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How we turned a $13.76 investment into one of the fastest growing shopify stores of 2016!

Written by Mike Cooch

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In this blog post, we are going to show you the simple, effective and slightly unusual way we launch our very fast growth ecommerce business. 

How fast?

Fast enough that we are ranked near the very top of this year’s  Shopify Build a Business Challenge (it doesn’t seem that we’ll be the fastest, damn it…better luck next year!).

Fast enough that we are shipping out thousands of orders each day after only a few months in business (the mail bags in the picture at the top of this post are a day’s orders stacked up outside of our office in San Diego, waiting for pick up from the local Post Office)! 

And we started it with a $13.76 advertising investment to get it all rolling.

Read on to learn how!

About Us

The team at BeACapitalist.com is passionate about building highly profitable businesses that we actually enjoy. But what we love the most is sharing what we learn, so that we can help people break out of their J.O.B.! 

We are constantly on the lookout for opportunities that will make it easier for people to achieve their dream of business ownership and financial independence. 

That’s why I’m SO EXCITED about sharing this Case Study with you! 

You’ll learn what we think is the fastest, easiest and most affordable way to start a new ecommerce business, or rapidly grow an existing one. 

I’ll lay out the exact model we used – from our first $13.76 spent on Facebook ads, to reaching the million dollars in revenue mark in less than 4 months!

Our background in eCommerce

We started our journey selling physical goods online by leveraging the Amazon platform. We had our fair share of success, reaching about $5,000/month in income in just about 60 days in our very first attempt. 

Not a huge number by any means, but it got us hooked on ecommerce. Leveraging the Amazon platform has many benefits, and it’s a very effective and simple model. 

However, one of the things that we didn’t like about it is that we didn’t own the customer, which we felt limited our growth potential as well as the value of the channel to our business. 

Being able to tap into Amazon’s in-built traffic was great, but for the reasons mentioned above, we wanted more control to market our own products very aggressively in order to scale. 

So we decided to start selling off of Amazon as well, which led us to this new business.

Deciding what to sell

Starting a new ecommerce business is full of interesting decisions, not the least of which is what to sell. Since the options were unlimited, we developed a list of criteria to evaluate ideas. Most importantly, we wanted to sell something that:

  • Was part of a large, fast-growing market
  • We could proactively market using direct response advertising
  • We could advertise on Facebook, because we felt that would give us the fastest and easiest opportunity to find customers very quickly (which it absolutely did!)

We came up with a few different ideas, and got started talking to manufacturers and researching advertising targets. Then…we were off to the races!

Six-figures in sales in just over 60 days – before we even set up our Shopify store!

I know you’re probably thinking, ‘Wait a minute, how did you do so much sales if you didn’t have a store yet?!’ 

Here’s how: We believe in testing our new ideas as quickly and cheaply as possible, so we started this business using what we call a ‘eCommerce Sales Funnel’ – a simple direct response marketing funnel – rather than setting up an entire store, which takes much more work and takes much more time. 

Using this approach allowed us to test incredibly fast and with almost no overhead costs! At the same time, sales obviously didn’t suffer. 

As you see in the image below, we pulled in well into the six-figures in revenue before we even had a store! 

Here are the numbers from our start on September 15th up until early November, when we made the switch to developing a full ecommerce store:

What exactly is an ‘eCommerce Sales Funnel’?

An eCommerce Sales Funnel is a direct response marketing funnel used to quickly acquire new customers, ideally at a profit.

There is a lot of jargon in that sentence…let’s break it down a bit. 

Direct Response means we’re spending money on advertising (in our case, on Facebook ads), and we’re looking to get people to take action and buy our products immediately. 

We measure our ROI based on how much we spent to get interested people to look at our offer, and how much revenue we made directly from those folks.  

This is NOT a branding exercise! 

In a ‘funnel’, as opposed to a store, we bring someone to a specific offer where their only choices are to either buy or leave. After a purchase, the customer has to go through a series of related offers before being able to complete their purchase. 

Let’s say you buy product 1. 

Now you have to look at my offer for product 2 and product 3 before you complete your purchase. 

For product 1, we use a very attractive, low-priced offer to attract as many as people as quickly as possible.  

Then products 2 and 3 are called upsells, and they are KEY to building a profitable funnel. 

Here’s what a simple version of a funnel looks like: 

This simple, incredibly effective model is how we got started quickly, without having to spend a ton of time and money before seeing results (we were profitable within days!).

Here’s why we started with a ‘funnel’ instead of a ‘store’…and you may want to, too.

Remember, a funnel is used to take people to one specific offer and then through a path of upsells. 

That’s totally different than taking somebody to a store, where they can browse around, look at a ton of different products or maybe get sidetracked and read your blog.

Now, I know you’ve heard people talk about launching a Shopify store, it’s a very hot topic in entrepreneurship this days! And we LOVE Shopify!

But, there’s a handful of reasons why we suggest that you may want to start your business with a ‘funnel':

  1. Very low complexity

    Launching a funnel involves setting up just a few web pages with a few products, instead of having to launch a whole store. In terms of images, copywriting, site structure, linking all product pages to your cart and autoresponder…there’s a LOT more hassle in setting up a full store than a simple funnel!

  2. Very low overhead

    What we love the most about this model is that it can work for even the most cash-strapped of entrepreneurs. All you need to get started is to build your funnel (my favorite all-in-one funnel-building tool for doing this is ClickFunnels), an autoresponder and a Facebook ad account (which is free!).

    You don’t even need to get a ton of inventory upfront if you can find a drop-shipper to send your products out for you after you make a sale.

  3. Very low commitment

    Having a low complexity and low overhead business model means that you can go into it with very little commitment.

    NOTE: this does NOT mean having low commitment to doing whatever it takes to reach your goal, it means not being overly-committed to a single product and/or market before you’ve tested.

    One of the biggest factors behind our success is our ability to quickly and easily test products and offers, making changes and trying new things quickly.

    If we had put in all of the time and effort to build a store, we’d feel much more ‘stuck’ with that store even if it wasn’t working out.

    But when we use a funnel, our ‘sunk cost’ in building the funnel is very low, so we don’t feel married to it. If we need to change things up, we do it!

    You WANT that kind of flexibility! This will allow you to test quickly, so that you can find a winning offer quickly.

    If we had stayed committed to our first tests, there’s a very high chance we wouldn’t writing this case study right now – this is an INCREDIBLY important point!

  4. Generates cash, a large list and a customer base…FAST!

    In most cases, you’ll be able to get much higher EPC’s (earning per click) using a sales funnel than you will with a store.

This means you’ll be able to generate more revenue per person who comes from your paid advertising, which means you can invest even more in your advertising.

Why? Because you can take people through a very specific purchase path and not give them any options outside of that path.

It’s been statistically proven time after time that if you minimize choices for people, they will take advantage of that one thing that you are presenting them at a much higher frequency than if you give them multiple options.

And since we have an optin page before people can buy, we are quickly generating a very large list of prospects and a customer base that we can then email to follow up with and send other offers (I’ll give you a powerful strategy to keep your list highly engaged – 25%+ open rates! – in a bit).

As you can tell, I’m a fan of funnels! :)

While I do believe other traffic sources and offer strategies work, if I had to pick one way to start or rapidly accelerate growth of an ecommerce business, this is it!

Ok, let’s take a look at a few of the important factors to make this model work…

Choosing a market

A big part of being successful with this model – or any ecommerce model for that matter – lies in picking the right market.

Here are some of the key questions we asked when evaluating potential markets:

  1. Is it a big enough market to build a long-term business around?

    We don’t want our funnel to just be a short-term revenue hit…we want it to be the start of a larger business. So we are looking for a market that is big enough to build on.

  2. Is there competition?

    Many entrepreneurs are afraid of competition, and therefore looks for markets that seem to be completely ‘untapped’. This is a HUGE mistake! You should be actively looking for HIGHLY successful competition doing hundreds of millions or billions of dollars in sales. THAT’S where you’re going to build a sustainable, long term business!

  3. Are there lots of products being sold both online and offline?

    If yes, that’s a GOOD sign! It another sign of a solid market full of active buyers!

  4. Are they repeat buyers?

    Are buyers coming over and over again to buy the same product? There’s nothing like a recurring income base to build your business upon.

    Are people passionate? Hopefully, you’ll be able to find a market where people are passionate, where they really LOVE buying your stuff!

And lastly, I highly suggest you get into something that YOU are passionate about; an industry in which you have a body of knowledge that makes you feel excited. That would be ideal.

To give you some examples of massive markets, Recreational Equipment Inc. is a business that’s making 2.2 billion USD a year, with massive stores all around the country. Camping and outdoor gear – that’s a HUGE market!

It’s also a market people are passionate about, and will buy several items year round!

Wayfair is another great example of this.

Wayfair is like an Amazon of home products; it sells products in the Furniture, Decor, Kitchen, Bed & Bath, Storage and other similar categories.

It was started by a couple of roommates in Boston, who bootstrapped it to $250 million USD in annual sales before taking outside investment.

How could they do that?

It was mainly because they’re selling in major product categories! People buy HUGE volumes of these products every single day.

And while before it was practically impossible to compete with the big dogs in this big markets, now we can easily place a more attractive offer in front of our prospects and be in profit in days.

That’s what’s so great about ecommerce…it allows you to compete with the big dogs in the most profitable industries.

So stop thinking tiny 50,000 person niches and start thinking BIG markets for a highly profitable, long term business!

Choosing a product to sell

Since we were selling the initial product at a very low price point to make the offer as attractive as possible, it was important that we try to find a product that is relatively low cost for us to fulfill.

We developed a simple checklist to help us find products that we can offer at low prices and still ultimately reach profitability with our funnel:

  • Is it a product that people are already buying in good volume?
  • Is it $3 or less in cost to you?
  • Is it easy and light to ship?
  • Can I ship it without it breaking?
  • Does it have a perceived value of $20 or more?
  • Is an easy, spontaneous purchase?

If we were able put a check next to all of those, then we felt confident that we had a product that was a potential winner.

Testing our funnel and scaling our ad spend on Facebook

The key to being able to ramp up our revenue as quickly as we did was our ability to tap into the incredible power of the Facebook advertising platform.

Facebook advertising is an entrepreneur’s dream!!!

As you can see, on day 1 – September 15th – we started this business with a $13.76 ad spend.

In the first week, we barely touched our ad spend, just adding an additional $20 in ad budget over the course of the week.

AD COSTS FIRST 7 DAYS

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Before it made sense to spend too much money, we needed to test to make sure that our target audience was going to respond to our offer.

How we found our target audience for our Facebook ads

Ideally, we wanted to find the best ‘buyer’ targets to run our ads to.

What do I mean by ‘buyer’ targets?

Let me give you an example.

Imagine I’m selling gardening products. I could target gardening blogs that share fun articles and photos about gardening, or I could target a gardening STORE.

There’s a BIG difference between the traffic of a gardening blog that people like to read, and a gardening store where people are going to actually BUY gardening products. That store has traffic made up of actual buyers.

So, if I can target a store instead of a blog, that is a much more attractive buyer target.

NOTE: Be sure to use Facebook’s Audience Insights to do a DEEP dig into possible buyer targets, it’ll be well worth your time. Ideally, you want to run ads to audiences of 500k+ people, and run ads to both very broad interests and specific targets.

‘Buying data’

Once we found our audience, our next move was to run multiple ad sets to get data fast, so we would know whether or not our funnel was going to work.

We call this ‘buying data’.

That’s our mindset. We are literally spending our money to buy feedback from the marketplace so we can quickly learn if we are on track or not.

This means running ads to multiple targets at the same time, so we can find out if we have a winner or not as quickly as possible.

We start all our campaigns with a $5-10/day per ad set budget. I suggest you do the same and let your campaigns run for at 3-5 days before making changes on them – be patient and let Facebook do its magic!

We were looking for obvious signs of success:

  • High click-through rates
  • A good percentage of people taking us up on our offer
  • Ad cost per purchase being less than 50% of revenue

Remember, our goal is to find an offer that has clear momentum, and then chase that offer hard. So if things were not looking too promising after 3-5 days, we were going to move on!

Ramping up our ad budget

We tested a few different products for the initial offer in our funnel…it turns out our third one was a home run.

After we found a winner, it was time to scale.

There are two ways to scale: ‘out‘ and ‘up‘.

‘Out’ means that you look for other targets similar to the ones that are already working for you, and advertise to them as well.

‘Up’ means you spend more to reach more of the current audiences you are already seeing success with.

We did both.

To scale out, I continued to do research on new targets that were similar in nature to the successful targets we’d already identified, and I put about 20% of my daily budget into testing them.

To scale up, I looked for ads that are reaching our ROI target, and I increased my ad spend by 50% each day that they hit the ROI target.

If they didn’t reach the ROI target on any given day, I didn’t raise my budget…I just let it sit at it’s current budget to see if it would start performing better.

If it started performing better again, great. If it didn’t after a few days, I’d kill it.

You can see how we kept increasing our ad budget in small increments…some from increasing the ad spend on existing ads (up), some from investing in new ads to new targets (out).

AD cOSTS sECOND 7 dAYS
AD cOSTS THIRD 7 dAYS
AD cOSTS FOURTH 7 dAYS

The reason why we didn’t want to do a sudden jump in ad spend, even if we were having great numbers, was so we could keep a close eye on ROI to make sure that it stayed consistent.

We didn’t want to throw our numbers off by increasing our budget too much too quickly.

Following this simple strategy, you can see that within a month we were spending more than $1,500 each day, or $45,000 each month.

That happened fast!

When and why we opened up a Shopify store

In November, about a month and a half after we first launched our funnel, we decided to launch a full store on the Shopify platform.

Why Shopify?

We love the platform. It’s affordable, easy to use, has tons of integrations, and they are great contributors to the entrepreneurial community. So it was an easy choice for us.

Why open a store now?

In order to capitalize on the momentum of the customer base we were building, and to hit our next stage of growth, we needed to offer a much wider range of products.

Offering a wide range of products isn’t what a funnel is designed to do, so it was time to open a store.

By this point, we had already proven there was a big market for our product, we had proven we had a winning product idea, and we had built a really big list of prospects and paying customers.

At this point, the effort required to build a full store was justified!

We kept (and are still) acquiring customers through our funnel offers, but the store allowed us to remarket to our list and customer base through email and Facebook retargeting, and sell full-margin products to people that were now repeat buyers, fans and loyal customers of our brand. 

And we were able to capitalize big time on this during the holiday season! 

While there was a point that we were weeks behind on delivery due to the incredibly fast growth of the business, we were able to scramble like crazy and get up to date before the big holiday rush. 

The big key here was that we were in constant, open communication with our customers, and we let them know what to expect, why this was happening, and thanked them for their understanding. 

We used email and social media, and an incredible support team we found, to keep our communication lanes open and the information flow constant.

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Creating repeat customers

Every ecommerce store has to find a way to drive repeat business if it hopes to survive.

During the month of November, we implemented a crazy effective email strategy that worked like gangbusters!

We called it our “Grand Opening Daily Giveaway”, in which we gave away one of our products every day.

This kept our customers and prospects incredibly engaged – and buying!

To do it, we used a viral giveaway campaign software called UpViral.

It’s a pretty slick software that allows you to build your list through people sharing your contest with their friends; I highly recommend it.

Every day we announced today’s winner, tomorrow’s prize, and a related offer – through both email and social media.

It was an incredibly effective strategy that had a huge effect in our sales for November, and helped us build an insane amount of goodwill and loyalty with our customers and prospects.

Check out these email campaign open rates – any business would LOVE to get this kind of response!

I highly encourage you to find a way to incorporate a similar strategy in your business!

We must have had a huge team to pull this all off…right?!

Actually, no.

My business partner and I started this, and we remain the only two employees of the company.

Instead of trying to hire employees during this period of crazy growth, we leveraged contractors from places like UpWork and GrowthGeeks, as well as people we found on good old Craig’s List.

I am so completely fascinated at how technology has made it possible for us to hire a team of specialized talent from all over the world.

It’s so dang cool that we have AWESOME talent working with us from Pakistan, England, Malaysia, Mexico, the Philippines, and more!

The ‘Outsourcing Economy’ and the move toward being a permanent free agent as a career has so many benefits both for freelancers and business owners it’s crazy.

When you’re thinking about hiring your next superstar, be sure to think globally and not just locally!

Summing it up and final thoughts

Clearly starting this business has been a fun and exciting ride, and of course not without it’s challenges.

We are HUGE fans of using the ‘funnel’ approach to quickly test your offers, launch into new markets, or rapidly accelerate the growth of an existing store.

Interested in Building Your Own eCom Sales Funnel?

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Follow the approach outlined above, and let us know what kind of results you get! And if you have any questions, please comment on this post and we’ll get back to you.

All the best,

Mike Cooch & the BiggerSmall.com Team

Mike Cooch

Mike generates 6-7 big ideas before breakfast (conservative estimate). BiggerSmall.com CEO & founder is a “serial entrepreneur” with Texas-sized passion for sales & marketing, business development, and technology. He is an expert in local and digital marketing. His businesses have been named to the INC Magazine List of Fastest Growing Companies three years in a row, and were also nominated as a Best Place to Work in their respective cities. He is married with three children, and is learning to surf in his new hometown of San Diego (lifestyle design, baby!).

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