My First Online Business Did $10M In 7 Months

If you’re into marketing (even a little bit) you’re gonna love this.

Plus, there are a bunch of lessons buried in this story. Stuff you can use if you’re a brand new marketer… and even a lesson or two if you’re a seasoned pro.

In January of 2001 I owned a company that sold discount health benefit cards.  We were doing $250k a month with huge margins, I drove a brand new Lexus (don’t laugh… they were cool back then), and I thought I was hot shit.

My salespeople all looked up to me.

Colleagues and competitors wanted to copy everything I was doing. I believed anything I touched would turn to gold.

By October of 2002, I was dead broke. Working a menial labor job (cleaning carpets). And wondering how I was going to pay rent.

I was dead broke

How I ended up broke is a story for another time. The story you’re about to read is how I turned it all around in less than 30 days.

One particularly crappy day (in September of 2002) I was stuck in traffic. The freeway was six lanes in each direction. My direction was moving at 5 miles per hour.

The company van I was driving stunk of filthy water. The air conditioner was busted. It was 105 degrees fahrenheit. And to top it off, I was already late for my next appointment.

My Nokia rings. I look down. It’s Tommy from New York calling.

I know if I pick up the phone he’s gonna pitch me (again) on helping him sell his software. I’ve already told him no 3 times. But Tommy’s the kinda guy who won’t take no for an answer.

He’d been trying to sell the software himself for a few months without much luck.

I pick up the phone.

Tommy says, “Hey… I’ve been thinking about the idea you had last time we talked… we should try it. You ready to quit cleaning carpets and come help me?”

“Yeah, I guess so.”

What can I say? He caught me on a bad day.

He called it Refund Recovery Software

If you were a business owner who had a contract with FedEx® or UPS®, his software made it easy to get a refund. If any packages arrived late, you were owed a refund.

Before this software, the process for checking to see if you were due a refund was 100% manual and time consuming.

His software automated this whole process.

Shipping refunds were a big deal. At that time, over 2 billion dollars in refunds went uncollected every year. That was according to FedEx® themselves.

We weren’t going to sell the software to the business owners doing all the shipping though.

We would sell it to wannabe entrepreneurs

We would sell it to people who wanted to be in business for themselves.

These wannabe entrepreneurs would buy our software along with a how to manual. The manual would teach them how to get businesses (the ones who had shipping contracts) as clients.

The folks who bought the package from us would process refunds for the business owners. Then they would split all the refunds collected 50/50.

In other words we sold the package as a business opportunity.

The market for people who wanted to start a business from home was huge… still is.

They’re a lot easier to sell

They’re also a lot easier to sell to than the business owners who were doing the shipping.

Besides… I already knew how to sell business opportunities.

I knew what to say and how to say it.

I’d been doing it off and on for over 15 years by then.

When Tommy first called me he was running ads in newspapers. The ads said just enough to peak interest and then directed the prospect to call.

His cost per call was too high. His conversions on the phone were too low. He was selling a few units. He had a handful of good testimonials. But he wasn’t covering his costs. That’s why he called me.

He needed help.

We knew each other from a previous sales gig.

Tommy knew I’d been spending time figuring out this brand new world of selling on the internet.

I told him I believed I could generate leads that were way more qualified. For a fraction of what he was spending per lead in newspapers.

He proposed a deal. 

We would not be partners.

I didn’t have to pay him a royalty.

I didn’t have to pay him anything at all.

All he wanted was…

I had to show him everything I was doing

When I figured out how to sell the software online I had to show him everything I was doing. Then we’d both sell it from different websites.

Fair enough.

Because I came from a sales background I was too chicken to let a sales letter do all the selling (at first). So I started by writing a sales letter designed to capture a lead and generate inbound phone calls. Then I’d have trained salespeople do the actual selling.

Back then driving traffic online was simple. You could buy targeted email lists (remember spam was not against the law yet). Get Response would let you load up to 5,000 emails at a time into their autoresponder and just start mailing.

So I did.

The first 5,000 names I sent to were from a list I bought from a website called The List Guy. He told me they were previous bizopp buyers. I loaded them up, hit send, and went out to meet a friend for lunch. I had no idea what to expect.

Not even 20 minutes later we’re sitting down to eat. My phone vibrates in my pocket. I don’t recognize the number. I figure they’ll leave a voicemail. The friend who met me for lunch was a guy I wanted to hire as my first salesperson.

As we start eating I’m explaining the sale. Not 2 minutes after the first call my phone vibrates again. Again, I don’t recognize the number. But this time I decided to take the call.

“Hello, I’m calling about the refund processor software.”

“Oh, hello. Can I get your name and number and call you back?”

I take his name and number. And the phone rings again. Then it rings again. Then it doesn’t stop ringing.

Inbound leads

The guy I’m with asks, “Are those all inbound leads?”

“Yeah, they are,” I say.

By the time I got back from lunch I had 259 full record optins. Also, 75 of those people called and left a message. 

This was in the first hour.

Within two weeks I hired and trained 3 sales guys. They all worked from home. I hired an answering service to take all the live calls so we wouldn’t miss any. The service would transfer the live calls to my guys when they were available. They’d take a message when they weren’t.

My sales guys were averaging about 20 minutes on the phone to answer questions and close the sale. We sold the software and manual for $298… and I paid the guys $75 a sale. Here’s the script I wrote for them.

$48,000 in the third week

In the third week we sold over $48,000 worth. But we were wasting a ton of leads and my sales guys were starting to cherry-pick. 

They only wanted to sell the lay-downs (the easy ones).  Why wouldn’t they? They knew as soon as they hung up the phone it would ring again with another hungry buyer.

I figured out pretty quickly… if I wanted to scale this thing I had two choices.

I could hire, train, and manage A LOT more salespeople.

Or I could figure out how to automate the whole thing and get rid of the salespeople altogether.

I had to automate the sales process if I wanted to scale

At the time, fully automating the sales process sounded like pure fantasy to me. But IF I could do it…  then I wouldn’t have to deal with the hardest part of running any business.

Managing people.

Not only that… but I’d be able to scale to the moon.

I had to give it a try.

So I got to work rewriting the sales letter.

The sales letter got longer. It went from 1393 words to 2319 words.

Yes, it got more descriptive. Yes, the colors changed. But the 3 big changes were…

1. Adding a guarantee.

2. A significant price reduction from $298 down to $69.

3. It tells them clearly what the work they’re going to be doing looks like and what support they’re going to receive (things that I left to the salespeople to explain in the first version).

I wasn’t sure this was going to work

I wasn’t sure this was going to work. So at first, I kept everything going along the same with the salespeople.

I set up a separate website for the new sales letter. When it was all ready to go, I bought a new list from The List Guy. Loaded 5,000 names into Get Response. Used the same email creative, and hit send.

Right when I hit send a friend called. He had tickets to an NBA game. He wanted me to go. I said yes. Mostly because I didn’t want to sit in front of my computer all night hitting refresh.

This was before smartphones so I had no way of checking how the campaign was going while I was at the game.

When I got home I ran upstairs to check my emails and see how it was going. I had a whole bunch of email notifications. Oh, this was getting exciting. I logged into my payment processor. It had to be a mistake. Maybe the system was charging people more than once.

Nope. No mistake. That single email to a tiny list of 5,000 people turned into 78 sales!

By morning I had 92 sales

By morning it was 92 sales! The cost to burn the CDs and ship them was covered in the $11 S/H I charged. Remember, the internet was too slow to do downloads back then. So, 92 sales at $69 brought in $6,348!

But the most exciting thing to me was, not one of those sales required a salesperson. I now had something I could start scaling immediately.

That morning I was on the phone to the list guy, “Hey, I’d like to try your service.The one where you send 100,000 emails.”

He says it’ll be $600 bucks. I fax him a check (haha, yep that was a thing). He schedules the email to go out 2 days later.

At this point I still haven’t told any of my salespeople.

I want to make sure it’s not a fluke.

During the next two days I must’ve done the math a million times.

Ok,  5,000 emails got 92 sales. 5,000 is 5% of 100,000. So, in theory this mailing should bring in 92 X 20. That’s 1840 sales times $69. Holy shit! That’s $126,960 dollars.

Then I did the cut-it-in-half math. “920 sales would still be over 60 grand.”

Don’t laugh… you know you’ve done cut-it-in-half math before.

The day comes. The big mailing is supposed to go out at noon.

I eat my lunch and go for a walk.

At 12:45 I log in to my processor. I see two new sales but both are for $298. They’re from the sales team.

I should be seeing sales from the email. At 1:00 I call the list guy.

“This is Luke. Did the emails go out?”

“No. Your mailing is queued up but the servers are going slow today.”

“When do you think it’ll go out?”

“Definitely by the end of the day.”

I tried to keep myself busy, but I must’ve hit refresh a thousand times that afternoon.

The first sale (from the new campaign) came in at 9:01 PM.

Sales were coming in one or two a minute

Within 5 minutes they were coming in one or two a minute.

When I went to bed there were already over 200 sales.

By morning the sales were at 356. Didn’t quite make it to 920. But that one email did $24,564 in just a few hours… over triple what my 3 salespeople had done on their best day so far.

My next call was to the list guy to ask how often he could mail 100k emails.

He picks up the phone. After I identify myself as the guy he did the mailing for yesterday I hear something weird in his voice.

He starts to go into damage control mode.

I got the distinct feeling most of the people who call him after doing one of these email drops are not happy.

I quickly stop him and say.

“Listen, it didn’t do as well as I hoped… but it wasn’t terrible. I’m not mad. How often can you do these for me?”

“You want to do another one?” I can hear the shock in his voice.

“I’d like to do them every day.”

After a long pause he says, “I can send 5 times a week.”

I ask for a discount.

He says, “No.” 

I say, “Ok, can you start tomorrow?”

The next week my salespeople sold $42,000 worth and the new (no salesperson needed) website did almost $130,000.

It was time to tell the salespeople.

They were bummed… but they understood. I gave them all a fat bonus.

The website was averaging 300-400 sales a day

By week 2 the new website was averaging 300-400 sales a day.

Remember, I agreed to show Tommy everything I was doing. So once I figured out how to automate the sales… we started splitting the traffic between two cloned websites. One day the traffic would be directed to his site… the next day to mine.

During the next few weeks I started split testing all kinds of stuff.

The original automated site had a squeeze page before they got to see the offer. On a hunch, I got rid of it. Sales went up almost 30%!

We started getting complaints from the folks who had given us testimonials. They were getting hundreds of people a day finding and contacting them. Against my better judgement I took the testimonials off the page. I was shocked… it didn’t affect sales at all.

It didn’t affect sales at all

I experimented with changing the price to end in a 7. Ending prices with a 7 is a popular myth in direct marketing started by Ted Nicholas. Ending in a 7 made no difference except that we collected less money. We went back to ending in a 9.

After a month or so I started looking for another traffic source.

We wanted to go bigger.

I can’t remember if it was me or Tommy, one of us stumbled onto what was one of the first CPA networks. This was an organized group of emailers who would agree to send us traffic on a cost per sale basis. In other words they would charge us a fixed price on every sale they made.

We loved this idea because it made everything very predictable.

They agreed on a price of $20 per sale. By this time we were charging $79 plus s/h. So $20 sounded more than fair.

We were doing 1,000 sales a day

Within two weeks of making a deal with the network we were doing 1,000 sales a day and climbing.

Remember we were shipping this software as physical CDs. There were no downloads back then. Tractor trailers were backing up to my garage and unloading cases and cases of the software.

We would have ‘envelope stuffing’ parties at our house 3 times a week. We’d have a bunch of people come over and help us stuff all those orders into envelopes. We’d order pizzas and watch American Idol while filling thousands of orders.

About eight weeks after the network started sending their traffic we hit 2,000 sales in a day!

I’d seen a few things take off in the past, but I had never seen this much money come in this quickly before.

It was crazy.

We hit 2 million in sales in one month!

We had a single $79 product… with no upsell and no backend.

We sold over 125,000 copies of the Refund Recovery Software in 7 months. But all good things come to an end. As you can imagine FedEx® was not happy with us. But their lawyers couldn’t find anything wrong with what we were doing.

So they sued us for copyright infringement. Turns out I had used a scanned image of their logo on our packaging.

Under threat of them bleeding us dry financially… we settled out of court and agreed not to sell the software anymore.

But man, what a ride.

Did you find all 6 of the marketing myths?

Myth number 1

Opt ins: Gurus would have you believe you should always capture an opt in. If you are selling something at a price point above 100 bucks it’s probably a good idea. But sometimes all it does is slow down sales. You have to test it.

Myth number 2

Testimonials: Most of the time testimonials are going to help you. I have another story where the whole sales pitch was made of testimonials. The exception is, when the offer and audience match up perfectly and the price is a no brainer. Again, you have to test it.

Myth number 3

Sevens: It seems like anyone who learned direct response from a guru believes prices have to end in a 7. Not true. Take it from someone who’s done 1000s of sales a day (many times). But of course, test it for yourself.

Myth number 4

Backend: In most cases having something else to sell your customers is desirable. But it is not always necessary for a successful promotion. Three of the most profitable campaigns I ever ran had no back end. But (you guessed it) test it.

Myth number 5

Big claims: Contrary to popular belief, you do not need to make outrageous claims to sell to the business opportunity crowd. In fact, sometimes in will actually hurt sales. The bizopp market has a wide spectrum. I’ve sold to these buyers at every end of the ‘claim’ spectrum. Make sure you know your audience. Test it.

Myth number 6

Low prices: I’ve had many campaigns that sold price points from $59 to $299 all with no upsells or backend. These campaigns all sold in the millions of dollars very profitably.

Here’s the conclusion. There’s no such thing as one-size-fits-all when it comes to marketing.

I hope you like the story.

If you did, subscribe to my “Knowledge For Sale” newsletter… there’s a lot more where this came from.