Hosting “Ecommerce Conversations” is a welcome respite from my day job of running Beardbrand, the direct-to-consumer company I co-founded in 2012. I periodically post podcast updates on Beardbrand’s performance, hoping the transparency helps other entrepreneurs.
Here’s my recap of 2023.
It was a terrible year for me and Beardbrand. It was the first year we were in the red. We’ve always had around 15% margins, but not in 2023
My entire audio is embedded below. The transcript is condensed and edited for clarity.
Losses
Beardbrand generates revenue primarily through our website but also via wholesale accounts. Sales from our site were down 53% from the peak of 2021 — our best year. They decreased slightly in 2022, but profit increased because we lowered expenses. In 2023, profit and sales continued to decline significantly. A huge tax bill last April was the downside of being so profitable in 2022. We’ve always had tax bills, which we paid on time, but it was difficult this time with the other losses.
Then we got hit with a tax lien early last year. The state of Texas audited us for sales tax compliance. We had to pay additional taxes, penalties, and fees. They gave us 30 days. Fortunately, we run a very conservative business and have emergency savings. We paid the state and the IRS simultaneously, plus some hefty bills from the holiday season. Thus all our cash went out the door at the beginning of 2023.
Another loss at that time was a mistaken 100%-off discount code. I created it about eight years ago, and somehow, it was reachable on our website. It was leaked to a Facebook group or on TikTok. We had roughly $30,000 worth of products purchased with this code. None of us here caught it.
Target was a key wholesale account for about five years. We lost that business in 2023. The staff there simply stopped replying to our emails after we proposed 2023 plans. We emailed, “If you don’t reply, we’ll assume you won’t carry our products from now on. We’ll adjust our order projections.”
We had purchased a lot of specialized inventory for Target that we could not sell elsewhere. We destroyed about $500,000 worth of unsalable products at the end of the year. Additionally, Target now claims we owe chargebacks for markdowns, which we strongly dispute. They have refused to pay about $170,000 of invoices over the disagreement.
We faced more challenges. My business partner had her third baby and decided to step back from the company. It’s been a challenge not having her in the day-to-day. We furloughed our entire team to half-time this past summer, and our organic YouTube content performed worse than ever. We tried TikTok Shops with the recommendation from Paul at BK Beauty, but it wasn’t effective for us. Lastly, we were sued for accessibility reasons despite the website’s excellent accessibility rating.
Wins
Our biggest win was having enough savings to cover our losses, tax bills, and unsalable products. Conserving cash over the years finally paid off.
We were fortunate not to have lost employees. Everyone we furloughed stuck through the hard times and returned to full-time in August.
Since June, we’ve been profitable, but not at the margins I’m comfortable with. We’ve plugged the holes in our boat. Now we’ve got to get the wind behind the sails.
Part of our sales drop was due to manufacturing glitches and launching products that did not meet customers’ expectations. We’ve resolved many product concerns by returning to our old-school formulations and finding manufacturers who align more with our production needs.
Another win was raising our prices in June. Our average order went from $48 to $60. We’re getting fewer orders, but our per-order fulfillment and shipping costs are a smaller percentage. That’s been nice. We pay less to our outsourced fulfillment vendor.
Another big win is increasing sales from product subscriptions. We went from about 1,100 product subscribers to about 3,000. I see that growth continuing into 2024.
For years we did not sell on Amazon. We launched there in 2023 and reached a $1 million annual run rate by year-end. Hopefully, Amazon will become a seven-figure channel in 2024 and beyond.
A final win was starting a new marketing strategy. After talking with the founders of Batch cannabis, we introduced an affiliate program. We’ve had good promotions and referrals from our affiliate partners, with excellent articles and other placements. We hope the program grows, not just in affiliate revenue but also in improved organic search traffic.
Looking Forward
Despite the challenges, I remain optimistic. Twelve years in, I’m as motivated as on day one to roll out new products and serve our customers. Tough times require perseverance to pull through.
We had many manufacturing problems in 2023. We’re excited to grow with a manufacturer that aligns with us. We will take it slow, one product at a time. We’ve learned the benefits of a tightly aligned partnership with one manufacturer versus diversifying with several.
We continue to focus on Meta for customer acquisition. We haven’t given up on our YouTube organic strategy. We plan on introducing a new video format. If that does not perform, we might shut down YouTube organic and focus on other avenues. We hope Amazon sales continue to grow and eventually replace what we lost on Target.
But our top priority is getting back to 15 to 20% profitability. That would help me sleep better at night.
I want to build Beardbrand. To me, the destination is the journey. Creating a business my kids can grow up around brings me joy and excitement. I’m aiming for a generational company that my kids and grandkids can run, allowing our family to live happy, healthy, functional lives. That’s why I show up every day.
via https://www.aiupnow.com
Eric Bandholz, Khareem Sudlow
