Today we interview Allan Levy, a serial entrepreneur who came from a family of entrepreneurs. Allan talks about moving from a small business to a large business by becoming passionate about people and team building
Only Founders: I’ve known you for years, but I don’t know a lot about your background. Tell us how you got started.
Allan Levy: The first part of my career dovetailed into the later part of my career. I grew up in a retail family. My parents owned retail stores, so I learned the lessons of retail trade folding boxes as an eight-year-old kid. I worked in the family business when I was in high school until I was 17 or 18. In college I started working wholesale, and ultimately worked my way into sales and ended up at an apparel company. I came in as the young sales guy who they gave every account that had no credit, every account that complained a lot. I worked my way up and was fortunate to be part of a company that was growing so fast.
I worked my tail off and moved from sales to a sales manager of a small division and then the company wanted to expand internationally so I became manager of international marketing and helped launch the brand in Canada, Central and South America. In 1988 we had a Russian distribution partner. I went to Moscow a couple of times, met Gorbachev and had dinner in the Kremlin with other business leaders, I was just 25, it was a great experience.
Nine years later, I left that company and launched my first venture. It was in the apparel industry, a wholesale company, then I also opened a sourcing agency. I saw an opportunity to source product out of Pakistan. We expanded and built a team of almost 100 people in 5 countries. I did that for a number of years and then my first son was born. One of the factory owners had said something about traveling and said “I see my kids grow up in spurts: I’m gone 3 weeks and I miss watching them grow”. I made a conscious decision I didn’t want that to happen.
So I sold that company. Started another wholesale company, licensed a couple of jeans brands for kids. It was 1998-99 and we had an opportunity to bring in an investment bank and really grow the business. But my partner wanted nothing to do with it.
I was a bit of a tech nerd. I was using email in 93-94. In 98-99 we had a website for the jeans business. My accountant laughed when I told him I wanted to raise money for an apparel company. He said, “don’t start an apparel company. The Internet is exploding, go start an Internet company. “
So I did. I sold the business to my partner and I said I’m going to learn how to raise money. I did a friends and family seed round, started an online gifting company. I started gifting because I was more comfortable with product, it seemed like an opportunity and at the time I knew nothing about advertising. We were running a “free gift” model. $5.95 shipping and handling and you get a free gift. I was trying to pitch that to the online sweepstakes companies: Put up a registration form. You’ll drive the traffic. I’ll give you a buck for every gift that is redeemed and all I want to be is your backend to your gift and you’ll get more leads from your reg form.
We then tried it ourselves, threw up a reg page, counter intuitive to anything anyone was doing in retail. You always make it easier to make the sale, and here I was throwing up a registration page with an email capture. Just an email, nothing else. Somebody signed up with their email, they got to our site, 50% signed up, 50% abandoned. I now had an email address on 50% of my traffic
At that time we were monetizing email addresses at about 45 cents per email coming in. It was costing me 15 cents to get an email address; I was generating 45 cents including the profit on the gift. Pretty good business, right? We got into the co-reg business and we grew rapidly. At our peak we were a $27 million a year business. All of our revenue was email driven.
I started talking to retailers about coming in. I wanted to do lead gen for retail. I started asking retailers basic questions like “what’s a lead worth to you,” so I can charge you that much, they looked at me like “I have no idea.”
I said: you have a form here to sign up for the newsletter, sign up for discounts: what do you make from that person? I’d ask, “what is the lifetime value of a customer for you” and they had no answer.
So I started answering those questions for them. I need to help you figure out the Lifetime Value, I need to build you a lead gen conversion platform. We need to have a welcome email, subsequent emails that generate revenue.
Our first client was elf Cosmetics. We took them from a $400k email program that they were improperly tracking to a $2 million email program in their first year. Back then it was the basics. A/B testing subject line, testing offer: does 30% off do as well as buy one get one 50% off (a 25% discount). Do recent openers and recent clickers perform better than the list as a whole. Really, really basic email analytics. I saw that these retailers weren’t doing the basics.
About a year in I saw that our clients were really ham strung just doing enough creative and coming up with subject lines for the testing. We were now telling them to come up with 2 pieces of creative 3-4 times a week rather than just one for the whole week, plus we increased cadence. They didn’t want to “bother” their customers, but once they saw the revenue come in, they were like “Can we mail 2 times a day.” Except they wanted to run the same creative twice a day. So we started building in design and campaign building functions to our offering.
Our offer was performance based. We took a percentage of increased sales so there was very little friction for them. If we brought them from 3 million to 4, we took a piece of the one. We started building a team off shore, working US hours, (50% of our team is off shore, 50% is US based). That was about 2007. About three years ago I decided to take it from a lifestyle business to a larger business. (In the last year, Sellup acquired Email Agency Alchemyworx).
OF: You are the first entrepreneur I’ve interviewed so far that came from a family of entrepreneurs and I wonder how that informed you as you started your own businesses.
Allan: Having a wholesale retail background made it very easy for me to sit down with retailers, because I understand their business as a whole. It put them at ease. I understood there is a markdown phase for merchandise; I understood that new arrivals don’t always arrive on time. And when I can speak those pieces of the language to them it made it easy to develop programs that made sense to them.
The other thing that helped a lot was, as an entrepreneur, knowing you are going to fail. Hopefully you are only losing battles and not wars. If you don’t take risks you are never going to fail but you are never going to move forward. I’m willing to take risks. I try and calculate the risks as much as possible. But having started multiple businesses, I just try and put the pieces that I think will be successful and then I roll the dice and take the chances. Having an entrepreneurial background has helped me grow and having a business background has helped me relate to the customers.
At the end of the day, people do business with friends. If you have the choice at the same price of dealing with someone you know and trust versus someone you don’t know at all, you do business with the person you know and trust. Even if it is a bit more expensive, you do business with people you know and trust. Sales 101: are you married? Do you have kids? These are things we use to make connections with. If I can I try and have a lunch meeting with somebody in the process of either closing the sale or once the sale is made because when you sit down to lunch you get to know the person. And at the end of the day I want to be a person they trust. If something goes bad (and it always does) I want them to know we had the best of intensions, we are trustworthy and when we say we are sorry we mean it. We fix the mistake and we learn from it.
OF: what about entrepreneurs coming up today. Will there be anything like we experienced with the birth of the Internet?
Allan: I don’t know if there will be anything like we experienced with the Internet. That is like two planets colliding and creating a third planet. That being said (and I have 3 boys so I constantly think about the future) change is happening at such a rapid pace that opportunities are more abundant today than they ever were. Moore’s law: things keep splitting and splitting which creates infinitely more opportunities if you are savvy.
You don’t have to be extremely creative to find the new, new thing. Most opportunities are making adjustments to the current thing: a little bit faster, a little bit better. An electric car is still a car. It is nowhere as innovative as the original car was to the horse and buggy. But it leads to infinitely more possibilities. Same with driverless cars. And the same thing we are seeing today with artificial intelligence.
OF: my favorite question: the difference between a small business owner and an entrepreneur. I’ve always said, the small business owner is passionate about a product, but the entrepreneur is passionate about growing a business and the product is irrelevant. What are your thoughts?
Allan: I got caught up in being a small business owner for the first seven years of this company. I’m fortunate in that today I do both. I get up each morning, come into the office and oversee a great team. I look at graphic designs and I love adjusting the creative and seeing it pop in the inbox, I have that same passion when looking at the data. So in that way, I got caught up in that small business owner mentality and doing it all myself.
But eventually I moved away from that: I moved the passion. I’m still helping the clients grow their business but I do it now by stepping back and growing the team. If I can train strategists, I can teach them how to deal with the customer, teach them a little bit about what I have…they aren’t going to have the 30 years of retail experience I have. They don’t know about folding boxes and stacking jeans and walking into stores and counting merchandise… but they don’t need to. They have me for that. I became very passionate about people. And that is what it takes to go from a small business into a big business.