomer

You had to close out the show. If anyone’s interested in getting in touch with you the best way.

00;37;27;01 – 00;37;36;11
Jacob Erdie

I think I am. I have my LinkedIn profile in the show notes, hopefully. And so really that’s it. Feel free and and reach out to me there. Say hi. So that’s probably the best way to get a hold of me.

00;37;36;12 – 00;37;41;27
David Schomer

All right. Sounds great. Well, Jacob, thank you so much for being a guest on the Firing main podcast and looking forward to staying in touch.

00;37;41;27 – 00;37;43;22
Jacob Erdie

Yeah, absolutely. It’s a pleasure being on. Thank you.