DELIVERING IDEAS TO EMPOWER TODAYâS BUSINESS OWNER
This is Kevin OâLeary, chairman of O-Shares, CNBC contributor and small business investor. Iâm here to share some useful tips and advice to empower the Spectrum Business community.
THE DIGITAL PIVOT
You know before the pandemic started in my portfolio of over 50 investments in small private companies, it kind of looked like this in terms of sales distribution: 50% was in retail, 40% went through Amazon, and 10% we did online directly to our customers. Thatâs sort of what it looked like for many businesses in America, probably like yours too. Then, all of a sudden in a 48-hour period, retail gets shut down. I mean thatâs just unthinkable, but it happened. So, what happens after that? 50% of our sales just disappears? It happened to you too. Well that made us for a while unprofitable. We canât lose half our business. The margins in the retail business are around 50% because youâre paying a distributor. You obviously have to pay the retailer too. Let me give you an example.
Iâve got a business called Love Pop Greeting Cards. Itâs in the greeting card business. Theyâre three dimensional cards. Itâs a very emotional purchase. Itâs done generally in drug stores or in retail locations. It wasnât really a big online business. The thing about greeting cards is people give them on birthdays, on holidays, on special times when they want to think of somebody, and not just the electronic ones, these ones were important. But we thought, wait a second, what about Motherâs Day? If all the flower stores are shut down too, why donât we pivot? Why donât we make bouquets of flowers instead of just greeting cards out of the same technology â 3-D laser cutting paper machines? We canât sell them retail, but weâll reach out online. What did we do? We set up a Shopify platform. We bought geo-locked ads all over the country around where we used to have stores. And lo and behold, the customers came back by the millions of dollars. And remember this, when you sell direct to your customer, thatâs not a 50% gross margin business, thatâs near 100%. So even though our sales were down, our cash flow was even better than we anticipated.
We made the same amount of money with less sales because we went direct. Thatâs what I call the digital pivot. And you can do it too. If youâre not selling direct to your customers, my question is âwhy not?â Why arenât you using technology? All of these technologies today: Wix.com, DocuSign, Zoom. These are all the licenses we bought. We standardized on Microsoft. We went and developed really rich platforms online with images in video and really high resolution photos and it wasnât that expensive to do it. And, all of a sudden, instead of making 50%, we made 100%. The cash flow remained the same. And weâve been doing this for six months now in pretty well every one of my businesses.
Thereâs a new America 2.0 emerging and itâs digital. It requires you to understand youâve got to communicate directly to your customer. Now if you donât have that skill set, hire somebody who does. You know, those kids are young, theyâre smart, they understand the social media platforms, theyâre using all of them, and they help us deal direct to our customer. Itâs a new empowerment that small businesses in America never thought it could have. All of that technology exists today for you to use. You just have to engage in it and get active and start telling your customers, âLook, you donât have to leave your house to use our product or service. Weâll send it to you. Just like the guys at Love Pop did.â Brings a tear to my eye, you know every time I open up these flowers.
Thanks for watching. For more of my small business tips and advice go to SpectrumBusinessInsights.com.
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Buck.Vivian
posted 09/13/2020
Success is to simplify complex problems and then do it.