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Hollywood Executive Turned Entrepreneur (and EXITpreneur) Part 1
Dan Smith is the Founder and former CEO of an e-commerce brand that sells iPhone wallet cases. In 2022, Dan sold his self-financed company for 100 times the invested capital. Dan is a former Hollywood executive, turned entrepreneur, turned EXITpreneur who spends his time consulting for major brands such as Fred Segal, Wired, Macworld, Beams (Japan), and AT&T.
Here’s a glimpse of what you’ll learn:
- [2:51] Dan Smith talks about his journey from Hollywood executive to entrepreneurship
- [9:28] Dan explains the origins of his business idea and how the first 1,000 products were manufactured
- [11:36] How did Dan’s product stand out in a saturated market?
- [17:24] Dan explains how e-commerce brands should use Google Analytics
- [21:37] What Dan did to improve his e-commerce brand’s conversion rate
- [28:35] Dan’s best advice for bootstrapping your business
In this episode…
You’re happy with your career, but there’s a million-dollar idea burning inside you. How should you move forward?
Dan Smith was flourishing in his career and having fun while doing it, but as the corporate world goes, a shift in operations forced him to re-evaluate his next career move. Leaning on the years of experience and talents he accrued along the way, Dan realized he could monetize that into his own business.
In this episode of Quiet Light Podcast, Joe Valley sits down with EXITpreneur Dan Smith in a two-part discussion about leaving a career as a Hollywood executive to bootstrapping his own business. From conceptualizing an idea then converting it into a multimillion-dollar e-commerce brand, Dan offers his best advice on how to self-fund a business. Plus, Dan shares how e-commerce brands can benefit from using Google Analytics.
Resources Mentioned in this episode
- Dan Smith on LinkedIn
- Quiet Light
- Quiet Light on YouTube
- Joe Valley
- Mark Daoust
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
- Chuck Mullins
- Google Analytics
- Quiet Light on Twitter
- Quiet Light on Facebook
- Quiet Light on LinkedIn
Sponsor for this episode
This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Joe Valley 0:18
Hey folks, Joe Valley here. Thanks for joining me for another episode of the Quiet Light Podcast. Today’s guest is Dan Smith, he’s a former Hollywood producer who worked on a number of different things. I think it was CBS children’s something or other. But that didn’t stand out. I can’t remember that one as much as the fact that he worked for Playboy as well, and help them promote and sell their digital products. That was a fun part of the story. But he’s really an exit-preneur as well. So we talk in two parts, part one and part two of the podcast, first about his prior experience as a producer, and what led him to become an entrepreneur, and the product that he built in the brand and the way that he went about it, where he was not relying on overseas suppliers, and not selling on Amazon, and really focusing in on the customer by actually speaking to the customer learning the language that they spoke, what they liked, what they didn’t like about the product, the brand, the website, using that information to make some changes. And in one case, seeing you know, a 25% bump in conversion rate, some really interesting stuff there in the first part of the podcast. The second part, we jump more into his exit-preneur experience in terms of selling the brand using our top advisor here, our good buddy Chuck Mullins, he speaks incredibly highly of Chuck. So if any of you want to reach out to chuck directly and have him take a look at your business, please do he can be reached at [email protected] So part one, here we go. Dan, welcome to the Quiet Light Podcast. How are you today?
Dan Smith 2:20
I’m great. Thanks for having me.
Joe Valley 2:22
Dan, folks, is an exit-preneur. He sold his business using Mr. Chuck Mullins as his advisor, I’m going to talk a little bit about his story, his background, how he built his business, how he exited his business, and what he’s doing now. So Dan, rather than me guessing and looking at LinkedIn profile, I talked to Chuck about your background, I want you guys I want you to tell the audience who you are, what your what your history is like and how you got into the CPG market that you get into.
Dan Smith 2:51
All right, cool. Well, I live in California, which is a great sunny place. And most of my career, I was an entertainment executive. So I produced TV shows or was an executive at places like Fox, and Playboy. And so I had this kind of magic career, making really fun TV shows and getting paid for it. So that was exciting for me. And then when I was working at Playboy, I ended up launching digital channels for Playboy. This was about 10 years ago, and they were instantly profitable. And I found that I was really good at using content. So that’s stills and videos to generate good traffic quality traffic that would convert not only in the US, but particularly in Japan. And so I found that I was able to make a profitable business in digital marketing. And so essentially I said, Well, why am I doing this? For Playboy’s money? Why don’t I do it for myself. But I knew that making immediate business was not necessarily easy. It wasn’t easy to make a profitable, easy media business. There’s high entry costs and low margins, unless you have just a massive hit. But I knew that Apple was generating approximately 220 million new customers a year for iPhones. They were selling these, these that many phones a year. And I also saw that Otterbox was selling cases for $70. So what I saw was, there was a price point that was established, and that Apple was sort of this wind of value that they were creating remarketing that Apple was grading. And so I figured if I could hang my sail up in front of apples wind of marketing, then that would be a really profitable business. One that I could bootstrap that wouldn’t require a huge investment in media. And so I created a product If that was would be manufactured in Los Angeles, so it was a modular product, so we wouldn’t have to invest huge money, huge amount in inventory overseas and then bring pallet pallets full of product into the US. So we have this modular product that would we could, we would manufacture only after we sold and collected the revenue. So it was a, so I had two elements that were good. And I thought for us to bootstrap a business. One is my marketing capabilities that had proven with an existing product. So I was taking a methodology that was already in place, and then applying it to a high margin, just in time manufactured product, so I wouldn’t need a lot of money to get it going. And so that’s that’s the, the essence of the business that we started.
Joe Valley 5:57
Yeah, this comes with experience and wisdom doing it that way. Right. Just in time inventory, things of that nature. But you still had to buy the parts, right. So you bought the parts had them shipped? Or did you buy them in the US? Have them sent to your manufacturing facility and assemble the parts?
Dan Smith 6:14
Well, when we when we started the business?
Joe Valley 6:19
When was that? By the way? What Yeah, it
Dan Smith 6:21
was 2014. Okay,
Joe Valley 6:24
well ahead of shipping, and freight issues, inventory strategist.
Dan Smith 6:29
So we started the business, we used a white label bumpers that we got from China. And then we added the this wallet components, the product, so it’s wood and fabric that we use. And so we took the white label bumpers from China, and had the components for the product for each iPhone bottle, and each color at the factory. And when orders came in, we would then assemble. So you had, you know, components that probably had, let’s just say $3.50 of value for a $60 product. So the manufacturing, which is the most expensive component would only be engaged once the revenue was in. So we had to invest in, in the in the bumpers were a long lead item. But all the other items were relatively shortly.
Joe Valley 7:29
So folks, we’re not giving out the brand name here because it’s been sold. We’re just talking about the and we’re not going to say how much it was sold for. But obviously he’s talking about an iPhone case that has a wallet component to it. The margin sound pretty damn incredible. Dan, launched in 2014, eight years ago, well, well ahead of the curve in terms of figuring online businesses, there’s not that many that I talked to these days that were launched that long ago, so good on you. That’s great. I just have to throw in something here because the guys listening to this podcast are going joke, ask him about playboy. So I’m just going to say, Dan, did you did you go into this business? Because you wanted to? Or because your wife refused to let you work for Playboy anymore? Straight up answer.
Dan Smith 8:23
Okay. Well, before I worked at Playboy, I worked at Fox Family Channel. And that’s where my wife married me when I was working at Fox Family check. But it was soon after we got married, that I needed to find a different career Fox family channel got purchased by another company. And that happens in Hollywood all the time. And so she when I explained to her the financial value of the work I was about to do, she was fine.
Joe Valley 8:53
The financial value if you’re looking at beautiful naked women all day long.
Dan Smith 8:58
The mortgage getting paid,
Joe Valley 8:59,
right? Yes, yes, of course. Of course. Yeah, of course. So when you launched this business, back in 2014, did you work within the first 12 months? You’ve talked about getting the bumpers and things of that nature? Did you do third party contract for the warehousing and assembly? Or did you rent a space, go old school and hire people to do it themselves?
Dan Smith 9:28
Well, here’s the one thing that world started. My wife who is a was an Accenture consultant. So she’s my ops consultant. We made a deal. I think I came up with the idea for the product in August 2013. And we made a deal that we were going to invest about $10,000 in the business and get launched than the $10,000. So I figured I had about a three month period to design the product, build a website and launch it and that’s what we did. We started in September, we launched in January. So So, in order to do that, I made the first 1000 cases in my garage. So I built the product and ship the product. And then after about six months, once we knew we had a flow and everything was working great, then we did a Kickstarter. And the Kickstarter was really the Kickstarter that really sort of amped us to the next level. And at the point that we launched the Kickstarter, then we moved into a three PL facility in Los Angeles. And the three PL facility was not just shipping, it was assembly, and manufacturing in the same facility. So basically, it was an assembly facility that added shipping, right. So the
Joe Valley 10:43
nice thing about your product is that it didn’t take up much space, I would imagine a tiny
Dan Smith 10:47
bit of space. Also just in time doesn’t work if you don’t have shipping or manufacturing is so that was that was it was sort of that was sort of the key to making it making it efficient was, you know, basically we use shipping easy. And orders came into shipping easy. And the three PL facility, printed a pick list, and made the products made the products and ship them the same day.
Joe Valley 11:11
So let’s let’s talk about, you know, this is a very, very competitive niche that you read, especially today. Going back to 2014 1516, when the business was just really taking off for you. Was were you just ahead of the curve, and therefore there wasn’t that much competition? Or did you do something that was unique and different? Because you’ve your background and experience? They got you ahead of the competition?
Dan Smith 11:36
Yeah, first of all, I think it was there were there was many iPhone cases back then it was it was a very well established market. But I just saw it, I just saw, as I said, the 200,000,200 20 million units being sold and the price point, I said, I don’t have to get a very big percentage of that, to actually have a profitable business. I mean, it’s a microscopic percentage. And so all I knew from my experience in Hollywood is you just need to be different needs to look different, feel different function better. And then that was a pretty easy layup. And so one of the first things that we did was we designed it, one thing I noticed was that in Google Shopping at that time, if you typed iPhone wallet case, which you would see was black and brown, black plastic, brown leather, that was it. So I designed the product with horizontal strip, colorful horizontal stripes. It was really just the concept of the product was designed for Google Shopping, you go and you type in searching Google Shopping, you see brown, black, brown, black, white, and black. And then you see orange and blue stripes, with with Mark with wood, it did people’s eyes would would catch would catch that. And they would click they made by the black case, but they’re going to click to look at the colorful case. So it’s sort of like dangling something kind of pretty in people’s eyes. So what I found, and I think it was clear throughout the whole arc of the business was that Google Shopping was a very powerful channel for us.
Joe Valley 13:15
But it remained that even even Amazon a
Dan Smith 13:17
few years at the end, it was the 33 for new customer acquisition was always the most powerful channel for us. What percentage of your I’m sorry, go ahead. Well,
Joe Valley 13:25
you found Go ahead.
Dan Smith 13:27
Well, what I found was that if you put Google’s algorithm, and I don’t understand it that well, but their AI, it seemed to encourage good performance. That’s conversion rate, customer service, SEO. And what we found was, the better we did in those in those metrics, the more share of impressions we got. So we you know, you don’t get Google impression Google Shopping impressions, because just because you bid. They want to Google wants the platform to be profitable for them. And they want customers to have good experiences. So if you’re providing a good experience, you get more impressions, and the product and the platform becomes more valid.
Joe Valley 14:15
This is fascinating. I don’t think I’ve had anybody on that’s talked about Google Shopping and the revenue that they’re generating from Google Shopping. It’s, you know, maybe ad spend on Amazon, Amazon, organic or even PPC on Google and Instagram and things of that nature. So this is this is great stuff. What percentage of your revenue by the time you exited the business was from Google Shopping versus other traffic sources?
Dan Smith 14:45
Well, I would say it’s difficult to say exactly because you really one thing that we always focused on was just first impression. If you look at Facebook, especially, they always they’re always trying to grab last input Should who was the last click before the by my feeling is if you’re really good at running a website, you’re going to retarget people with emails and all sorts of other methodologies. So I’m and if you have a good product and a good presentation, I’m not concerned so much about the how we how we get people to the bottom of the funnel. Because I know how to do that I have the technology and the expertise to get people through the funnel. But getting people in the top of the funnel, I found is where you can spend a lot of money and in efficiently
Joe Valley 15:35
Dan Smith 15:36
inefficiently they essentially it’s very inefficient. But Google has if you look in Google Analytics at the very I forget the name of it, I apologize I always loved last week specifically with Google Analytics. At the very bottom of the left, there is the shared, I forget exactly the term but it’s the the shared tracking, where you can click and see who your first impressions who, where they first saw your website. So Google Analytics gives you 10,000 bits of data, I found that that was the most valuable. So here’s some advice. That’s the most valuable piece of data. And if we want at the end, I’ll pop it open. And I’ll give you the link to the Google analytics section that allows you to do this,
Joe Valley 16:20
does it show it shows to where they first found your site and but even though they come in from a different
Dan Smith 16:25
channel, you might not pop it up right now just give you all the information.
Joe Valley 16:29
Yeah, for those that are listening, instead of watching, this will be available on the Quiet Light website under learn podcasts. And you’ll be able to pop it up there about.
Dan Smith 16:41
Alright, so if you go into I apologize, I’m looking at Google Analytics right now I’m not looking at a camera. But if you look into Google Analytics at the bottom and conversions, they have multi channel funnels. Okay. And then you go into assisted conversions. Okay, if you look under or maybe it’s my apologize, it’s model comparison tool. Actually, at my Google Analytics is no longer connected to the business. Hold on. Wait a second. I’m getting into the right business. Give me one second. Here we go. Data apologize, I should have this open. Well, we
Joe Valley 17:20
don’t prepare for these podcasts. Okay, well, you would have had an open. Alright, so
Dan Smith 17:24
you go into Google Analytics. The very last item in the left hand nav is conversions. You click conversions, then you click multi channel funnels, and then you click modern model comparison tool. It will model is comparison tool, then has these different models, you can look at last interaction, and you click first interaction. Okay. So first interaction tells you based on a conversion, who was the where was the the the main site, the first site that got you there. And what I found pretty consistently with our business was that Google paid search does Google Shopping primarily, and organic search, were our main drivers, we found that for a period of about three years, up until about 2018, Facebook was very valuable, we could put UTM codes into our Google ads. So you can track once you have a new UTM code and in the in the URL that you placed in your your Facebook ad. If you have a properly formatted UTM code, then Google model comparison tool will track that conversion. And what we found was up until 2018, we would have approximately three times as many conversions off of Google that we went off of Facebook. But around 2018, it started, the Facebook percentage just started to die. No matter what we did in Facebook, we weren’t seeing the first interaction performance that we saw on Google. And so and then that once Google once once Apple sort of killed off the cookie, or the tracking, then Facebook at least an arc and you just became, you know, you, you, you, you invest in Facebook, just because you know that there’s traffic there, but you’d have no sense. They had no sense that we could really track that. Yeah,
Joe Valley 19:30
that’s interesting, good piece of information there. I do need to have at some point, a Google Analytic analytics expert that knows absolutely everything about GA on the podcast. So anybody listening, if you’ve got a contact, please send me an email [email protected]
Dan Smith 19:47
told you everything I know about Google. Information.
Joe Valley 19:54
Back in 2018 when Facebook did an algorithm update and then I Apple made their changes. Did your Did you? Were you able to replace that revenue that was lost? Or did your revenue decline over a period of time?
Dan Smith 20:10
Through the out the, let’s say it’s eight years that we have the business our revenue grew pretty much 30% a year, sometimes a little on the online revenue, not those the stores that was really different. But we had pretty, pretty consistent 30% A year growth and we were funding our advertising from revenue. So you know, there was no, there was no outside investment coming in to buy ads to sort of turbocharge growth and make us hockey stick. So revenue was up. But what we saw was that conversion rate was an interesting way for us to invest our money. So basically, we saw that I saw that the ROI on investments in conversion rate was much higher than the ROI on a marginal investment in ADS. So we we repurpose some of our ad spend into Google. But we really focused we decided in approximately, I think, 2017 2018 that we were going to focus our our brain trust our power, you know that our internal skills, not so much on growing revenue, I mean, growing traffic, by converting the traffic that we got, so we focused on was a consistent monthly or quarterly improvement in conversion rate.
Joe Valley 21:32
And how did you how did you improve that? How do you improve the conversion rate new landing pages?
Dan Smith 21:37
Well, I think this is this is the key. First, we did a little research. And so if you do research on conversion rate improvement, I think you see it, in my opinion, a lot of tablet, you know, what color is your buy button? How many words are you using? And, and we’ve already done all that stuff. So there’s a, there’s a methodology that I learned not well in Hollywood, doing focus groups. So Hollywood uses focus groups to test product and get the real people’s view on what’s you know, it’s working or not on your TV show. And it’s very expensive, and we weren’t gonna spend that kind of money. But what we did do is say, Okay, we’re going to try and interview one customer a week on the phone, very analog. So we reach out to customers and say, hey, we’ll give you a free case, talk with us for 15-20 minutes. And then whenever we get on the phone, we would ask the customer, hey, tell me about yourself. And then whatever the customer would say, we’d say, hey, that’s interesting. Tell me more. And that was the key to our approval seeking for sharing what we did once you get people talking about themselves, they’re going to be honest with you. And they’ll start telling you, oh, I really didn’t like this thing on your website. Oh, I wish you had, if you talk to him for about 10 minutes about themselves, then they’re like, Oh, I like you were love a little bit, I’m going to be honest with you. And so what we found was 90 out of 20 of the people are will say something, but it’s not going to be earth shattering. It’s not gonna be something that we didn’t think about. But one out of 20 is gonna say something that made me go. And this is I think my experience in Hollywood to be able to go what’s a good idea? It was sort through a bunch, you know, sort the wheat from the chaff. And so what we found was pretty consistently, one out of 20, people would say something that would make me go, Oh, that’s interesting, or something that they weren’t saying, for example, when we started our product, because I worked at Playboy, I was really good at shooting stuff at the beach. So everything was people running around the beach with a phone wallet case, which really not using a photowall case. But it worked really well. What we saw in our reviews, and our interviews was that customers we talk about, oh, California, like this California, California, California. But then, at some point, they weren’t saying California anymore. And we realized that that brand story, we’ve moved from this sort of flashy brand story to more of a functionality like people were buying the product because it worked really well. They liked the functionality. And they repeated their they bought again and again. So we stopped hearing about California. And so we just basically moved our photography and video team inland to downtown LA and started showing people engaging with the product in a better representation of what they were engaging with the product or just going out for coffee or gaming on the subway. Or and so that that that one change, just basically taking our photo team and moving it 10 miles inland. We saw after about two months and 25% improvement in conversion rate. That’s fantastic. And so we did there were probably every year we would get one or two really good nuggets from our customers that we would use, that would drive our modifications on the website, you know, to what we found was we use fewer words, but we use words that our customers were saying to us in this conversation. So we were really tracking the way they described the product and made sure that we weren’t selling the product using our terms, we were selling it, you know, we we had blasted enough, we have enough relationships with customers that they knew who we were, they knew who our product was. So when they said it, their their, their terminology, was a better representation of what new customers would want would speak. And so we found that, in general, that that worked really well. Also, we stopped showing people’s faces.
Joe Valley 25:49
And notice that I noticed that on the site, again, we’re not going to insight but I don’t see a single person’s face. Well, there’s one that’s very blurry. So action,
Dan Smith 25:57
only the review. So like when customers gave us reviews, we would have customers faces. So that would show that these were real people and what they look like and but our models were you would only see their hands and their torsos so that people can see themselves. And also very neutral colors, you know, grays, you know, not a lot of flashy colors, grays and blues and neutral colors, also that the products were colorful. So we wanted to have neutral backgrounds. So the color products with
Joe Valley 26:28
this is interesting in that in that, you know, the just the courage, and I’m going to call it courage because some customers, some business owners are not comfortable reaching out to him and having a conversation with their customers, but the courage to actually pick up the phone and call the customer. So I want to ask did you, did you initially didn’t make those calls? Or did you always make those calls? Or did you outsource it to or having an out while you do it?
Dan Smith 26:50
I made the first calls for the first few months so that I established the way the the way the conversation would go, and the sort of the tone of the conversations. And then we had our customer service guy who was really a writer, you know, he’s really good storyteller. And then we just have started having him do the calls. And I think he did a better job than I did. He was he’s very good at he was very good at making people feel comfortable.
Joe Valley 27:19
What What was the secret to actually taking that conversation and documenting that conversation in a way that you could look at these keywords that they said or suggestions or comments that they made? I wish
Dan Smith 27:30
I could say as fancy was? It was a Google Doc. So you know, it’s just I scan it? Like, I would wait until we had like four interviews, and then I would just scan him.
Joe Valley 27:39
He would just take he would just take notes on the conversation. Yeah, I
Dan Smith 27:42
mean, just take notes of the conversations. And yeah, and, you know, I think the, you know, as we talk about how you launch a bootstrap, you know, when you’re bootstrapping a business, you know, a lot of times, especially if you’re looking to kind of Shark Tank, okay? And, or Kickstarter is a better example, if you look at a Kickstarter, or at least when I was doing Kickstarter, he would see five people, okay, I got my VP of blah, blah, blah, blah, blah, VPLS. And there would be five people there. And they haven’t made a nickel yet. So what I found was, and was that if I have these assets was my experience running entertainment companies, and making good creative decisions, and listening for stories and trying to find the essence or kernel and a story that will that will people will relate to? So I would say you didn’t ask but I would say the best advice I have for bootstrapping is really doing a good inventory of what are your personal assets? What do you bring to the table that’s going to be free, you don’t have to pay for this. And I think if you if we you know, kind of listen to things we’ve said it’s all based on. Also, I ran playboys DVD business. And so I understood about inventory and inventory costs and the financial costs of getting stuck with inventory. And that’s why i i was very clear to me, I was gonna do just in time manufacturing
Joe Valley 29:10
my my kids would be like, Dan, what is a DVD? What is what is that?
Dan Smith 29:15
Very expensive to store and they’re very expensive to destroy. So I just when I launched my business, I was able to learn that on Playboy stuff, you know, what are what are creative ways, you know, you can look at problems and avoid problems when we’re when I’m paying, like, it’s my, it’s my checking account, cash is going out, you know, it forces you to focus all that’s
Joe Valley 29:41
fascinating on the bootstrap and building the business and, and growing it by making every dollar count, you know, in reaching out talking to the customers yourself. This is something that I don’t think we do enough of in fact, I need to redesign my website, I need to start calling customers and say, now what’s bad Add what would you do differently? What are we hoping for? What am I not providing for you both on the Quiet Light side and on the Exitpreneur side.
Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guest, email us at [email protected] Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter, and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.