199: Build A Remote Service Business with Dan Brownsher

20
Feb

Dan Brownsher, founder and CEO of ChannelKey, a full-service channel management marketplace agency specialized in increasing sales for retail brands on Amazon and other digital marketplaces. We discuss about the Remote Recurring Service Business Framework, how Amazon build its original flywheel, and the good ways to reduce churn on a service business.

—

Listen to the podcast here

 

Build A Remote Service Business with Dan Brownsher

Our guest is Dan Brownsher, founder and CEO of ChannelKey, a full-service channel management marketplace agency specialized in increasing sales for retail brands on Amazon and other digital marketplaces. Dan, welcome to the show.

Hey, Steve. Thank you for having me. I appreciate it.

Well, I’m very curious about what you’ve got in your bag, bag of tricks and all that. But let’s start with your journey. I mean, how does someone go from selling cufflink at a bachelor party in Munich to running an agency that has facilitated over a billion dollars in Amazon sales?

I love that question, Steve. I appreciate it. So, yeah, the background is that, at least for my e-commerce journey, I wasn’t always an e-commerce guy. I was, in fact, before that, I spent most of my days in the operating room watching spine surgeries. So, the transition from spine surgery to e-commerce was a really interesting one, to your point. For me, it started on a train in Munich, Germany. I was with a buddy of mine, or a group of buddies of mine for a bachelor party.

And one of the guys, a bachelor actually, had previously started an e-commerce business with his then girlfriend, now wife, sourcing jewelry on Alibaba, selling that jewelry on eBay. So I said to him, and I generally am entrepreneurial and like to create various streams of revenue if I can. Hey, why don’t we replicate that business? And instead, let’s source cufflinks and money clips from Alibaba and sell those things on the internet. So we said, sure, why not? So we did that. So literally on a train in Munich, Germany for a bachelor party, we decided to start.

And that, by the way, was in 2008, 2009 when the world economy had just collapsed and died. And we said, hey, let’s start another company. So that was an interesting timeline for us. So we did that. We started that journey, started that process, sourcing these goods, you know, talking to factories in China when I’d never done that before and negotiating costs and shipping and freight and all of these things.

And before you knew it, I had boxes of cuff links show up on my doorstep in my house in Columbus, Ohio. And I wish I had a picture of it, but I was operating this thing out of my basement. My partner was in Cleveland, I was in Columbus, and I had boxes of cufflinks all over the floor. I had a photo studio set up in the back and I was taking photos of these cufflinks. We had spun up a micro website called cuffcrazy.com where we were listing all these cuff links, we were selling them on eBay and I would pack these orders, we’d get orders.

We started getting orders which is amazing and I had bubble wraps and bubble mailers and packages full in my basement of all these cuff links and between surgeries I would go drop them off at the post office. So that was the start, it was a total side hustle for me, working with a good buddy of mine, you know, started when the world economy collapsed. And that was pre-Amazon too. We weren’t selling anything on Amazon at that point, Steve. This was all eBay and this was all on a micro website called CuffCrazy.com.

So, how did you fast forward to the present time? How did you evolve? Was this the same business that evolved or you basically switched horses in midstream?

So the business evolved. So what happened is that, again, this was a side hustle for me and my buddy at the time, my partner, and he had another business very similar to it in a different product category. He ended up starting two other businesses, basically the same model in different product categories. And he ended up moving to Las Vegas. Okay, so he bought a house in Las Vegas, moved his now wife out to Las Vegas, and all of a sudden, they started sending all these trade shows on the strip, these category-specific trade shows. So, one of those was called Magic.

So he all of a sudden started going to this show Magic, which is a fashion show, SLG show, soft leather goods, and all of these brands were exhibiting at this trade show. Tommy Hilfiger, Kenneth Cole, Betsy Johnson, Toomey, like all these really cool well-known brands where you could buy this stuff in Macy’s or Nordstrom or wherever. So you started going to talk to these companies, these well-known brands and started buying merchandise directly from these brands. Amazon had just really started getting going at that time. And we started listing this product, this branded merchandise on amazon.com.

This was early FBA days, zero advertising. And what happened was, is the business absolutely exploded, okay? What we realized is that there was high demand for branded merchandise, we all knew that, versus selling no-name cufflinks or no-name jewelry that people hadn’t heard of, all of a sudden we’re selling this branded merchandise on this e-com channel that all of a sudden has a ton of volume. And so that’s when the business really changed and became a full-time, full, non-side hustle opportunity, primarily for my partner.

At the time, I was still not active in a full-time basis, but he was and the business exploded we hired a bunch of people a bunch of buyers started sending more trade shows in in Las Vegas and I’d have vivid memories of this environment again. It was like the wild wild west on Amazon, and you’d have these guys We had buyers that were walking to go see Tommy Hilfiger with an iPad at a trade show. Like we’ve never heard of you before. Who are you? Okay, and why are you coming into my trade show booth and picking out only one SKU? I got 50 other SKUs here, but you only care about this particular brown wall. Why do you only care about that brown wallet? Well, we knew.

Based on the time we had spent on Amazon, we knew what the high volume SKUs were. So we would walk into these trade show booths, and it could be any brand, and say, listen, we don’t care about your assortment or what you’re launching, we only want that item. And we’re gonna write you a $10,000 PO right now for it. Like, whoa, hold up a second, who are you guys? Why would I ever do this for you?

So then, so how does this morph into what you’re doing now, helping other people set up sites? How did that switch happen?

Yeah, so the business exploded on Amazon for three, four years in a row, doubled every single year. We built all these relationships with brands. They said, cool, we know who you guys are. You’ve got a good reputation. You pay on time, all of these things. But for us, what we realized, Steve, is that we were in essence trading commodities on Amazon and everybody started competing on price. There became more competition. It was not a protectable business.

So we said, all right, guys, we want to be your exclusive seller on Amazon. In exchange for that, we’re gonna provide you services. So Tommy Hilfiger, we wanna be your exclusive seller on Amazon with a brown wallet. They said, great, okay? You guys need to control your distribution and we’re gonna do your ads, we’re gonna fix your catalog, we’re gonna do your store, we’re gonna do all these things.

So that was the first time I ever see we provided a service to brands as opposed to just buying their goods, okay? We did that for a while, but we realized it was flawed for a couple of reasons, and one of the big ones is it required our brand partners to be able to control their distribution and mitigate gray market goods. Otherwise, we couldn’t sell. So we said, Steve, that moment in time, timeout, there’s some value here, something is right, but it’s not totally right.

And the realization was that the way to win on Amazon in the future long term is to be the owner of the brand, control the intellectual property. So he said, all right, if we’re going to buy any inventory and sell it, we’re going to own it. Okay, it’s going to be our brand, our trademark, our IP. So he said, all right, we’re going to pivot this product business back to private label, which it was when we started, okay, and any other brands that we’re going to work with, we’re going to service them via an agency.

Okay, we built the best in class Amazon business for ourselves. Why not help these other brands do it? So that was the genesis of Channel Key, Steve. We saw a massive problem in the market where brands were being poorly represented on on Amazon, which is a fast growing marketplace with a ton of exposure. Pricing was a mess. It wasn’t a great merchandising experience for brands. It’s a great platform to sell goods, but it wasn’t a good merchandising brand representation experience. And we felt like we could solve that problem. So we took a lot of those brand relationships that we had, we built a service business and an agency around it. And we officially launched Channel Key in January of 2017.

That’s awesome. So let’s switch gears here a little bit and let’s talk about this framework. If someone wants to build a remote recurring service business, and maybe you could help them then sell their products on Amazon, but how do you actually build that business? Because now you can work with remote employees, so you no longer have the brick and mortar. You know that you want to create recurring revenue because that’s where the money is and that’s where the value is. So how do you marry these two, make it remote, recurrent revenue, a service business, maybe other people’s products? What’s your framework?

I think the first thing you got to realize, Steve, and I think you’re seeing this already, is you have to find an ecosystem that supports a non-project-based environment, okay? And or offering, okay? So for us, that was Amazon. That was Amazon. People are buying products when you’re sleeping. It never stops. It’s continuous. It’s always on. We’re always open for business. Consumers are always buying and spending, and Amazon is a living, breathing organism that never shuts off. So it requires ongoing maintenance and management and strategy and execution.

Okay, so for us, that ecosystem is Amazon. Clear as day. Okay, now, there’s other businesses that do a lot of this type of work, but a lot of it is this project work. And I’m not saying project work is bad, okay, but if there is a scenario or environment that requires you to always be on, that’s when you can get into this subscription-based model. Okay. So for me, an agency, okay, this is a people business, Steve. I don’t have trucks. I don’t have a warehouse. I don’t have a manufacturing facility. It is people, okay. It is people, and it is contracts, and it is technology.

Okay. So if that’s true, and for to have proper remote business, you know, not every business can be remote. Okay, not every business can. So businesses that can be remote are businesses that are structured like this. It’s people and computers and technology and contracts. So if that’s true, then my emphasis is on the people, the culture and the team. That sets the foundation for the entire business. Without that continuity, without that strength, without that brand message, that brand voice that’s consistent internally to each other, but also externally to our clients and our partners, it becomes really hard to create this scalable business. So for me, focus is on culture and team.

So number one is you have to build a great culture, a great people, right? People, right? See, what’s the second step in this framework of being a remote recurrent service business?

You have to package or create a customized offering that speaks to your target audience. Okay. Who do you want to do business with? And why? What is your ideal client profile? And this is a really hard exercise, and it changes over time. For example, we just changed our ICP based on a recent planning meeting because our business changes over time. But you’ve got to ask that question now. When you start a company, it’s hard. Sometimes you’ve got to accept everybody. You need to take the revenue that you can get.

You have to package or create a customized offering that speaks to your target audience. Click To Tweet

But over time, if you identify who your ideal client profile or you identify what your ideal client profile is, it can add a ton of clarity to your business. And once you do that, talk to them. Ask them what they want or what they need. And if you’re willing to listen, they will tell you what they want. And if you’re working in this, again, this ecosystem that creates non-project based work with a great team, and you talk to your clients that you’ve identified and they tell you what they want and what they need, and you create a package around that or a service around that, you’re in business.

Okay, so you got the right customers, you have a customized offering. So what’s next? How do you make the revenue recurring? Is it just that you select a recurring service to begin with?

Well, you’ve got to execute, Steve. You have to execute. Part of the right way to execute is creating or attempting to create repeatable outcomes. This is really, really hard in a people business, in a service business. I’m not going to say in a remote business, but at a people and a service business, it’s really hard. It’s become one of the hardest things for us as we’ve grown and scaled. You start with two employees, you get to 100, a lot of things change along the way. People are different, clients are all different.

The more people you add, the more clients you add, the more complex the business gets. Your service offering grows. And you’ll start making exceptions. Okay, hey my ICP, is this my ICP, is this not my ICP? This client wants this, but this one doesn’t want it. Okay, so you start making exceptions and before you know it, you get lost. And so the key, at least for me, for my learning is operating the business to a system and via processes that are documented. And going back to EOS, right, people write seats on the bus, what I’ve realized, Steve, is that we need a really good operator on our team.

Because I’m not necessarily that guy. I’m the culture guy, the vision guy, the biz dev guy, the relationship guy, not necessarily the organized SOP process operator guy. And so you have to, in order to scale a business like this, you have to have your operating principles in check, or at some point, something will break, okay? So to create repeatable outcomes, good team, well-documented processes that are followed by everybody, which is really hard to do. We’ve struggled with it many times. We still struggle with it, especially if you’re creating a business that is growing and scaling, it gets even harder.

Okay, so you got the right culture, you figured out an offering, you made it a repeatable process. Maybe you have an operator who runs the show for you, then that’s it. Anything missing?

I think one of the other big things, at least in my business type or a service model, service-based model, right. That is remote is you got to select the right technology. Okay. So we’re in the people business. We have technology and people in contracts. Part of what you need to do is hire the best people, but you need to identify that you can’t necessarily scale your entire business only with people.

You also have to layer on technology, which creates better outcomes for your clients, creates more scalable processes, and creates leverage for your people. So you want your team focusing in the most strategic elements that are driving the best outcomes for your clients and let technology do a lot of the manual repeatable type work. That’s been critical for us is to constantly evaluate new tech and select the tech that creates the most leverage for our people.

Focus in the most strategic elements that are driving the best outcomes for your clients and let technology do a lot of the manual repeatable type work. Click To Tweet

So is this how Amazon originally built its flywheel as well?

Man, that’s a great question, Steve, because the flywheel is more than a remote service company. But in essence, Jeff Bezos is obviously a fantastic visionary and a great mind. And his, I think, Flywheel was slightly different. Now, there might be elements of it that are analogous to what we’ve built, and I’m not saying nearly at the scale that he’s built Amazon. But the flywheel was the system. It was, he built the ecosystem.

And if you look at it, it’s more than technology, it’s more than people. He is creating that consumer environment himself, which is different, right? At Channel Key, we’re leveraging the ecosystem that has been created and creating an offering for our clients. In his scenario, it didn’t exist, right? This marketplace didn’t exist. AWS didn’t exist. And what’s amazing about his flywheel that still works today is how it just feeds on itself.

Everything that they do feeds this engine and it gets bigger and stronger and spins faster and allows them to add more to it, whether it’s their media business, whether it’s their pharmacy business, whether it’s their obviously retail business, it all feeds itself and it creates momentum and inertia.

So is there a way to replicate that? That kind of maybe not exactly the Amazon model. It’s very hard to replicate. But the idea, this flywheel idea, do you see how you can engineer your flywheel in your remote service business or recurrent service business where you are intentionally creating a self-feeding mechanism?

I think the answer is yes, Steve. You can create your own flywheel, okay, in this environment. And we’ve done that. Any time you’ve got a lot of people and you’ve got a good amount of clients and you’re creating value, there’s value being created at every stage of that process, you absolutely can do that. And we actually have an example of that.

As you add new services to your business, okay, so when we started the agency, we did one thing, right? We are do full service channel management for brands on Amazon, that’s all we do. But as you grow and scale and develop, typically you add other services, okay? Typically those services are adjacent or useful for your existing client base, not necessarily a different ICP, okay? Just a different bolt-on that is useful to that ICP so we added DSP.

We added full funnel advertising We created a partnership ecosystem where we align all these adjacent companies that exist in the world that provide could or could provide some value or service to our clients and so all of a sudden Before we had one thing to sell to our clients or discuss with our clients that creates value now all of a sudden We’ve got five different things that creates value for them.

Okay, so in essence, that is a flywheel for ChannelKey. Right, you add a client into the top, okay, and now all of a sudden you can talk to them about DSP, you can talk to them about partnerships, you can talk to them about ads, you can talk to them about full funnel, okay, and so that speeds up, and it creates more opportunities for our clients, for our staff, and for everybody in the value chain, for our partners.

So, yeah, absolutely. But you’ve got to achieve some level of critical mass, Steve, before I think you can do that, right? You’ve got to have this foundation built that you can build, that you can layer more disparate pieces on top of to create that chain, right? It doesn’t happen overnight. It’s hard to build a flywheel from day one. You’ve got to, it’s based on momentum, business momentum.

Now, the opposite of the flywheel momentum is, of course, churn and you’re losing customers. What did you find is a good ways to reduce churn or to diminish churn as much as possible?

I think churn is in a lot of cases the enemy of most businesses or certainly an agency business. And churn could be defined as churn of staff, people churn, right, or churn of clients. And so mitigating that is really, really hard, okay, on the people front. It’s not reasonable for us to think that our people are going to be with us forever. And we don’t necessarily want that either.

Like my objective from a culture and people perspective is that we create an environment where they can grow and flourish and learn and develop, okay? And sometimes we take them as far as they can go and they need to go somewhere else to get more training or more learning or develop themselves differently. And I’m totally okay with that. I think that’s a good thing.

There’s a book called The Infinite Game that I really like that basically says that, listen, we’re not in a, this is not a soccer game where there’s a start and an end of the game, okay. This is an infinite game, there’s no end, there’s no clock, it doesn’t end and the players in the game change and the teams change and the people change and sometimes the rules change.

And so my intent is to create this environment where people can grow and develop. To mitigate churn, okay, of people, I think comes down to the culture and what you set and the consistency at which you operate that culture. The moment you’re inconsistent or you do things differently than you say, you create doubt in people.

And you could argue that in a remote setting, it’s easier for people to change jobs. Right. They’ve got more options. They’ve got more opportunities. They’re not beholden to a certain geography. And so I think consistency around culture and creating the environment that that that you set out to create and managing that and maintaining that and taking very close care and nurturing that is absolutely critical.

Consistency around culture and creating the environment that you set out to create and managing that and maintaining that and taking very close care and nurturing that is absolutely critical. Click To Tweet

So what’s your brand of building great culture, Dan?

My brand of building great culture comes down to, if I had to distill it down, is an environment where people can be vulnerable and there’s trust, okay, because it’s hard. Life is hard, business is hard, clients can be really hard, but at the end of the day if I trust my team okay, and they trust me meaning they know who I am. They know where I’ve come from. They know that I’ve got blind spots. They know that some days I might feel like an imposter, or I’ve got baggage I’ve brought with me to the to my day and that they could tell me how they think or how they feel without concern for retribution or or anything like that.

I can work with that and the same for them. If I can go to my team and have a real conversation with them about what they’re doing, how they’re feeling, what’s working, what’s not working, are you happy, are you sad, give me feedback, good, bad, or ugly, I feel like we can solve any business problem or any problem that comes through. Okay, I want to have fun, I want to work hard and I want to be in an environment where people trust each other and want to be around each other and they want to support each other. And that’s what I’ve tried to build at Channel Key.

That’s awesome. Well, I love this model, you know, focusing on the culture that can be the most sustainable competitive advantage to have a great culture. You build the right offer around the recurring revenue model. You can tap into talent all over the world so you can have remote people. And then there’s this great platform, Amazon, where you can basically leverage the platform, the Amazon flywheel for your own business. And so if people would like to learn more about, maybe they have a retail brand and they want to grow on Amazon. They need help or they just want to understand this model deeper. Where can they reach you and where can they learn more?

Yeah, Steve. So, follow me on LinkedIn, okay? You can follow me, follow Dan Brownsher on LinkedIn, follow ChannelKey on LinkedIn. We put out a lot of content, a lot of information. That’s one way to do it. We’d love to interact with you. You can set up calls to talk to us or our team. And the second way is go to www.channelkey.com. We put out a lot of blog content, we put out a newsletter. So you can sign up to receive all that content, that information on our website, as well as on LinkedIn.

Okay, so if you’re an entrepreneurial listener and you want to build your business, the best way to do it is with remote staff, with a recurring revenue model and leveraging a platform that is already proven and is working great. Amazon is probably the best example. Check out ChannelKey, reach out to Dan Brownsher and he’ll help you do this. Dan, thanks for coming on the show and sharing your journey from the cufflinks business in Munich all the way to a billion dollars on Amazon. Great talking to you. 

 

Important Links:

This entry was posted in . Bookmark the permalink.