Lessons from the founder of the Bankruptcy Drive Ecom agency
Josh Durham knows the downsides of entrepreneurship. He founded an e-commerce business in 2015 and quickly grew his income. Then he went bankrupt.
He said to me, âWe made weighted blankets. We have grown this business to around $ 6 million per year. Then he tanked overnight. It was brutal. I had to fire everyone.
Fast forward to 2021, and Durham bounced back. He started a successful marketing agency, Aligned Growth Management, which builds on his e-commerce lessons. He and I recently discussed his journey, from early successes to bankruptcy and vice versa.
Our entire audio conversation is embedded below. The following transcript is edited for clarity and length.
Eric Bandholz: Tell us about your journey to Aligned Growth Management.
Josh Durham: I got into e-commerce in 2015 when I started my first business. It was called Weighting Comforts. We made weighted blankets. We were the first adult weighted blanket on the market. We have grown this business to around $ 6 million per year. Then he tanked overnight. It was brutal. I had to fire everyone.
Bandholz: What happened?
Durham: The market collapsed under us. We have not evolved well on our product. Manufacturing in the United States was our biggest downfall. Our competitors had automated and outsourced production to China. They made weighted blankets at $ 5 each. My cost was $ 40 to $ 50. Our margins vanished as soon as Target hit the market with its own version.
Bandholz: Have sales disappeared?
Durham: Yes. In the fall of 2018, we started to see indicators. It was two weeks before Black Friday, and we didn’t have enough money to pay the payroll. In the end, it was a bad match between the product and the market. Additionally, we tried to go from $ 2 million in revenue per year to $ 10 million. It was too ambitious.
I co-founded the business with my mother. It required a lot of debt. We borrowed almost a million dollars to try to keep it open. It was a frightening situation. We closed in May 2019.
We sold the brand and the mailing list to a digital marketing agency who used it as an internal brand. But the proceeds were not enough to pay off the debt.
Bandholz: Have you signed personal guarantees?
Durham: Yes, personal guarantees for a bank line of credit.
Bandholz: It’s like the faster you grow, the more money is needed for inventory. The more you tie up your money, the less money you have for marketing. So you’re stuck with all that inventory but no capital to sell it.
Durham: Yes, it is a vicious cycle. And then you make a sale every two weeks. It is a spiral. It’s fatal.
Bandholz: You mentioned your mother. Was she carrying any of this debt?
Durham: Yes, she had some of that debt for sure. The sellers too. Everything was personally guaranteed.
Bandholz: How do you pay off a million dollars in debt?
Durham: One bite at a time. I had to file for personal bankruptcy in Tennessee. I submitted my file in September 2019.
Bandholz: Everyone is talking about the winning stories. But yours is another aspect of entrepreneurship worth discussing.
Durham: It was a dark, gloomy time. When you grow a business, you get income. It is an exciting time. I made Forbes lists during this time. Then I went bankrupt in nine months.
It was mental exhaustion. I was trying new things every week to keep the business going. Our overheads were very expensive. We have transferred part-time employees and tried to make our marketing more effective.
I ended up in bankruptcy court. It was a sad experience overall. I had almost no money, just enough to live for a few months. I needed a job. But the work has become a healing experience. Just being able to settle down, focus on my health, mentally recover and rebuild.
Bandholz: You bounced back, you came out of the hole.
Durham: After the bankruptcy, I was trying to decide what to do. Should I create an agency or freelance with other e-commerce brands? But I did meet Peter, the CEO of Groove Life, which makes rings, belts and watch straps for the outdoors. He said, âWhy don’t you come and work here for a year? So I joined Groove Life as a growth manager.
Bandholz: Groove Life is very successful.
Durham: For sure. The strong margins on the company’s products allow for a lot of advertising spending and investment in customer acquisition. The founders did a great job building a brand. They focused on the guy who loves to hunt, fish and work with his hands. No more blue collar workers from Central America. Everyone in the market has focused on CrossFitters, fitness influencers, that sort of thing.
The company also has an incredible warranty – a lifetime warranty. They stay behind their products.
Bandholz: How long have you been with Groove?
Durham: About a year and a half. I was in a period of transition. I got married last year and started to rethink my priorities. I like entrepreneurship. I am passionate about it. I like to bring value, to create financial freedom for myself. I love helping others. So I went on my own and started Aligned Growth Management, a marketing agency.
Bandholz: Advertising agencies, from a brand perspective, can be frustrating. Everyone promises to grow your brand like crazy, but very few can. How do you help your customers grow?
Durham: First, we try to set realistic and healthy expectations. We are not going to create a big win from just one tactic. This is the trap that many agencies have created for themselves. Rarely is it something that pushes the needle.
We try to add value beyond buying ads. Growing an ecommerce business isn’t all about having the best Facebook advertising. It starts with the product. This is the biggest differentiator. A founder with a marketing mindset when designing the product sets the business up for success, as opposed to creating the product and then figuring out how to sell it.
We focus on three channels: Facebook, email-SMS and an ambassador program.
Customers with strong internal stakeholders see the most success. Instead of outsourcing all the responsibilities to the marketing agency, they have their own strategy, game plan, promotional timeline. They have new products coming out with planned campaigns. Many brands don’t have a real marketing strategy. They send out random email campaigns, for example, whenever they can get some content.
Bandholz: Are there still opportunities to grow on Facebook with data loss?
Durham: Reporting on Facebook’s platform is bad with the changes to iOS 14. I like to divide performance metrics between a lead metric and lag metric. The metrics of prospects are CPMs, click-through rates. These data are not going to be shaky.
The lag metrics are return on ad spend, cost per purchase, number of purchases, that sort of thing.
Bandholz: You’ve walked around the block. I appreciate that you open up, that you are vulnerable to the downs. Everyone hears about the winning entrepreneur. But it’s hard there. Your willingness to share your story will help other businesses. So thanks.
How can listeners reach you?
Durham: The best place is Twitter – @joshjdurham. I am also on LinkedIn. My agency’s site is AlignedGrowthManagement.com.