eCommerce Lifestyle
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How I Lost $1,000,000

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Anton shares how he lost over $1,000,000 by making beginner mistakes. Looking back, these were all easily avoidable.  Listen in so you don’t have to learn the hard way.

As always, if you have any questions and suggestions, please feel free to leave a comment below. Don’t forget to share this with someone who needs to hear it.

What's Covered in This Episode:

  • Starting too many businesses

  • Not managing cashflow
  • Bad hires
  • Bad tracking
  • Live events
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Transcript

What's up everybody. Anton Kraly here. And welcome back to the e-commerce lifestyle podcast. If you're a first time listener, just know that this show is designed to help e-commerce store owners to increase their revenue, automate their operations and become the authority in their niche. Now, today's episode is going to be a bit different. It might be a bit longer than our normal eight to 15 minute episodes. And that's because what I really wanted to do is just share a story or some stories with you that are all interconnected and that have all led to me losing over a million dollars since I got into business back in 2007. So, when I say how I lost my first million dollars, I don't mean I lost the first million dollars that I made, I mean over these years I've lost well over a million dollars by making a bunch of mistakes that could have been avoided.

So, the goal of this episode is just for me to share this with you and hope that you can hopefully take some of this and internalize it and not make some of these mistakes and do better with holding onto your money because what I've realized is making money... Once you first figure it out and you have something that works, it really is easy but keeping that money can be a lot harder. So, I'm going to go through five different things that I have done over the years that have caused me to lose my first million dollars. Now, the first one is something that I think every single entrepreneur does as soon as they start making some money and think that they are some type of genius because they figured this thing out and that is starting too many businesses.

So, instead of focusing on the one that makes you think you're a genius, you decide, "Okay, I've done this. Let me do it again and again, and again." And even worse, you can do what I did and try to do it in even unrelated sectors or unrelated business models. So, one of the first things I did once my e-commerce stores started taking off back in 2007, really 2008 is when things really started scaling up and I was making more money than I ever thought I would make at least that early on, is I thought, "I have these online stores, they're making me money but is this even real?" It didn't feel real because I was working from my computer at my apartment in Long Beach in New York. And I was like, "Okay, let me actually take this money I'm making now and invest it into something that," to me seemed to real.

And back then, again, I wasn't aware of how big online businesses could come or become. So, I thought, let me build something that's offline. A physical business. So, what I did was get some business partners and I started a digital signage company on Long Island in New York, where I'm from. That business was... Basically the goal of it was we went out to different businesses, including gyms, including any high traffic locations. So, coffee shops, we had a contract with over 30 Dunkin' Donuts locations. And the business was we would install these LED screens basically like digital signage boards and we would promote their products on it. So, for Dunkin' Donuts... What's the new thing this month? What's the special this week? And we had the ability to sell ads on those screens. So, basically what we were doing is calling up all these other local businesses that were advertising in local papers, in the yellow pages. And we were selling them ad spots on these screens.

Now, the business did okay but the amount of time it took and the amount of capital that we had to put up to buy... Because the stores didn't pay for anything, right? The benefit to them was they can show their stuff off. The benefit for us was we would literally do all the work. So, buying dozens upon dozens of these displays, all of the networking computers that had to be hooked up, all of the servers that we needed to power this whole thing, hiring salespeople to be selling to local businesses. It was just this huge input of man hours and money, literally tens of thousands of dollars, probably close to $50,000 invested. And the amount of time that went into it was pulling me away from the e-commerce businesses and the e-commerce businesses were the ones that were making me real money.

So, that was a big loss. We ended up selling the business and getting close to breaking even but the amount of time that went in the amount of time that I got sucked away from my core business was a huge just... It was problematic, right? It cost me a ton of money, both in actual cash and in time.

Now, the next one was affiliate marketing. So, again, I have these e-commerce stores, they're all doing great. And I'm like, "Okay, why don't I try to get into the affiliate business where I'll build strictly affiliate sites and I can earn money off commissions and I won't have to deal with customers and I won't have to have products shipped and it'll just be so hands-off?" So, ended up, again, investing tens of thousands of dollars into having all of these affiliate sites built this whole network for ourselves, an internal network of sites.

And again, they ended up doing pretty good but after maybe a year and tens of thousands of dollars going into that, I was probably making net profit somewhere around 5,000, $7,000 a month from them. But my time was almost all into that. And then when I looked at my e-commerce business, my physical product business, I was making closer to 30, 40, 50, $60,000 net profit in our best months back then. And I was like, "What am I doing? Why is all my time going... And money going into these projects that are making me $5,000 net profit a month?" So, again, it cost me tens of thousands of dollars to get started, to make much less than I was in my core businesses. And I wasn't focusing on growing my core businesses. I was focusing on trying to find the next thing or create something else.

Now that leads me into another business I tried to start. And by the way, most people should never do this. And that is software. So, again, have all these stores working, making money, thinking, "Okay, let's get into a subscription business. Let me develop different software's online that I think there's a need for, that I would use myself." Going into this with zero experience. What happened again, months, probably a year, maybe a little over a year went into some of these projects, well over a hundred thousand dollars invested. At the end of the day to have something that generated maybe a few thousand dollars a month. Again, all this money, all this time, going into these projects between all these other businesses. Well over $200,000 that were making me almost nothing compared to the core thing that I already had running. And again, this is really common from a lot of entrepreneurs I talk to, they make these same mistakes.

So, I'll get in how to counter this later, but you don't want to do this, okay? When you have something that works, focus on that, treat it as your main business and grow that thing to the moon. You don't need to start a million businesses and most likely what's going to happen is you might have other winners in here and there. But for the most part, they're going to take a lot of your money, they're going to take almost all your time and they're going to actually hurt your main business while making you a lot less money if any. Now, that leads us into the second big thing that really hurt and that cost me hundreds of thousands of dollars. And this was not managing cashflow properly when I was first getting into e-commerce. So, when I first started, a lot of people don't know this, but I actually wasn't drop-shipping I was bringing in containers of product from China.

So, I was having them shipped from Shenzhen to different ports in New Jersey, in New York, in Long Beach, in California. And because I was bringing in these huge containers, literally dozens of them... They cost sometimes as little as 30,000, sometimes up to $80,000 for the product. And I just didn't know what I didn't know. So, basically what happened early on is overpaying myself, overpaying different people we worked with and then getting stuck. This is what really got me with PayPal back then, this was probably 2009. They held over $50,000 in our account. And they basically said, "Okay, we're keeping this $50,000 as a reserve. We're going to keep it for six months and you just don't have access to it."

And back then when I was first getting started, $50,000 was the world to me. And because this cashflow was now held, I had to slow down my ads. I had to slow down how many orders I was actually accepting because I wasn't able to access this money to run the business. So, for about six months, I lost out on probably 20 to $30,000 a month of net profit because I had to scale back on my business because I hadn't managed cashflow correctly and because I put myself in a position... By the way, every mistake I made... This is all on me. So, not blaming PayPal, I'm not blaming anybody else but because of this I had to really halter my sales for about six months which costs me at least a hundred thousand dollars in potential profit that would have been there if it was a normal six months but I made the mistake. I didn't manage cash flow correctly. I didn't realize PayPal could even do this. And it hurt in a big way back then.

So, the third thing that I did and... Let's just get [inaudible 00:09:04], right? Everyone's probably like, "Why am I listening to you Anton? Tell me all the ways you lose money," but it's important. Again, I wish I would have known these things. So, hopefully it does help you or maybe at least you can realize that we don't all just hit home runs day after day, after day from the day we get into entrepreneurship to the day we retire or die, which is probably how my entrepreneurship career is going to end. I don't see myself ever doing this stuff because even with all these problems, I love it. I wake up for this every day. But the third biggest mistake that I made that led to me losing my first million dollars is bad hires. And again, this is something when you decide, "I want to build a side hustle," or, "I want to build an online income." You don't go into it thinking about all the people you're going to hire and how you're going to hire them and what the process looks like.

So, the biggest mistake probably... And by the way, this applies to direct hires to freelancers, to contractors. Probably the biggest one for me in terms of money lost was hiring a company to handle logistics and freight shipping and not shopping around. That might sound like, "Why wouldn't you do that?" And it's because I just thought, "Okay, I found this company. They seem good. They're legit. They're worldwide. Let's work with them." And for a few years, I worked with this one company that handled all of the logistics from our containers from China to the States and then handled shipments from when the products arrived at port to break them up and send to our customers across the US.

And after a few years, I thought, "You know what? Let me finally..." I don't even know how the idea came into my head. Maybe it was a conversation I had with someone. I really don't know. Maybe just seeing how big our bills were. I thought, "Let me check these prices, right? Let me check what freight shipments cost from other companies." And I realized I was paying over a hundred dollars more per shipment domestically than I could have been. I could have been saving for literally years and thousands and thousands of orders, a hundred dollars per shipment that would have been direct net profit.

So, when I look back at those numbers, it's easily 300 to $400,000 in additional expenses I had because I didn't shop around when it comes to freight shippers. So, that was a massive part about how I lost money. Again, this isn't just all money that I gave away or that I gambled away or anything like that. It's literally mistakes I've made. And this was a massive one when I looked back and saw that. It was literally... The way I thought about it when I saw this and did the math is, I could have a brand new Lamborghini in the driveway without doing anything different than I've done for at that point, probably the past three years. And all I would have had to do was email somebody else for a quote. So, huge mistake that cost me a ton of money.

Now, another one that led to... Probably close to a hundred thousand dollars of money lost is hiring bad salespeople. So, sales is an interesting thing, right? I am not a sales person. I never will be. It's not my personality, but there are some salespeople that are amazing. And there are some salespeople that are sociopaths and egomaniacs and when you're interviewing them or talking to them, they make it seem like they're the best, right? They're big talkers. It's probably by nature but a lot of them are big talkers and unethical and they don't do what they say they're going to do in terms of production.

And some of them are even, I don't know the best way to say it, but they act in a way that will actually not only keep sales consistent but actually harm your sales. So, some of the salespeople we've hired, we've had amazing results with, some of them have been with us for years and years and years, but some of them have cost us a lot of money in lost commissions. Some of them have been with overpaid commissions because they literally were lying about how much money they were making. And back in the day, I didn't have systems that were good enough to actually be able to really identify this... It's fraud. Fraud early on to see, did the numbers actually match? So, made huge mistakes there as well. I don't want to discourage anybody and say you shouldn't have salespeople because again, we have some that have been with us for probably, I think our longest at this point is maybe three years and they're absolutely amazing but that is a role I have made some big mistakes on.

And yeah, it's something that you got to be extremely careful with when you're hiring. Now, another one that led to at least a hundred thousand dollars... It's probably much more... All these numbers by the way, I'm not looking at reports or anything. I'm going off what I remember because a lot of these mistakes were close to a decade ago but another really big one was with hires. Hiring different agencies to handle different parts of marketing and mainly with search engine optimization and some of our pay per click ads. Once I started making money, I should say, I've always had pretty big budgets when it comes to advertising. And if you're not on top of this stuff, at least every few days to be checking your KPIs, money can disappear and be overspent extremely fast. And with different companies we've worked with, again, SEO and some PaperClick agency is money has literally continued to be spent or been increased with either flat or decreasing sales.

So, when it comes to outsourcing anything, when it comes to traffic, you need to be not in the mindset of, "I'm going to hire this person and they're just going to do their job," but, "I'm going to hire this person with clear KPIs and every few days we're going to review these KPIs together." Because again, if you don't do that, you can fall into the same trap that I did where half a year goes by, you've spent an extra a hundred thousand dollars by paying these agencies and your traffic and sales are either flat or declining and that money is just now gone. So, don't do that. Now, the fourth one is related to traffic and paid traffic and investing in ads, and that is having bad tracking. So, I've talked about this before in other podcasts but there were literally years in my business where I didn't know how to track where conversions were coming from.

Again, still running extremely profitable but never knowing, "is it this Google ad that's making me money? Is it this ad I had on a blog? Is it this post that we sponsored?" Just not knowing like, "is it this different platform we're using and uploading our product catalog to?" I just knew that overall we were spending X a month and we were making X back and that was great. But once I figured out how to actually track e-commerce sales properly and attribute them to the correct platform, I realized that for years, again, I was spending in some cases, $10,000 a month on certain platforms that were at a huge loss. So, overall to me back then, again, being inexperienced, I saw overall our numbers were great, but I didn't realize all of this money that was literally going to platforms that were just extremely not profitable.

So, that led over the years to easily hundreds of thousands of dollars in money lost. And I would highly recommend.... I teach in Drop Ship Lifestyle in my drop ship blueprint, getting e-commerce sales tracking set up properly before you spend a dollar on ads. Because again, this would have led to another Lamborghini in the driveway, or maybe even let's say a Ferrari this time. So now I have a Lamborghini and a Ferrari without doing any extra work besides setting up tracking properly and cutting losers as soon as they were identified. So, really easy things to solve just things... When you don't know, you don't know. And that's where I was when I was first getting into this business. Now, the fifth one is not related to e-commerce, but it's just related to more like businesses in general. And this is the last one that was just a huge spike and a huge... It hurt.

This was with live events. So, you might know this if you're a podcast listener but with Drop Ship Lifestyle, my e-commerce coaching company, we've done live events every year for the past seven years. Now with coronavirus this year is pushed off a year but we've done them all over the world. So, we do them in Thailand, we've done them in Mexico, in Bali, in Hawaii, in Prague. We're literally all over the place. The next one's going to be in Portugal. And typically with those events, I do lose money. So, the company loses money. They're not made to be like, "Oh, we're having some sales fest," or anything like that. They're made to have people come have a great time, connect in person. It's really good for the community and for me too. I love meeting everybody in person and hearing about their wins and just teaching in person.

So, I wouldn't really complain about money lost on the average year of a retreat, but the one live event that was so painful was one that I did. It was probably three years ago now. And it was after I moved back. I was living in Ho Chi Minh City in Vietnam. And I moved back to the States to Austin, Texas, and I wanted to do an event in Austin because I was living there. I thought it would be a great way to bring people in, hopefully build up the community of our people. And I decided instead of doing it in our normal Drop Ship Lifestyle retreat type events, because those should be an exotic location, let's do it and let's have it be this event for all internet marketers in general, right? An internet marketing event.

So, basically what happened is went, found a good conference center. And this is the only time we've done an event, at least in the continental US we've done one in Hawaii at that point. But the first one in the continental US. So, found a hotel, got pricing and already right away I was like, "Wow, this is going to be a lot more money than it costs to put on any of our events that are worldwide." But again, I was thinking, "Now we're in the States. More people will want to come because, hey, we're right here. It's closer for most of our audience," because about 70% of our audience and members are in the States.

So, ended up signing this contract and just crazy expenses. Again, I don't have the contract in front of me, but something like 20K for the room, something like 10K to have a projector set up with some microphones, something like 30K for food and beverage, just all these crazy expenses. And then on top of that, what these hotels do. The domestic hotels, is make you sign up for a room block for hotel rooms. So, saying like, "Yeah, we're going to have this event and we'll get at least X amount of rooms." Don't remember how many it was. I want to say somewhere around 80 or something like that. So, sign this whole contract, put this whole thing on, spend all this time and money promoting it.

And what happened... And, again, my fault. This is all on me. I should've known. But the weekend that we had the conference set up for was also the same weekend as UT, University of Texas in Austin, their graduation. So, because of that... It's a massive school. There were all these families and parents coming into Austin from all around the country to see their kids or their family graduate. And because of that hotel rooms were three X what they normally should cost and flights were also more money because everybody was coming in for this.

So, as we started to promote this. People were like, "Why are these rooms so much money?" Because it wasn't the fanciest hotel in the world. And we really couldn't do much about getting discounts, right? We can get a little discount but nothing significant. And it was really... It was an expensive event for people to even want to show up to. Not from ticket sales but from the increased and inflated flights and inflated hotel room costs. So, that really hurt us. It led to a lot less people showing up then I wanted to and it ended up being about, I want to say, 100K for the actual event, which I honestly would have been okay with.

And that was between just the conference center, again, food and beverage, projector. You needed not an electrician, but a tech person to be there that I don't even know if I ever saw them but their salary... All these people you have to just pay. And then what really got me after that 100K is about two weeks later, I get notifications on my phone whenever I get a charge on my card for over $5,000. And I got one for over $140,000 from the hotel and conference center. And I thought, "This has got to be wrong. They must have messed up. We already paid a hundred. Now they just charged us..." I think it was 147K or something like that. So, I called our contact there and she's like, "Oh yeah, that's just the extra fees for," I don't even know. Part of it was the hotel rooms. And then there was just all this other stuff that they added on and there was no way to get out of that.

So, that right there was about 240K on one event plus all the time and energy and resources of myself and the team to put this together, do the research, set up the event, book cool after parties, get our speakers set up with everything they need. It was just a massive loss. So, overall I'm probably out well over my first million dollars lost. And I'll be honest, there's a lot more than this. These are just the biggest ones that came to mind and that I think a lot of entrepreneurs can benefit from hearing, especially as you start to make money. So, I would say key takeaway from this episode guys, is that making money...

Once again, once you have something that clicks and that works, it really is easy. But again, keeping that money is harder because as entrepreneurs, what we want to do when we see something working is do it again and again and again, and that is not the path to wealth. So, what you need to do is focus on what is working for you right now, and focus on growing that. Like I mentioned earlier, you really need to know your numbers and use that data, use your numbers to grow profitably and keep what you have to get bigger and bigger and bigger because that is the true path to wealth. And that's the way to actually hold onto your money and make a lot more than you would by being everywhere and anywhere and trying a million things at once.

So, that's it for today guys. Hope you got value from this podcast. If you did, as always, I would really appreciate it if you can go over to Apple Podcasts and leave a review. I'll post the link in the description for that. And also, if you're listening to this and you don't have a store yet, definitely go check out dropshipwebinar.com. I have free training there that's designed to show you how we build these businesses. And also, I make an awesome offer for our flagship coaching program there. So, that is dropshipwebinar.com. I will link that in the description as well. So, that's it for today. Thank you. I appreciate you. And I will talk to you in the next episode of the podcast. See you.

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