How To Scale an Ecommerce Startup To Eight Figures With Nathan Hirsch of EcomBalance

Guillaume: Hello everyone. Guillaume Le Tual here, host of the Ecommerce Wizards Podcast where I feature leaders in e-commerce and business. Today’s guest is Nathan Hirsch, the CEO and founder of EcomBalance. Today’s topic will be about his previous company, ‘Scaling FreeUp.net from scratch to eight figures’. Before we get started, we have our sponsorship message:

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Alright, Nathan, thanks for being here today.

Nathan: Thank you so much for having me. I’m excited to be here.

Guillaume: Awesome. Can you give us a brief overview of your career as an entrepreneur?

Nathan: Sure. So I started by buying and selling textbooks in college because I was a broke college kid looking for extra side money and I started competing with my school bookstore. I created a little referral program and before I knew it, I had lines out the door of people trying to sell me their textbooks to the point where I got a cease and desist letter from my college telling me to knock it off and and stop competing with them. That ended up being one of the best things that ever happened to me. My parents were both teachers so I didn’t want to get kicked out of school. I had this Amazon account that I had been selling textbooks on, so I started experimenting on what other products I could sell. Through a lot of trial and error and months later, I came across baby products. I was dropshipping baby products before I even knew it was called dropshipping. I built relationships with different manufacturers that would keep my credit card on file and ship products where I told them to. I was selling millions of dollars out of my college dorm room, if you can imagine me as a 20 year old single college guy with more hair selling baby products on Amazon, that was me.

Guillaume: From your college room you reached multiple seven-figures from Amazon?

Nathan: Yeah, this was 2008-2009. So very early days before the courses, before the gurus, before Gillian Tans and the e-commerce software. This was way early in the Wild Wild West of the Amazon. So I’m growing this business and I have to start hiring people. It’s too much I can’t balance it myself while also doing school and there is social life and all this stuff that college had. So I started hiring college kids which was an absolute disaster. They were unreliable, they cared more about other things than my business. They were drinking on the job, they were sleeping in and not showing up for shifts. I made one good hire who is now my business partner, Connor. He became my business partner later and has been working with me for 10-plus years. But I needed a solution for hiring and I didn’t think adults would take me seriously and college kids weren’t reliable. So a buddy of mine told me about virtual assistants, again, that just changed my life. I built a VA army to run my Amazon business.

Over the years as Amazon started to get harder, we started to lease these virtual assistants out to different Amazon sellers as different Amazon Facebook groups and communities started to pop up. People would say, ‘Hey Nate, do you have a graphic designer? Do you have a lister? Or, do you have a PPC person?’ when PPC came out. So this became the FreeUp Marketplace. So while Amazon was getting harder, FreeUp was exciting for us. It was our own brand, our own website. We were doing B2B and building partnerships and learning SEO, and learning marketing and all these things that we never got an opportunity to do, just dropshipping on Amazon. We eventually shut down the Amazon business and we focused on FreeUp, which we can talk more about. We scaled that to a million, 5 million, 9 million, 12 million, over four years before being acquired at the end of 2019, which was months before the pandemic which was kind of crazy.

One of our clients bought us, we can kind of dive into that story. From there we thought that we’d be traveling the world after taking a year off but the pandemic had other plans. It was a weird place to be, stuck at home with no business to run. So we built the Outsource School, which is our membership that teaches people our hiring process. And we’ve been working on EcomBalance, which is our monthly bookkeeping service for e-commerce sellers. We’re also launching a new brand called the AccountsBalance for non e-commerce sellers because finances were such a big part of everything that we did at FreeUp and our past businesses. So that’s kind of the short, long version of how I went from books, to baby products, to FreeUp, to Outsource School, to EcomBalance.

Guillaume: Pretty neat there. So when we’re talking today about scaling FreeUp.net from scratch to eight-figure you had the benefit of having one more business before that. So you had some interesting and serious cashflow with the multiple seven-figure business from your Amazon store so it helped you to fund and start this other venture, it doesn’t change even if someone has venture capital to start a business?

Nathan: We actually didn’t use any of that money.

Guillaume: Yeah, exactly. You can still fail when you launch a business no matter how much money you put into it, you’ll not be able to generate that profitable and scalable business. So that’s interesting, let’s dive into that. FreeUp.net, what was the vision about it? And when you say you started from scratch, where exactly is your definition of scratch?

Nathan: We started FreeUp with $5,000. I mean, we had money in the bank from our Amazon business but we didn’t know what FreeUp was going to become, it exceeded our wildest expectations. We’re a big proponent of minimum viable product or minimum viable service where we get things to market as quickly as possible and test it to make sure we can sell it and make sure people like it before we put more money into it. We’ve also had the benefit of growing very cash positive businesses like dropshipping which is very cash positive, you don’t spend any money.

Guillaume: Yeah, you get paid upfront and you need to have no inventory, so it’s very cash positive.

Nathan: Right, and we built FreeUp the same way. So we started with the $5,000 and we leased out 5-10 virtual assistants, clients were paying us and there was a week’s buffer before we paid the freelancer. So we were always getting cash upfront. Then we were taking that cash and investing it in our software, in our marketing and in these different things. So we liked to build businesses like that. We really just went to get that product out there. We went to different e-commerce communities. We said, where do our e-commerce sellers hang out? We went to Facebook groups, we went to podcasts, we went to newsletters, we went to blogs, and we tried to partner with everyone in the space. And within a few years we were working with 80-90% of the e-commerce influencers, e-commerce agencies, Facebook group owners, podcast hosts, we were working with all of them. Our focus from a marketing standpoint was to work with everyone in the space, no drama, none of the stuff that some people go through, we were just trying to help everyone and generally work with these different people.

Now, one of the best decisions we ever made and this kind of relates to EcomBalance is, we hired a bookkeeper from day one. Right when we started and before we were very profitable, the month would end within the 10 to 15 days after a month ended, we would get an income statement, balance sheet cashflow and we’d review it. We had a meeting on our calendars, my business partner, Connor and I, and we’d go through it. What services are selling the best? Or, fixed prices growing faster than hourly? Where are we spending money? Can we increase payroll? Can we hire more people? Where’s our marketing dollars going? So this same meeting that we’d been running every month for the past six-plus years, we started with FreeUp. This was the key to our success because we weren’t just guessing, we weren’t just making gut decisions, we weren’t making decisions based on what the money we saw in the bank account. We were making real decisions based on the real numbers of the business every single month.

Guillaume: Okay, so you have already dropped like four or five golden nuggets. Just to recap that, if you can, when starting from scratch to build a cashflow positive business helps you a lot because you can sell for fun rather than rely on debt and credit for funding in order to grow. You try to work with everyone in the space, so you’re getting your name out there. No drama, try to work with everybody. Then again, do media marketing, newsletters, blogs, podcasts, and everything you can try to get an appearance on. Closing your books monthly is very good business hygiene, so it should at least close monthly. When you get big enough you can go even further than that, like the big cruise ships, it’s daily. You have every accounting, every exception case, everything is closed daily. In our case, we also do all of our accounting daily and close monthly. So I think those are great startup tips, you’ll be starting on the right foot.

Nathan: Yeah, and a big thing we teach at Outsource School is consistency. So another thing we did is we hired a virtual assistant right away for FreeUp, our own internal virtual assistant not a VA on the platform, although we hired from the platform. We did outreach every single day, we reached out to five e-commerce blogs, five e-commerce podcasts, five e-commerce influencers, five e-commerce sellers that were potential clients, five e-commerce Facebook group owners and we would just have a VA doing this every single day. We would get rejected all the time because that’s business but we’d follow up six months later and we would get accepted. Other people would be busy and they would respond in a month but consistency is key. We did the same thing with our marketing at Outsource School, the same thing with our marketing at EcomBalance and now AccountsBalance, which launches on Thursday. It’s the same type of marketing, it’s consistency, it’s not about one big project that we’re going to work on for the next three weeks and just get it out there and get a bunch of customers. It’s consistency every single day in targeting the people in the space. Whatever works, you double down and you do more of and whatever doesn’t work you get rid of and maybe try again later with a different approach. One thing we tried was podcasts back in 2016-2017.

Guillaume: Before, it was really popular. It was starting, it was merging, it was there but it was not nearly as popular as now.

Nathan: Exactly. So we went on a few podcasts, if they didn’t work we would have pulled back and done something else. But it was a great way to get in front of 1000s of people. For EcomBalance, let’s say we reach out to wealth managers and we reached out to five wealth managers a day, a few weeks in if that’s not leading to any good partnerships we’re going to stop reaching out to wealth managers and we’re going to focus on CPAs or focus on whatever. So that’s kind of the approach that we take, that consistent marketing with tweaks along the way.

Guillaume: Pretty cool. Of course, you gave the best thing which is the foundation, the formula, just focus on what works and then ditch the rest and try something else, another group of five. But do you remember what was working best for you while building this up, from the Facebook group, the podcast, the newsletter and everything? Of course, you want to be seen everywhere, but was there some that stood out?

Nathan: Yeah, podcasts are big. We talked about working with a lot of influencers, there’s this one influencer, Ben Cummings, this was a turning point for our business. He trusted us with this community, I chatted with him on the phone and he said if I could do a presentation. He told me up front, ‘Hey, I’m going to tell my community value and you’re going to get a lot of business and I need you to be able to handle that business because my name is on the line, I need to be able to trust you’. This was a once in a lifetime opportunity. We did a presentation and our website was blowing up. I was getting call after call for three days straight, no joke, working 15 hours a day. All I was doing was talking to this community. I honored my word and I made him look good. And this happened countless times over the course.

If someone agrees to work with you, if someone agrees to help you, if someone puts your name on the line, if someone refers business to you, you got to make them look good, you got to go above and beyond. That doesn’t mean there won’t be issues, with every startup there’s issues that come up, it’s how you handle that issue. If a VA quit and one of those referrals, I’m going to refund the person, I’m going to cut the replacement cost, I’m going to get them a replacement, I’m going to make sure that they’re treated well so that when they go back to whoever referred us or whoever that influencer is, that it looks good on them. It’s the same thing with EcomBalance.

I think we’re fortunate now after going through FreeUp that we have people in the space that trust us, they know we’re not going to screw over their clients and all that. But we still have a lot to prove, we’ve got to prove that we have good service, that people will stick with us and have a good experience. So we’re going through the same thing now, we’re like, if someone’s nice enough to post about EcomBalance in their Facebook group, we want to take care of them. And that has always been our mentality along with just getting feedback. In the FreeUp days for all the four years we were asking every client, every freelancer on the platform for feedback. With EcomBalance, we did a bid round with 25 clients, we gave them some free bookkeeping and got feedback and we used that feedback to make the process better every single month.

Guillaume: Okay. And this major influencer that got you busy like crazy for three days and got flooded with leads, did you know how big his audience or community was? Do you have ballpark numbers like 100,000 people or?

Nathan: I don’t know. Probably it wasn’t 100,000, it was probably a few 1,000s, I think. Something that I’ve learned along the way is you might have people with gigantic Facebook groups of 100,000 that aren’t engaged or don’t necessarily trust that person, and you might have someone with a newsletter of 500 people and you get a bunch of clients. So, and everything in between. So I think size isn’t the ultimate reflection, sometimes it’s quality over quantity but he had a pretty large community as well.

Guillaume: Especially if it’s all bots on Twitter and fake subscribers.

Nathan: Exactly.

Guillaume: This is a big issue right now. So in scaling this business, FreeUp has some strategic advantage over some other businesses in the sense that you vet freelancers, so you have that filtering process. Then those other companies pay you and hire these people as freelancers or employees or whatever. But you’re not a typical staffing agency and you also don’t have inventory to carry, and so on, so the scalability of the model is beautiful. But what kind of internal structure or challenges did you have to solve to be able to scale first, to seven figures, and then to eight?

Nathan: I mean, the business model definitely mattered. We weren’t an agency, we were a marketplace. We didn’t have to manage all these people, which was nice and we resolved issues whenever they came up. Another thing that we did really well was we had an affiliate program on both the freelancer and the client side. So when freelancers would have a good experience, they’d refer more people and clients would do the same thing. And we built affiliate programs and Outsource School and EcomBalance and AccountsBalance as well and that’s a big part of it. We’re like re-occurring affiliate payouts, because if we’re going to be making money on someone we want to continue to pay that person that referred us. So I mean, that was a big piece of it as well, and then good decision making. That kind of comes down to the finances, do we sponsor this conference? Do we sponsor this after party? Do we sponsor this newsletter? Do we hire more customer service reps? Do we hire more marketing people? Do we wait? Where do we actually spend this money that we’re making?

There’s a little bit of trial and error, there’s a little bit of that consistency and seeing what’s working. And there’s other things that you just commit to long-term like social media. Very few people hire a social media VA that just makes an ROI within a month. That just doesn’t happen, but it’s a long-term play. It’s the same thing with SEO, we invested in writers and SEO people where we said, the goal is in short-term ROI and we’re going to spend 500 bucks a month and it’s long-term, but then, by year three, by year four, our domain rating is through the roof. We’re now planting those same seeds at Outsource School, at EcomBalance, at AccountsBalance, with realistic expectations of what’s going to happen. The goal is a long-term play, it’s not necessarily short-term but you’re doing other things at the same time to get those short term plans better.

Guillaume: That makes sense. Very interesting. There’s often that question when you build a marketplace, it’s a bit of a chicken or the egg question, you need to have businesses that come to hire staff, but of course, you need to also have the staff that people can hire. So you’re building both sides of the marketplace, what’s your take on this issue?

Nathan: We had a small advantage of having all these Amazon virtual assistants and freelancers before we started FreeUp. So we had the freelancers and VAs first, although we quickly ran out of them and started recruiting. My overall philosophy is, get sales first. Get clients that are willing to pay and you’ll figure everything else out. Sales cures everything. The best problem to have in business is, too many clients, too many people buying your services and all the other stuff you’ll figure out. We do a good job of staffing people on EcomBalance, but if we get more clients than we can handle, Connor and I are hiring people, we’re process people. We’re going to go out, we’re going to hire more people and we’re going to make sure that every single client is taken care of. So you almost always want more demand than supply because they’re never going to be perfectly even, no matter what you do, but we’re always very aware of it. We’re planning and we’re using those monthly reports to plan. We’re saying, a lot of people are hiring PPC freelancers, we better start recruiting more PPC freelancers for next month. So it’s a combination of leaning more on the demand side but also making sure that you have a plan for the supply side.

Guillaume: Interesting. And you also have the benefit, as you said before, of a very scalable business model in the marketplace. It’s not a big commitment, you reach out to a freelancer or a PPC guy or whoever and say, do you want to be featured on this platform and maybe get more business? And I’m guessing that it was free for the freelancer?

Nathan: What was the question?

Guillaume: Was it free for the freelancers who joined the platform?

Nathan: Yeah, it was free but it was hard to get on. We would get 1000 applicants a week and we’d only let in 1%. So we definitely pissed off some freelancers along the way. Although we were very nice and respectful to them, we only wanted the top 1% of the 1%. So it was free for them, there were no fees for them. If anything, they could make money just by referring other people or obviously make money on the platform. This is where I think Upwork and Fiverr get it wrong, create just as good of experience on the freelance side as you do on the client side. We wanted the freelancers to feel like they were taken care of, that we were listening to their feedback, that we were making adjustments and improvements for them. It’s similar with the EcomBalance, we’re listening to our internal team. We want this to be a win for everybody, that’s the goal.

Guillaume: You’re making it sound too easy to build an eight-figure business right now. So what else do they need to know about this?

Nathan: No, it’s not easy. I mean, along the way you’re kind of encountering hiccups. We had a company competitor in this space who came out with a very similar business model and tried to copy us. We had software that crashed along the way on a weekend where we had to bill clients in three days and we lost all their billing data. We had to build it all back from scratch. All that stuff happens. But for us, we kind of take the same approach when it comes to business. We do market research, we get the minimum viable product out there by giving away free services, free products in exchange for feedback. We get those initial clients and make sure they really love the process then we look at our numbers and we invest strategically into what’s working. We then focus on low-risk, high reward situations, for example, going on a podcast is very low-risk, nothing bad is going to happen by me going on the podcast. High reward, get in front of 1000s of people. So we like to focus on those things and then listen to feedback along the way while also building out other marketing channels like SEO, like affiliate programs, like putting out lots of content, all these things. That along with good decision making is how we run all of our companies.

Guillaume: Awesome. So any last thoughts you would like to add, scaling from scratch to eight-figure, which is a huge topic? I heard very good things from you about all these strategic pillars to put in place, of course, we are looking at a very quick overview but it’s very good guidance. Anything else you’d like to share?

Nathan: The last thing is hiring. Hiring is key. Making good hires makes you look good and makes it easy to scale. Hire people that are good at things that you’re not good at. With FreeUp, when we sold it we took $500,000 and gave it to our team in the Philippines because we couldn’t have done it without them, they were awesome. We had 1000s of freelancers on the platform but we had a 30 person internal team that ran all aspects of the business, from sales to customer service, to bookkeeping, to lead generation, you name it. So to us, we couldn’t have scaled it, we couldn’t have worked that many hours if we wanted to. We relied on the team. Like, with EcomBalance, I’m not a bookkeeper and so we have to hire very good bookkeepers who are only as good as our hiring. So a big part of running a business in general is not how good of an entrepreneur you are, it’s how good you are at hiring really good people and keeping them around because turnover kills businesses. With FreeUp, we had very little turnover through the four years.

Guillaume: Awesome. All right, so Nathan, if someone wanted to get in touch with you, what’s the best way?

Nathan: If you want my hiring process, check out outsourceschool.com If you’re interested in bookkeeping, check out ecombalance.com. Feel free to connect with me, Nathan Hirsch on any social media channel.

Guillaume: Alright, thanks for being here today, Nate.

Nathan: Thanks for having me.