On this 70th episode of The E-Comm Show, our host and BlueTuskr CEO Andrew Maff is with Nathan Hirsch of EcomBalance, an online bookkeeping service for eCommerce and digital businesses, as well as Outsource School, a membership that teaches business owners how to hire effectively online. Coming from a strong entrepreneurial background, Nathan shares the importance of having an accurate bookkeeping system in place for fellow entrepreneurs to effectively scale and grow their business including those looking to exit, using clear, broken-down data.
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Utilize Bookkeeping and Hiring to Effectively Scale Your E-Commerce Business - EcomBalance
SPEAKER
Andrew Maff and Nathan Hirsch
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Nathan Hirsch
Nathan Hirsch is a lifelong entrepreneur and is currently the CEO of EcomBalance and Outsource School. Nathan is best known for co-founding FreeUp.net in 2015 with an initial $5,000 investment, scaling it to $12 million in yearly revenue, and having it acquired in 2019. Today, he leads EcomBalance, an online bookkeeping service for eCommerce and digital businesses, and Outsource School, a membership teaching business owners how to hire effectively online. Nathan has appeared on 400+ podcasts and is a social media personality. He and his wife live in Denver, Colorado with his two dogs where they are foster parents.
Transcript:
00:02
entrepreneurs should never do their own bookkeeping. It's a bad use of your time or just bad at it for the first year of my Amazon business. I did my own bookkeeping I spent hours and hours and hours and just had to pay someone later to redo it all because it was all wrong.
00:16
Hey everyone, This is Nezar Akeel for Max Pro. Hi I'm Linda
00:21
and I'm Paul and we're Love and Pebble Hi this is Lopa Van Der Mersch from RASA and you're listening to and you're listening and you are listening to The E-Comm Show
00:37
Welcome to The E-Comm Show, presented by BlueTuskr, the number one place to hear the inside scoop from other ecommerce experts, where they share their secrets on how they scaled their businesses and are now living the dream. Now, here's your host, Andrew Maff. Hello,
00:55
everyone and welcome to yet another episode of The E-Comm Show. I'm your host Andrew Maff and today I am joined by my good friend here and Nathan Hirsch, who is the CEO of Ecom Balance as well as the outsourced school as well as some stuff that he's done in the past which is actually how we met way back when but But Nathan, how you doing ready for a good show.
01:16
Yeah, dude, I am ready. Thanks so much for having me. I live in Colorado, and we just got destroyed by a snowstorm. So I'm just looking at the outdoors. Oh, no snow right now.
01:26
Is it snowing right now?
01:27
Oh, yeah. It just started eight hours ago. And all schools are canceled. Everything's canceled. So I'm inside for the day.
01:35
Oh, fun. Well, good day to do a podcast. Right? Right. So I always like to do this, you know, the stereotypical start of like, you know, pretend no one knows who you are, and all that fun stuff. And tell us about your background, etc. But I'm also super interested in it because I've known you for a while now I know you and I met way back when you were a really original founder of a free app that you then exited. Or one of the co-founders I should say, but why don't you kind of give us a little bit of your background and we'll kick it off from there?
02:02
Yeah, so I was I always wanted to be an entrepreneur growing up I have a lot of jobs. My parents made me responsible for making money and buying my own stuff at a young age. So every summer and every winter, I was always working errands, sales, and lease Firestone, you name it. And I learned a lot about just sales and customer service and working with people and financials. And when I got to college, I started hustling on the side, I started buying and selling people's textbooks competing with my school bookstore, to the point where I had like, a nice little operation going I had these people going around, I would pay them like a percentage commission, they would go around and get me books. I had lines outside my college dorm room of people trying to sell me their books. And we had this, this M I think it was eight people to a dorm. But for whatever reason, we didn't have one of the rooms occupied. So that room was just filled with textbooks. So I had this operation going out of my college dorm room in 2008 and 2009. This was the early days of Amazon. And at the time, Amazon was just one of the places I was selling these books on there, all these different bookstores and I would just pick whatever the biggest, highest price was and ship it to them. Amazon started to become the highest price and I had this seller account on Amazon that was brand new. Well, I ended up getting a cease and desist letter from my college telling me to knock it off and stop competing with their school bookstore. Now, the rebel in me wanted to be like screw it, let's fight the school. But my parents were both teachers and I didn't really want to get kicked out of college that would not have gone over well. So I pivoted, I had this Amazon account. Amazon was just starting to get into new things. And I kind of had this idea of drop shipping years before I even knew it was called Drop Shipping. I said hey, no one really knows what Amazon is they have all these other products now I don't have any money to buy inventory. I don't have any place to store inventory. What if I had other people ship products for me? So I started calling all these different, like online e-commerce stores. I don't know if you ever heard of major back in the day or Meijer I don't know how to pronounce it. Then I started going to like US manufacturers I never really did China or anything like that. But US manufacturers who at the time didn't know ecommerce didn't know Amazon, they were just selling to brick-and-mortar stores and my little pitch was hey, I'm good at getting sales on Amazon. All you have to do is keep my credit card on file, I'll send you an email on where to ship the order or I can check it on your site if there's a way to do that. And you just ship the product where I tell you to I'll mark it up I'll make the difference. And that was that and this blew up I had to be one of the first 1000 Amazon sellers to drop shipping, especially in the baby and toys category and this business exploded before I knew it. I was selling hundreds of 1000s of dollars millions out of my college dorm room I had to start hiring people and that was just a disaster because college kids were super unreliable I remember just banging on people's dorm rooms trying to get them to wake up and show up for work. And that kind of led me into the VA Freelancer space. But that's kind of how I got started just selling textbooks and then moving on to drop shipping.
05:14
So then obviously, I know the story continues, which is like, that was a nice little segue if I'm sure this is how you started free up, am I right?
05:21
Yeah. So this Amazon business, we sold 25 million over seven years, but it peaked at around 5 million. And these were the good old days, you could do anything on Amazon, there was no PPC, and there was no real Amazon software, you listed it and it would sell. And as we kind of at the beginning, we thought, hey, we're going to take down Amazon, we're going to be the next ecommerce giant. That didn't really happen, Amazon became harder, their algorithm changed more competition, and that 5 million became 3 million and the next year would be 3.5. And next year, it'd be two and we kind of just found ourselves instead of growing the business, we were just kind of adjusting to whatever changes Amazon was making every single year and that became not fun. Meanwhile, we had all these great VAs and freelancers that knew ecommerce and I started networking with other ecommerce sellers. And I started leasing out this vas a lot of which were very seasonal because we were selling baby toys. So the fourth quarter, we needed a lot of them. And people started really liking that. It was to the point where Connor my business partner and I build the website, we came up with the name free up and started to market it a little bit going on podcasts like these. And this business started to outpace our Amazon business. And it was a lot more fun too because we were building our own brand. We had our own website, we weren't adjusting to Amazon's rules and, and regulations there. And so we made the decision to stop the Amazon business. We didn't sell it, we just shut it down and focus on freeing it up. And that ended up being one of our better business decisions early on.
06:48
That's amazing. And then obviously, as time went on from that you did exit free up, correct?
06:53
Yeah, yeah. Again, timing is a lot. So Upwork and Fiverr had just gone public and they had started to increase their fees. Now there are a lot of E-commerce agencies and freelancers and all that didn't really exist back then if you were an E-commerce seller or an Amazon seller and you wanted someone who knew Amazon PPC or new Amazon listings, you didn't have a lot of options. So we became the go to we started partnering with all the people in the industry, whether they had a podcast or a Facebook group or community, you name it. And this business grew, we did a million dollars in the first year, 5 million, in the second 9 million in third, and 12 million in the fourth before one of our clients, the Hoth reached out to us and Mark Hargrove, David Martin who buy a lot of businesses and they essentially said We like the freelance space. We don't build businesses, we buy them, we use free up, we like free up, and we'd love to see if there's an opportunity to acquire you guys. And we kind of heard them out and made us an offer. And we did a lot of due diligence on them to make sure we knew who we were selling it to and that they would treat our clients and our team well. And obviously, we didn't want to end up in a lawsuit or anything down the line. And they've been great and kind of honored their word. But that was four years of scaling the company before exiting.
08:05
Wow, well, obviously congratulations. That's awesome. That's usually not the case. I know. The story behind that was you started off with very little capital in free up, arguably nothing compared to sum. And you scaled that up to I believe, about 12 million before you actually exited annually. Correct?
08:24
Yeah. So free up, we really started with the minimum viable product developer that we had used from our Amazon business, created a time clock software that all it did was the VAs could log in and record their hours and clients could see the VA is on their side. And we had to manually add the VA to their account, clients would email me text me, Skype me, hey, I need a customer service rep. I need a Lister. Very, very makeshift. And we would keep track of all of it in a Google doc billing was very manual. And we just took it to market and started placing VAs and freelancers. And I think what really helped us is whenever you start a marketplace, you kind of always have this chicken or egg situation like do you get clients first or whatever you're supplying to the clients? With us. We had this army of VAs and freelancers from our Amazon business. So we kind of had a head start there of people that we trusted. And then once we ran out of all of them and placed all of them, then we had to build a recruitment team and start getting more applicants and adding it to the platform. But it wasn't until we got to the end of year one that we actually started to invest in our software and hire more people. It was the very bare minimum for the first year.
09:33
That's awesome. So fast forward now. Obviously, you're now CEO of econ balance which is reppin on the shirt right now as well as outsourcing school. So what made you will a tell us a little bit about that? And then b What made you start this business?
09:46
Yeah, so we sold free up November 2019. So the original plan was to take some time off and travel the world I didn't think I would see Connor for a year and shortly after we sold the company COVID hit and all our plans change Usually we had to cancel our flights. And so we were kind of stuck inside with no business to run nothing to do, we can only watch so much Netflix, and we didn't really have any business ideas. And so a buddy of mine, Nate McAllister, who you probably know in the space, reached out and said, Hey, you would really be good at a course on hiring because obviously, you guys are good at hiring. Free up, for example, I had no US employees, we had 30 full-time virtual assistants working out of the Philippines doing everything from billing, a customer service to marketing, you name it now, there are 1000s of VAs and freelance on the platform, I'm just talking about my internal team. And so we built a course called outsource school with cracking the VA code and kind of like all our businesses, we kind of launched it with a minimum viable product, we sold about 50 of them. And if people hated it, we were just going to refund them and move on to something else. But people really liked it. And they started asking me for more. So we started uploading all of our SOPs to outsource school to where now it's a yearly membership, you get access to our hiring process and our SOPs, and we really use that to kind of bias time to brainstorm and figure out what we want to do next because running the membership is definitely not a 5060 hour a week thing. So we started consulting with different ecommerce sellers. And we learned pretty quickly that we hate being consultants and I will never do that again. But the common theme was before we could help people make decisions on their business, we had to revamp their bookkeeping process so we could get accurate data in order to help them make decisions. So that kind of gave us the idea to start a monthly bookkeeping business. We did a lot of market research, we interviewed 100 ecommerce sellers, you can find those interviews on the econ balanced blog, and like like we always do, we launched a minimal viable product. We did a beta run with 25 clients who hired bookkeepers, obviously, because I'm not another bookkeeper. And Connor's not a bookkeeper. And luckily, that went well. And now we're at the point where we have 100 clients, we're about a team of 10, or 11, bookkeepers, and we just launched a second brand called accounts balance, which I know you use for non ecommerce businesses, as well. So that's been kind of a fun adventure. We're one year in so we have a lot, a lot of work to do. But
12:17
I was gonna caveat that and be like, I am actually a client of the other side of accounts balance now, which is essential, I'm imagining it's the exact same thing just not ecommerce, correct, correct exactly the way that I mean, that's the way I look at it. And that's it, honestly, like, the whole thing so far has been awesome. It was like I had a bookkeeper prior to this kind of groom. And immediately I was like, Okay, this is, this is how this is supposed to be run. Even when I go through my numbers and stuff. I'm like, okay, at least I can find things now. So fantastic. So, so you you exited, you know, free up, you've had your own e-commerce company. So obviously, now that you're kind of in an E-commerce bookkeeping scenario here, what is your opinion, even though you mentioned you're not a bookkeeper? Like you're, I'm sure you know, more than most at this point, because you're running the business? What is your opinion and how sellers should be overseeing their books? And even like, What are your thoughts on if they're going to exit? What kind of situation do they need to put their books in?
13:09
Yeah, so I mean, my first thought is, entrepreneurs should never do their own bookkeeping. It's a bad use of your time, your time could be better spent on growing your actual business. And even if you have a background, let's say you are a CPA in another life, I would still argue it's a bad use of your time. But also entrepreneurs are just bad at it. For the first year of my Amazon business. I did my own bookkeeping, I spent hours and hours and hours and just had to pay someone later to redo it all because it was all wrong. And for you, for an entrepreneur to spend time buying a course on E-commerce, and bookkeeping, to me that that's crazy. I think during our market research, we noticed a lot of bookkeeping companies like selling courses to entrepreneurs on how to do bookkeeping. And it just made zero sense to me. That's not what entrepreneurs should be doing. At the same time, you need to learn how to read an income statement, a balance sheet, and a cash flow statement. That's a good life skill. Even if you're not an entrepreneur, you can use it for investing in companies or buying stocks, it's something you should learn how to do. But you need to be able to create a good monthly process where the month ends, by the 15th of the month, and you get your three statements, income statement, balance sheet cash flow, you never even need to log into QuickBooks, but you have to get those reports on time. And then you should have a meeting on your calendar every single month. And this is a meeting that Connor and I have been running every month for the past six years. And at this meeting, this is where you make all the decisions. Bookkeeping is nice because it lets you file your taxes on time and and not extend there. And yes, it can help you sell a company which we'll talk about but the main thing that bookkeeping does is it helps you make decisions every single month. You shouldn't be making decisions based on gut or instinct, you should be looking at the numbers, seeing the trends, and that's where you make your decision. So that's kind of how I look at it from an entrepreneur standpoint and how we try to frame econ balance. And from a sales side when Mark and David reached out to us and we had that initial phone call. And they asked us a lot of questions, we knew our numbers inside and out because we had had that meeting every single month for the four years of free up. And so then when they got into the books, everything that we told them on the phone matched everything on the books, because we knew our numbers, and we had for years, going back have clean books. And so having clean financials is step one of selling any company, I've yet to meet someone who successfully exited without clean books. But you also need to know your numbers. And obviously, there's a lot more to selling in terms of timing and finding the right buyer and all that.
15:38
Yeah. So from an E-commerce standpoint, now, you have all these sellers, you know, some of them, whatever happens in the market this year will be very interesting. But you're gonna have some that may or may not be looking to either exit or they're looking to kind of, you know, pull back on what they're spending, or maybe they're going to try and fight through whatever we end up dealing with in this market. From an econ bounce side of things. Do you? Obviously, you mentioned you don't consult, but do you give any kind of insight into Hey, based on your books, and based on all of these other sellers that we're working with? Here's our opinion, or are you just like, No, we're gonna let you guys make your own decision? What's probably more commendable?
16:19
Yeah, so we don't coach or consult, like, we're not a CFO, now you should take our books and go to your CPA and develop a tax strategy and go to your CFO or whoever your business partner, whoever it is, you're making decisions. But our goal is to put it in a way for you to understand and the best way to do that is by looking at this month, compared to last month, and this month, compared to the month by the same month last year. And looking at trends like hey, is payroll going up faster than revenue, or having good segmentation? So you might be selling five products, but two of them are unprofitable, and you're wasting a lot of time there. So all the insane things with marketplaces you might be selling on Amazon Europe. And that might not be a good use of your time, depending on what the numbers say. So we're more of providing you clean broken down data. But it's still up to you to make decisions. And obviously, ecommerce is changing. And you've got everything from the economy to like Amazon changing fees, and all this stuff that's going there. But it still comes down to making sure that you're growing a real brand and not just thinking of yourself as an Amazon seller, and that you understand the actual margins you're making on product products, and not getting caught up in some of the fake stuff like your top line revenue that isn't as helpful into actually growing a great business.
17:35
So what's your end goal with econ balance, so since you got free up and cleared that eight-figure mark, were able to exit successfully wanting to take a vacation but didn't. So what happens with EECOM balance once you've kind of hit, you know, whatever your target is,
17:48
yeah, Connor and I have talked about this a lot. I mean, obviously, anything can change, and people can come up and make offers or whatever. But we've kind of already gone through an exit, we don't really need the cash, so to speak. And we like the business model. We think that in 10 years, 20 years, and 30 years, ecommerce out or bookkeeping isn't going anywhere. So we like being in that space. And we think that it'll still allow us to do other adventures as well. And a kind of keeps us in the commerce community which we really like. So our goal is to grow this bigger than free up, we don't have like an end goal to sell it, we never really had an end goal to sell free up either. It just kind of happened. But we're excited we have a lot to, to kind of prove in the space. We're focused on accounts balance and growing that side as well. And we want to be known as a reliable book monthly bookkeeping service for entrepreneurs going forward.
18:39
Nice. So do you think you'll ever get back into being an E-commerce seller?
18:44
I don't honestly. If I did, it would be like far away from Amazon. And I know a lot of people that crushed Amazon and all that I personally just like, I don't really like authority. So me being dependent on Amazon's rules and changing on me. I've kind of been through that and that just doesn't appeal to me as much but who knows, maybe one day I'll wake up with some great product idea and that'll change everything.
19:10
Completely agree. I can't deal with Amazon either. noxious, but uh, Nathan, thank you so much for being on the show. I know you're super busy. So I want to keep you any longer than I have to. But obviously, I'd love to give the opportunity here to let everyone know where they can find out more about your econ balanced and of course Outdoor School as well.
19:26
Yeah, feel free to connect with me on any social media channel and Nathan Hirsch goes to outsource school.com econ downside calm accounts balance.com. Everything's there and we have a lot of great free resources thanks so much for having me on.
19:39
Yeah, thank you, buddy. Everyone who tuned in, obviously thank you as well please make sure you rate review subscribe, and all that fun stuff or head over to theecommshow.com where you can see all of our other episodes or whichever podcast platform you prefer. But per usual thank you all for joining Nathan and we'll see you all next time.
19:58
Thank you for tuning in to The E-Comm Show head over to ecommshow.com to subscribe on your favorite podcast platform or on the BlueTuskr YouTube channel. The E-Comm Show is brought to you by BlueTuskr, a full-service digital marketing company specifically for E-commerce sellers looking to accelerate their growth. Go to BlueTuskr.com Now for more information. Make sure to tune in next week for another amazing episode of The E-Comm Show.
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