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[MUSIC PLAYING] DREW SANOCKI: Hello and welcome to module 1, lesson one of W e-commerce. Ladies and gentlemen this is what you never want to see when you log into Google Analytics. The business is karmaloop.com, a streetwear apparel retailer that peaked at $100 million in revenue in 2012 and then underwent a steady decline through 2015 when the company filed for bankruptcy. During the summer of 2015, I was part of the private equity team that acquired the assets of the company.
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I did diligence on the deal then joined the company as chief marketing officer. At the time the business was losing a half million every month but it wasn't for lack of trying. This was a company that tried everything on the acquisition side of things Facebook, Google shopping, affiliate marketing, influencer marketing. You name it Karmaloop had given it a shot. And he had nothing hidden until he made one big shift that revolutionized the business.
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That big shift was moving from an acquisition mindset to retention mindset. Three months after we made that shift, our metrics were improving. Revenue, conversion rate, average order size, all were up. Ten months after the shift we had moved from losing a half million per month to profitable and 11 months after the shift we sold the business for an eight figure capital gain. I came away from this experience with three key insights.
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First, most businesses limp along when they could be growing a lot faster. Second, it's possible to double a business without twice the effort. And third the best way to do this is to deconstruct a revenue model and focus on what I call the three revenue multipliers. How to do this is the subject of this course. Before I go any further you might be wondering who I am. My name's Drew Sanocki.
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I live in New York City. I'm a self-proclaimed e-commerce growth expert, I do air quotes when I say that. I run an agency called Empire Growth Group and I blog about how to grow e-commerce businesses at nerdmarketing.com. I could think of three reasons why you should spend the next hour listening to me. First reason, I was in your shoes. I started my own e-commerce retailer designpublic.com in 2003.
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I grew it to a seven figure revenue total in about a year and then I continued to grow it until I sold the business in 2011. I talk about how I did this and how I sold the business in a podcast at nerdmarketing.com slash 9. Second, I now operate larger e-commerce companies. My experience as CMO at Karmaloop is one I'm going to talk about a lot in this class. And finally, my agency Empire Growth Group works with medium to large size direct to consumer brands.
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Probably like yours. We have two groups of clients, we've got the brands themselves and then we've got the private equity funds that own or buy these brands. For both these clients who serve as an outsourced growth team. So working with private equity funds gives us critical insights, why? Because if you ever want to sell your business odds are it will be a private equity fund kicking the tires. So in this course, I'm going to share some of the insights that they look for and some of the things that they look for. Here are some of the companies I've worked on, they range from seven figures in revenue all the way up to nine figures.
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And I've used the same approach, the same three multiplier framework to grow many of them. So rest assured, it's not a shot in the dark approach that applied just once at Karmaloop. So let's call it the private equity growth approach. It involves three multipliers that I'll tell you about shortly. But it also involves a short time frame 100 days. You see when a fund acquires a business they don't care as much about growing it over the next 10 years.
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They're much more concerned and focused with growing the business over the next 100 days. That way they can show their investors an immediate return on their investment and everybody's happy. That's the perspective I want you to take here. I don't want to give you a 10 year growth strategy, I don't want you call me up in 10 years to thank me when I can't even figure out how to turn on my cell phone because I'm old and senile No, I want you to call me in three months, 100 days from now.
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I want you to get some massive gains in the short time by focusing on three simple levers. These three revenue multipliers are the only ways to grow revenue. Multiplier one is to increase purchase frequency or the number of times on average your customers order from you. It's a retention metric and we call it F for short. Multiplier two is to increase the average order value or AOV for short and multiplier three is to increase the total number of customers or C.
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Most of you probably go blindly after this multiplier and I know it's 90% of what I read about in marketing blogs. But you're taking this class because you have a big business. You already have customers, you already have some acquisition working, so you probably have some lower hanging fruit from multipliers 1 and 2. The power of these three comes from the fact they're multiplicative. Let's take a hypothetical company that in Q1 had 2000 customers who spent an AOV of $150.
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Each customer bought twice on average. That gave this company a total revenue $600,000. If we increase each of these multipliers by 30% more than doable within a year, this company now has 2,600 customers spending almost $200 per order and each customer comes back roughly 2 and 1/2 times. The revenue now totals 1.3 million. So more than doubled the revenue just by increasing each multiplier 30%.
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I think that's pretty compelling. And this is what I want to explore over the next few modules. In module 1, this module, I'm going to delve more into this private equity framework that are used to grow big brands. In module 2, I'm going to talk about multiplier one and talk about purchase frequency and customer retention. In module 3 I'm going to explore my multiplier 2, AOV, and how you can increase that. And in a module 4, the final module I'll delve into multiplier 3 in customer acquisition.
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I'm not going to be comprehensive in each of these modules instead I want to zero in on what I see working today for most of the brands I work with. And in the next lesson I want to give you my process for growing businesses. To recap what I talked about in this lesson I'm going to give you a proven growth framework that's worked at e-commerce brand after e-commerce brand. I want to simplify growth for you by focusing in on number one only 3 multipliers and number two what you can do in the next 100 days.
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Thanks and I'll see you next lesson. [MUSIC PLAYING]
