Good morning,
We’re back again with another DTC Summer Series Newsletter Takeover!
This week, learn from DTC legend Ezra Firestone as he chats through buying and turning a DTC brand profitable in 90 days.
Enjoy!
Here’s what you’ll find in today’s DTC:
⚒️ Ezra Firestone chats about acquiring a hair color company BOOM! Beauty and the challenges of scaling the business.
💰 He shares how he was able to cut expenses by simplifying the business and finding new revenue streams, such as selling on Amazon.
🩷 And…his number one tip to create a winning and healthy work environment within your team.
You’re reading this newsletter along with new subscribers from: Head High Wines, Resort Pass, and Ascension Dance. 👋
💈 How We Turned Around a Struggling Hair Color Company — Part Three
Amazon Optimization
Optimizing our Amazon presence was crucial. Amazon accounts for over 50% of ecommerce revenue in the U.S., and we needed to be strong there.
Here’s what we did:
Supply Chain and Margins
We decreased product costs by negotiating with multiple suppliers, moving fulfillment to a new 3PL provider, and eliminating underperforming SKUs. We improved demand forecasting to avoid out-of-stock issues.
Cost Reduction and Efficiency
In supply chain management, redundancy is key. Think of it as having multiple queens on the chessboard. We negotiated with six or seven suppliers to ensure better pricing and redundancy. We also normalized purchasing patterns to realize cost efficiencies, much like predicting your opponent’s moves in chess.
Despite some upfront losses, we moved fulfillment to a new 3PL provider with an improved cost model. It was like sacrificing a piece for a long-term strategic advantage.
New Product Launches
Launching new products is crucial. We added basket builders, complementary items, and new core items. This strategy provided new top-of-funnel acquisition opportunities, upsell and cross-sell chances, and increased average order and customer lifetime value.
Product Development and Launch
Launching products is like introducing new pieces on the chessboard. You need to strategically place them to maximize impact. We started with basket builders that are easy to produce and bundle. Then, we slowly added new categories and use cases, like bleach for fantasy hair colors.
To figure out what to launch, we used two key methods:
Team Building
We onboarded new leadership and ensured no functional gaps in operations. We aligned the entire team towards a cohesive brand strategy and vision.
The Outcome
Within 90 days, we turned the company from losing money to making over $100K a month in profit. Turnarounds are tough and often harder than expected, but when they work out, they're incredibly rewarding.
I hope this inside look into our turnaround of an eight-figure company was useful to you. Let me know what you think, and I'd love to connect with you on social media, my blog, or in my mastermind.
Thanks for reading!
💈 How We Turned Around a Struggling Hair Color Company — Part Two
Simplifying the Business
We streamlined the bloated organizational structure from 71 employees across eight areas to 18 key employees and added two new C-level leaders. This follows the principle that you can often do more with less, similar to Elon Musk’s strategy at Twitter.
We slashed payroll from $6.2M to $2.1M and reduced reliance on third-party services from 50 providers to 18.
We transitioned from a complex headless Shopify integration, which required an eight-person IT department and the ReScience email/SMS platform, to an off-the-shelf Shopify solution and Klaviyo for email and SMS. This move reduced our overall tech stack costs by more than 90%.
Customer Acquisition Strategy
We shifted focus from inefficiently driving new customer acquisition to profitable sales from repeat customers. We selectively acquired new customers at optimal costs until profitability was reached and then scaled acquisition efforts.
Product Strategy
We cut the overexpanded SKU portfolio from 300+ to the top 25 SKUs, representing 47% of sales. This allowed us to focus on our best sellers, streamline operations, and improve margins.
Revenue Acceleration
We re-engaged our email list with my ICOSA system of value-add content and social engagement. The previously mentioned transition from a headless Shopify instance to an off-the-shelf model, enabled us to use apps like Zipify One Click Upsell and Post Pilot to drive average order value (AOV) up. In just eight months, we increased AOV from $40 to over $60.
Upsell and Cross-Sell Strategies
Think of the upsell and cross-sell strategy like a masterful game of chess. Each move is calculated to increase value without overwhelming the customer. Here’s how we approached it:
💈 How We Turned Around a Struggling Hair Color Company
Hey everyone,
I’m Ezra Firestone, and I've been an ecommerce entrepreneur since 2005. I've had my fair share of wins and learned a lot along the way.
Today, I want to share a story about a recent company turnaround I led with insights and strategies that might help you, whether you're a team member or a CEO.
The Background
I recently bought a hair color company with a lot of personality and a good following. This brand exploded during COVID, skyrocketing from a few million to tens of millions in revenue.
However, fast growth can break companies—I've experienced it myself with one of my brands, BOOM!. Our marketing efforts took us from $3M to $17M in just one year, and no other department could keep up.
We ran out of stock, struggled with customer support, and faced delays in getting components. Fortunately, it wasn’t my first rodeo, so we navigated these issues and grew from $17M to $40M before selling 70% to private equity in 2020.
However, the hair color company wasn't as lucky.
They made some common mistakes when the big money started coming in—they spent it too freely. They invested in offices, a big team, and even those quirky phone booth workstations. It was a wild scene, and the overspending was substantial.
As the COVID effect waned, their overhead ballooned, and they began haemorrhaging money—losing hundreds of thousands of dollars in certain months.
The Turnaround Strategy
I teamed up with Drew Sanocki (ecommerce OG and the guy behind Post Pilot) and some very cool and very skilled private equity backers, and after months of due diligence, we bought the company.
Here are the four principles I needed to agree with before buying:
The Challenges
This company didn’t have many potential acquirers because turning around a losing company requires operational expertise, not just investment. We had to take over 100% of operations, install new leadership, and turn it around—an arduous task.
Despite its challenges, the company had good qualities: a solid customer base, decent revenue, and a fun, expandable product category.
The Turnaround Steps
Turnarounds are tough, often more challenging than expected. Here’s how we approached it:
Inventory and Assessment
We started by interviewing all team members to understand their roles, attitudes, and how they interacted with other departments.
We discovered that departments worked in silos without cohesive leadership or strategy. Classic issues like lack of interdepartmental communication and misaligned marketing efforts were prevalent.
🎉 CELEBRATE THIS!
🐝 August 17: World Honey Bee Day, Thrift Shop Day, I Love My Feet Day
👩❤️👨 August 18: Mail Order Catalog Day, Serendipity Day, Couple’s Day
🎀 August 19: International Bow Day, Potato Day
🏖️ August 20: World Mosquito Day, Beach Umbrella Day
✍️ August 21: Sweet Tea Day, Brazilian Blowout Day, Poets Day
🍑 August 22: Bao Day, World Plant Milk Day, Eat A Peach Day
✈️ August 23: Cheap Flight Day, Cuban Sandwich Day, Kobe Mamba Mentality Day
🌐 IN THE SOCIAL SPHERE
To create a healthy work environment, make sure to acknowledge your team and let them know their feedback counts!
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DTC Newsletter is written by Rebecca Knight and Frances Du. Edited by Eric Dyck.
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