E117: How an MMA Fighter Built a Multi-Million Dollar Company Selling Digital Products

“Even when you find business models that are pretty well fleshed-out, there’s gonna be a million ways to connect the dots that you just kind of have to take your best swings and learn as hard as you can and work as hard as you can. That’s going to be everybody’s experience in entrepreneurship. There’s really no way around that.” – Dan Faggella

Our guest for today's episode is a Class A badass guy. Those who have been listening to the podcast for a while now know that I vet every single guest to make sure that they don't pitch a product or service that's not useful to our listeners. Hence I have a rule to never interview anyone I haven't met personally.

This guy just broke that rule.

Our guest, Dan Faggella, is an awesome, I-wish-I-had-more-time-to-talk-to-him impressive guy. I've been in ecommerce for over 15 years and it's hard to impress me with anything these days. But Dan just blew me away. I talked to him for about 40 minutes and had me thinking about implementing his ideas on my business after the interview.

Dan Faggella is the founder of Tech Emergence, a company focusing on artificial intelligence. But before he founded Tech Emergence, he built and ran Science of Skill, an eLearning ecommerce company geared towards self-defense. What started as a way to fund his dream of building an AI company became a multi-million dollar venture, achieved by selling digital products.

In this episode Dan and I talk about his early days in ecommerce, how he came about the idea of creating Science of Skill, tips on selling digital products, and tons more tips on ecommerce and entrepreneurship in general.

As a sneak peek, here are some conversation points:

• How Dan and I virtually met
• Why and how he started Science of Skill
• How he found ecommerce as a way to fund his lifelong dream of creating an AI company
• The two approaches to selling digital products
• Leveraging digital products to increase margin on physical products
• Why he doesn't sell on Amazon
• Where he finds his customers and his sales channels
• Tips on selling digital products
• How he finds experts for his instructional videos
• His badass Jiu Jitsu skills and how he can beat guys twice his size (link to video below)

This is an unusually long episode and I apologize for that. I just loved talking to Dan and wish I could have more time with him. It was such an insightful and information-packed conversation and I hope you find it extremely useful as well!

Resources mentioned:

MyEcomCrew
Epic video of Dan beating big guys
Coloring Club

If you want to know more about Dan or reach out to him, you can go to his website, or shoot him an email at dan@techemergence.com. You can also find him on Twitter (@danfaggella).

Thanks for listening, as always. Until next week, happy selling!

Full Audio Transcript

Mike: This is Mike, and welcome to the 117th edition of the EcomCrew Podcast. Just as a reminder, you can go to EcomCrew.com/117 to get to the show notes and leave a comment on this episode. And I have a feeling you're going to want to do that because the guy on the podcast today is just a total badass. And it's crazy how connections and things kind of come your way.

I've had this policy of not interviewing anyone on the podcast that I haven't either met in person, or had a close personal relationship online with, which is kind of weird in itself where you can have a relationship with someone online. But for the most part everyone that's been on the podcast is someone that I have met in person.

I like to personally vet all the guests before getting them on to make sure they aren't pitching something that I think isn’t good for the community and people listening. And I have no problem with people coming on and talking about something that they do sell if it's something that I've used myself and I trust and think is a good product. And the thing that I realized at first here when I was interviewing Dan is he has nothing to sell.

So that's a good check mark, and he also was vetted by a friend of mine Chris who runs Rhodium Weekend, he's the guy that introduced me to him. I found him through Andrew Youderian from EcommerceFuel. So like I said it's interesting just how things work in life. You just meet one person then meet the next person. So it's important to be out there networking, always be networking.

And I met Dan through that. When I saw his name I was afraid to butcher it how to pronounce his last name. So I was like Dan, how do I pronounce your last name? He was like it’s Dan Faggella, and you pronounce it the Italian way like Dan Faggella. But when he said it, it was much more graceful and sounded much more badass than when I do it. I just make a fool of myself trying to do this stuff.

Speaking of badass, Dan is like one of these like prime first class, A grade badass kind of guy. He's an MMA fighter, and he actually has some stuff up on YouTube. We'll put this on the show notes. Now he's not a professional MMA fighter, but he was fighting guys that were like three, four, five, six week classes ahead of him, and taken them down.

And it was just awesome watching some of the YouTube videos of him doing that. He talked about that on this interview, so we'll get into just a little bit. But the way this all came to be is he was selling digital products for a very long time, and has since sold that business for seven figures, and his story is just awesome.

And as you guys know, I've been in digital marketing or online marketing whatever you want to call it for almost 15 years now. It kind of dates me and makes me feel old. But over that time it's become hard to impress me. I mean it's just at this point in my life, in this point of my career, I feel like I’ve either seen it all, heard it all or done it all. And when someone like Dan comes along and just completely blows my mind, that is hard to do. And I think you guys are going to love this interview.

I have a feeling that this is going to be the episode that gets the most replays in the history of the EcomCrew Podcast. I've already gone back and re-listened to this thing. It is just an awesome interview. This guy is full of knowledge. I hope to be able to apply a lot of the stuff to our business over the next six to twelve months, just a lot of really great ideas on how to sell digital products, how to get videos for content for your brand. It's just absolutely amazing, an amazing interview. And I think you guys are going to love it. So without further ado, let's get Dan Faggella on the podcast, and we'll talk to you on the other side of this break and enjoy it.

Guest Intro: Even when you find business models that are pretty well fleshed-out, there’s going to be a million ways to connect the dots that you just kind of have to take your best swings and learn as hard as you can and work as hard as you can. That’s going to be everybody’s experience in entrepreneurship. There’s really no way around that.

Mike: Hey Dan, welcome to the show my friend.

Dan: Hey Mike, I’m glad to be here man.

Mike: Yeah thank you for coming on, just a quick intro because people probably don't know you in our world. Dan Faggella is with Tech Emergence, and actually the thing we're going to be talking about today is his previous business which I'm really interested in. Dan and I met virtually through a mutual friend of ours Chris who runs Rhodium. I was just telling Dan before we hit record here that I've had this policy of not interviewing anyone that I haven't met in person. So thank you for being the first one to make me get off my rule.

Dan: I'm glad to get you out of your comfort zone, and I hope to not scare you to go back to your old rule. I think we’ll have a lot to resonate on today.

Mike: I think I'll be fine. We talked for only maybe three to five minutes here before the podcast. You seem like a really interesting dude. I'm really looking forward to this conversation. Just like most of the podcasts that we do, I try not to do too much pre-interviewing because I think the first time you talk about something with someone, it's just more genuine and exciting and interesting.

So I'm definitely really interested to dig in this with you real quick. So as we talked about, you run a company or ran a company called Science of Skill, a nice exit there. But let's start at the beginning of that, like when did you start it, why did you start it, and all that good stuff.

Dan: Totally. Yeah I'll get right into the nitty-gritty. So basically Mike, when I got out of graduate school of the University of Pennsylvania, I was a cognitive science guy. I sort of started kind of coming to the conclusion that maybe this understanding of intelligence would be more interesting in machines than in people. This is when I was maybe 23 or something. And so I realized like man I got to eventually get into sort of AI. I'm interested in ethical concerns around this stuff.

But Mike when you come from a town of 4,000 people, you can't just pack your bags and start paying Silicon Valley rent with like some future hope, right? You've got to kind of get your act together. So I was in my small town still running my first business which was a martial arts academy which I sold a couple of years later.

And I was trying to figure out, man how can I have a location independent income stream that could generate multiple commas, more than one comma in a bank account so that I could fund really what ends up being kind of a technology platform sort of idea around artificial intelligence, and eventually be able to kind of facilitate conversation around the social and ethical concerns of that area which is a real passion to me.

And I realized Mike, well what's the only real skill I have? Well I could do some email marketing for my gym, and I know how to chill people unconscious because I've won a lot of jujitsu tournaments, and that's what I teach in my academy. So why don't I take this physical gym, put it on the internet and then I can kind of be wherever?

I could move to the west coast and still kind of rake in bucks unlike a physical martial arts academy where I cannot live 3,000 miles away. So e-commerce was essentially a vehicle to fund a life purpose without really having to give up equity for something that really mattered to me.

Mike: Interesting, that's an awesome story. I'm curious just real quick about your little town of 4,000 people, where was that?

Dan: Yeah man, Wakefield, Rhode Island, you've never heard of it and you never will again. And so that it's one of those towns I am of obscurity Michael. I am a very average stock. And so that's where I'm from. And yeah I mean there's just not much going on down there. It's kind of a resort town. In the summertime, the rich people from New Jersey come up and go to the beaches, but otherwise you got your plumbers, you got your sandwich shops, and you got some sod farms and that's pretty much what you've got.

So there’s not much tech there, it was sort of inevitable I'd have to leave. But I needed some way to make money and not be there at the same time, and e-commerce happened to be the best vehicle.

Mike: Yeah definitely very cool. So when did you get this idea, when did you start this project, what year was it?

Dan: Yeah, Science of Skill was an idea I probably had right when I got out of graduate school when I was maybe 23 or so. But I really didn't turn into a business until I was about 24 or 25. So I had essentially filmed — so I've won a number of tournaments in a pretty big national tournament, and a lot of my videos on the internet Mike, they were of me beating bigger opponents.

If you Google like Dan Faggella Jiu-Jitsu, you'll see a match of me against this guy named Pat Walsh who's a UFC fighter, and the guy is about twice my size. I mean I walk around Mike at about 124 pounds just to give you an idea of how huge and muscular I am or am not. So as it turns out for some reason the internet loves videos of little dude's beating up on big name guys who have been on TV in Jiu-Jitsu matches, and kind of like twisting their ankles and making them yell and stuff like that.

So the internet loves little versus big stuff. And so some of those videos were catching on, and I thought, man, could I basically teach a seminar about all the stuff that I've learned about beating bigger opponents, turn that into a DVD and see if maybe some of the people that like this video, because this thing is getting views without me doing much about it might be interested. And that's kind of what we did.

So I think the first product I ever sold was like a $40 recording of a whole bunch of different seminars that I put on about beating bigger opponents. I think we might have only made about 400 bucks. I think I had AWeber account that was running my gym full time. So I didn't have much time to do it. I made about 400 bucks, but I thought to myself, okay, this is a channel that's at least viable, why don't I go ahead and explore this and see if this could become a multi-million dollar business, and fund what I really want to do with my life kind of in AI and ethics, and as it turns out it was.

So that was the beginning of it, kind of a weird story, but it just seemed like the most opportune way to grab an interested audience and offer something that they might like.

Mike: Yeah very cool. So putting things in perspective so I can get on my own timeline, what year would that have been when you're 24, 25?

Dan: Yeah so this would have been — when I sold the first couple of little digital things, this might have been 2013. And so that was really before Science of Skill I think was even an LLC. I don't think it was an LLC until 2014. It might have been LLC in 2013, but it was like 2013 when some of those initial sales kind of trickled in, it might have been late 2012.

And yeah that was the kick off, and it took you know four years to get it to more than two million. But luckily it was able to grow pretty quickly and the scale worked out. I think that digital aspect of the products kind of helped us keep the margin while we were doing a lot of volume of actual sales.

Mike: Definitely interesting. So by 2016 you were doing two million dollars?

Dan: Yeah 2016 we did a hell of over a million bucks, got into 5,000 and then two months into the following year I was able to sell it for a little bit over a million bucks with 90% down. And that's really what helped fund what I wanted to do all along with my own cash and sort of my own kind of control of my next venture.

Mike: Cool awesome. So I really want to dig into this because I think that we've been in ecommerce now for almost five years, and we started with treadmill.com selling big heavy expensive pieces of equipment, and now we're trying to do obviously lighter and smaller things, but they're still physical products, and we've been pushing the envelope even more with higher margin products.

So I think this is important as you're running a business. I mean margin allows you to make up for mistakes and also is what puts money in your pocket at the end of the day. But there's nothing higher margin than digital products. And we've kind of put our toe in the water with this. For those of you who’ve listened to the episode that we talked about coloring club, we’ll make sure we put that in the show notes.

But just real quick, our digital product basically is this site called coloring.club, and you can sign up for five bucks a month and you get 30 drawings a month delivered to you. It's a recurring charge, and our number one priority wasn't necessarily the amount of money we were going to be collecting. Five dollars a month isn't enough to really move the needle per se, but it does get people signed up and in our ecosphere that we can then sell them some of our higher value products. That was kind of the angle we took with it.

But even still of that five bucks we’re collecting, basically four dollars and seventy cents of it is profit, and the thirty cents is the credit card fee. So let's talk about that a little bit, what can people be doing or thinking about to apply digital products to their own businesses? I think that will be a really interesting conversation.

Dan: It's a great place to start. There's a whole bunch of directions we could go here Mike. One thing that might be handy — so our business was kind of predicated to — I'll talk about this in two ways, and if you want to interrupt me, please do. But one way is, okay let's just say you want to start selling content from scratch. That's one approach to this, just, hey I want to offer a digital product, and I want to have some great margins, and have something that is really going to sell well, that's one thing.

The second thing is kind of tacking digital on to physical products as a margin added for you and a value added for the customer. And that's a really interesting way to sort of add margin to a physical sale business. So to give you an idea on our site Mike with Science of Skill, initially was almost all digital, and I will talk about that, I’m happy to.

But by the time I sold the company, most of our front end sales, our initial kind of customer transactions were for physical products like let's say a DVD or maybe a self-defense knife, or maybe some other self-defense tool of some kind. And along with that, we would tack let's say a video course to show you how to defend against a knife attack, which might have been filmed by let's say a SWAT team trainer, or somebody with a really extreme kind of qualifications in that area.

So you're getting a product, but you're also getting this awesome instruction along with it which is a good reason to buy the same product through us as opposed to going through Amazon. And maybe you even will pay a couple of bones more through us because you're also getting this value add along with it. So I do want to add Mike that it's not just pure digital, that there are ways to sort of leverage digital as a reason to make people pick you, and as a reason to bump your prices just a hair so you can kind of shove some of that extra margin to the bottom line.

Mike: Got you. So when you're selling the knife as a part of your listing if you're on Amazon or a part of your website, you're selling the knife for 19.99 when this is mostly selling for let's say 14.99 everywhere else, and you're saying that this also includes this DVD or this digital download that comes with it?

Dan: Totally and or Mike sometimes we would match the same price, but we would just add the digital thing along with it, and we would let's say have some high converting up sales in the backend that we would get a certain percentage of take on. And so we'd be able to sort of monetize that as well. So because we had up sales so we could grab some extra margin, we could afford to sell it at the same rate as everybody else. But our conversion rates might be better than Amazon.com, because it's the same quality product manufactured by the same people.

But you're also getting a 45 minute program about how to actually use the thing as opposed  taught by let's say a Marine Corps scout sniper, or a Brazilian Jiu-Jitsu black belt, or someone with great qualifications. We had a number of great instructors around the world, and that was a reason to spend your 14 bucks with us as opposed to someone else. So sometimes it’d be a good excuse to have a little bit of a higher price. Sometimes it’d be just a good excuse to make sure that we get the sale instead of Amazon.

Mike: Got you interesting, that's definitely a really good idea. I’ve actually seen a couple of Amazon listings in the past that have done this type of thing. And it's really interesting.

Dan: Interesting, I have never seen that. So you’re saying people offer something digital along with the product on Amazon?

Mike: Yeah like a free eBook.

Dan: Wow, I thought that Amazon prevented you from doing that. I thought that there was — see the reason I never went through Amazon, I got nothing against them, but it's like I just don't like having a parent. Like there's — I forget if it's in the Bible, but something like he who is sent is never as great as he who sent him or something. Just a really yucky feeling to just think that Bezos is your father. I just sort of rather jump off of something really tall than sort of being an underling. So yeah just never…

Mike: [Overlapping 00:17:50] selling on Amazon now.

Dan: Yeah it is ridiculous. I'm spiritually incapable of sort of being in that role. But I mean if the margins are good and if you can make it happen great, but just the beholdeness is a frightening thing. But you're saying that there are some people that actually do that through Amazon's platform, that's news to me?

Mike: Yeah I've definitely — I had to see if I can find an example for the show notes.

Dan: That would be pretty cool man; yeah I'd love to see.

Mike: But there's definitely sometimes where I've seen, buy this product and it comes with a free downloadable whatever it might be, and I've definitely seen that more than once. And you’re right, maybe it is against Amazon’s terms of service because basically the only way to deliver that would be to send them to a website where collecting their email address or something probably as a first step, and that isn't allowed.

Dan: Of course yeah, Amazon needs to own the customer, which again just all of our margins Mike are in the backend. So we had really segmented dialed in database of what people bought when, what surveys they filled out, what they were interested in. Our margin was made in that backend, and with only selling the knives, the margin is just not enough to have a profitable multimillion dollar business given the way that we were running it. So we just never went through that route. But that's kind of interesting, so go figure.

If you want Mike, I can go briefly into kind of how to start with purely digital off the bat if that's still of interest.

Mike: It is but I wanted to follow through with the thought process, you stole my next thing I was going to ask you when you talked about the margin with the knives. I'm curious because I was thinking that exact thing before you even mentioned it, because we also are working on something like a multi-tool for Tactical.com. And I know kind of what the margins are there for that, and some of the margins you talked about earlier didn't quite line up with that. So obviously there is some other step.

You're selling a knife at 30, 40% margin, or whatever; giving away the digital product is a value add to get them into your system. What were the up sells afterwards, and what were the margin and stuff on those?

Dan: Well I'll tell you the basic rule that we had. So we had a rule that for physical products we would never offer something on the front end that factory from merchant fees I think that we couldn't purchase for like 60% of what we were selling it for. So that 40% of the sales price would be margin. And I think factoring for shipping we had some other rule about that. But basically Mike, we never sold anything that was like at a hard loss, you understand what I'm saying?

Mike: So if you buy for four, you sell it for ten.

Dan: Yeah, we had some kind of a rule along those lines. But the important factor here as well is that we would find products initially that we could test, we would test them. And some products Mike would do really, really, really well. So there was a Smith & Wesson product called the Smith & Wesson special tactical, which is just kind of one of their basic kind of knives that they sell through 100 different channels. But we ended up really doing well with that product. Our self defense audience really liked it; a lot of our folks are sort of into firearms. I've never owned a gun in my life, but we had some great instructors for firearms on our website.

We had a lot of folks that are interested in that area on our e-mail list, and so they really resonated with the brand. And we ended up being I think sort of by a wide margin the folks that were moving the most of that product. I think initially was on East Coast of the US, and at some point it might have been just we were the people selling the most of that knife. And so the company that was actually making it, we ended up building a relationship with and we ended up getting to a point where we were really getting some pretty good prices.

So initially your margins will be kind of uh whatever you can bear, you set your own rules, but we certainly had rules for what we could bear, we never sell anything at a loss. But the good news is you find a real winner and you can really huff and puff and get a ton of sales every month for the thing. You can start to get on the phone and sort of negotiate significantly better deals for products and get yourself down to maybe 60% half of what you were initially buying them for, and that's what we were able to do with a lot of the models that sold well. So that was another interesting kind of factor for us.

Mike: Okay very cool. And then you were just — so this was like another company's product, and then you took your own spin on it with the digital download add on up sell type thing or whatever value add, it's an absolute value add, and that was why you became so successful?

Dan: That's exactly it; yeah that was pretty much our whole value prop. And up sells were definitely part of it too Mike. So we would find a related product maybe a DVD course, maybe another physical tool of some kind that we would also have healthy margins on. And sometimes we’d come up with a bundle where we put together like let's say two or three different products together in an up sell, and it would differ depending on the front end product.

But we had sort of a fistful let's say half a dozen core bundles that we could put on the back of our front end products. And even if we only had let's say between 15 and 30% of people take it, it was enough to kind of more than cover ourselves for shipping and kind of add some extra margin to the bottom line. So high volume helps a lot Mike, having rules off the bat helps a lot, and then also finding up sells that are high margin that you can get a reasonable and healthy conversion rate on, that's another good way to be able to do this at scale and not lose money.

Mike: Yeah brilliant. We do some similar things, but this is very awesome, and I guess my next question actually I'm thinking here is just I'm curious where you found customers. I mean you were off of Amazon exclusively, this would have been 2015, 2016, so it's still going to be relevant to today, where you finding people to buy the stuff?

Dan: Totally. There's two main channels for us. So when we started off, it was almost exclusively through affiliate channels. So we had people who had let's say very large email lists in the self defense space, or in the firearm space or in the kind of preper [ph] market. For some reason, those people were always interested in self defense. We never really had preper related stuff when I was running the company, but for some reason the homesteading and preper people were very interested in self-defense. I don't really know why but it is where it is.

The other people that were interested were the people that are interested in like gold bullion and things like that, like investing in gold. We found that out through some really weird series of testing and trying things. It was a list that was in kind of in the gold space that was promoting a lot of other people's tactical stuff. And I thought, man, that's really strange, we're kind of more self-defense than anything else, maybe we should try it.

So initially was affiliates, but then as we grew Mike, what we ended up doing was we would just find the list brokers and the people who owned let's say large email lists or large social accounts in the spaces where we operated. So I kind of listed a bunch of them for you already. And we would essentially say, hey what does it cost to get a sponsored email, or what does it cost to get a dedicated email? And then we would purchase essentially email advertising.

By the time I sold the company, we were spending anywhere from $35,000 to $55,000 a month on essentially e-mail reach, and that wasn't even including what we were paying out to affiliates which is probably maybe another 10 or 20,000 a month as well. So yeah a lot on kind of paid email ended up being our main driver to get us past the multimillion dollar mark, but initially the first three years almost Mike was almost exclusively finding affiliates, and then giving them a very fair cut on their sales.

Mike: And with the affiliates, were you doing that for something like ClickBank or were you doing it through different affiliate channels?

Dan: Yeah I never really got into ClickBank. I've heard of them, I’m familiar with them; we really ended up just going through Infusionsoft affiliate tracking. So we just had our own e-commerce. ClickBank has kind of all of its own interesting sort of rules, and if you want to launch a new product sometimes it'll take a week for your page to get approved, and it's your affiliate partners who really appreciate that sometimes.

So we would we would just use Infusionsoft. Now there's a trust factor there Mike, which means with your Click Bank nobody has to know or trust anybody. They're still going to get paid. For us, we essentially had to build relationships with people often by promoting them first, and then when we did well for them they would try us. And then if they had a great win, we would essentially meet people through them. So we would get warm introductions.

Now if you get a warm introduction, people are much more likely to be willing to go through your Infusionsoft thing for a small test. And if you pay them well, you treat them with respect, there's a whole business strategic advantage. I talked about this a ton with my team when I was running the company. But there's a whole business and strategic advantage to just responding extremely quickly, and paying out extremely quickly, and being extremely friendly with affiliates.

If you just do that even if you don't have the best offers, now we had some great offers, but even if you just do that that is like an automatic business win factor for you. And I made sure to really drill it in with our team. So we would always get back to affiliates in like 12 hours, like this ridiculously quick. And so we built some great relationships there. So email and affiliate, those were our traffic channels, and they still work to this day.

I can tell you that Mike because my head of marketing, his name is Tim Reese, who ran Science of Skills marketing for me when I was out here on the West Coast; he was on the East Coast. He recently split off, basically copied, and pasted the same business model in the fitness space. He's still a super good friend of mine. The people who bought the business have trained up another marketer, and he wanted to do his own thing.

And he's already going to be doing more than a million bucks this year with the same email channels, the same affiliate channels in the fitness world. So the stuff definitely still works, and that's how we pulled it off at Science and Skill.

Mike: Cool yeah I mean this is definitely brilliant. I mean I love the stuff. I think already it's been – you’ve broken the barrier of I know someone before coming on a podcast. It’s definitely very cool. I love really interesting creative marketing ways. I mean this is stuff we haven't really talked about specifically on the podcast here before, and I love just injecting new ideas. And anyone that's out there listening to this stuff, I mean as someone who's been doing marketing for 15 plus years, I can tell you that this stuff is gold, and you should — everyone should listen to all this over again.

Dan:  How nice, I’m glad. Yeah it took us a lot of bang. I don't want to sound smarter than I am. There was a lot of banging my head against the wall. But I will tell you when it did get up to kind of scale time, they definitely worked for us, and I certainly hope your listeners can abide.

Mike: Dan I want to do a quick sidebar just real quick. You said something I think that is so profound. This happens all the time. Like I'll go speak about whatever it might be, and it seems like you're a complete genius when you're talking because like you have whatever it is completely refined. And in your case it's this stuff that you just listed here. But just repeat this again, like there was a lot of banging your head against the wall at first. You didn't just discover this the first time out of the gate.

Dan: No way no way Mike. I mean you know how it is; I mean you've been in business for I don't know when you started doing affiliate stuff in like mid 2000 or something?

Mike: Yeah.

Dan: So you've been around, and that's certainly longer than I. I think anybody who is in business even if you go with a model that's been pretty well fleshed out, so the digital publishing physical sales model, there's a million other people that have done it in our space. And in your domain’s Mike whether it's cutting boards or coloring books, there's somebody who sold a similar margin product a similar way.

Even when you find business models are pretty well fleshed out, there's going to be a million ways to connect the dots that you just get massively confused with, and you just kind of have to take your best swings and learn as hard as you can, and work as hard as you can and kind of push through. And sometimes you push through and you find something good enough. Sometimes you push through and you just can't make it work, and you need to find another way to reach that goal, whether it's marketing, whether it's customer service whatever.

And sometimes you push through and you find something that becomes a gem around which you can really drive your business forward. And so everything in business, even the stuff that seems like it would be really simple from the outside becomes something where you're knocking your head against the wall as the boss. And sometimes you get it good enough and that's kind of where you are and it works for the business, sometimes you flop and you've got to find something else, and then sometimes you find a winner.

And I’ve only collected so many gems Mike, but I'll tell this much, I'm not very keen to losing them as the price is too damn high. So yeah that's going to be everybody's experience in entrepreneurship, there's really no way around that.

Mike: Yeah definitely, very cool. All right so we're already running out of time unfortunately. I have two more things I want to ask you real quick. The first one just real quick, you had asked earlier and I want to come back to is, just getting started in digital products only. Let's talk about that for just a couple of minutes.

Dan: Cool, cool. I'll touch on it for a couple minutes and we'll move right on. I'm going to lay out what I think are the most important tenets here for people to kind of brainstorm on, on their own. This is what I would advise anybody starting in this space. So if you want to sell digital products to your audience, it helps if you already have an audience. There is a really big white canvas if you don't even know where you're going to point yourself.

But generally speaking people have a website; they have an idea of what they want to sell. Some of the low hanging fruit of what you could sell for me anyway Mike, this was always a signal for us is what is the content that is just kind of performing the best as it is. If I look at my YouTube videos, if I look at my blog posts, if I look at my social media posts, maybe if I talk to people at conferences and I see sort of what attracts the most attention just among sort of my peers in that space and with my customers in that space, what's the stuff that is already jumping out as being more valuable, more interesting, more appealing?

And that's usually going to be a good seed to start with what do you want to create product wise for your actual audience. So figuring out what's already successful, in my case again we had some videos of me beating bigger opponents up on YouTube. That stuff is still up there. And that was by a wide margin the most interesting stuff for people, both in blogs and in video. And so my first course was really explaining and breaking that down in depth. And so, that's kind of one step.

The second step is and I’ll cut short after this when you do have an audience of reasonable significance, whether it's on Facebook or email preferably here, and we're talking about an email list of let's just say you got 400 to a couple of thousand people on an email list. When you have an audience of that kind and you've been sort of exposing them to different kinds of content, staying in front of them on a regular basis, building a bit of a relationship with them, then you can go ahead and ask them sort of some topics of interest.

So some of our most important topics of interest for Science a Skill including firearms were ideas that came from our readers, not ideas that came from us. So I was never a firearms guy Mike, but we talked to our audience, we had some great instructors for hand to hand self-defense. And these people said, hey, look the thing that you're missing here is firearms. You've got well qualified people, why can't we learn that?

And as it turns out, that became a huge driver. I'd say the firearms market was maybe 25% of our revenue, so half a million dollars in the year that I sold the business. So sometimes your audience will tell you brilliant ideas for what they want to learn. And those are kind of the two biggies that I would point out.

Mike: So I promised myself I wasn’t going to ask a follow up question because we're running out of time, but I have [overlapping 00:33:18]. I’m curious how you found those instructors. You said you found them because you didn't have the experience. I get how you had the video of you beating up a much bigger guy, and I can promise you as soon as we hang up on this podcast I'm going to go watch that video. That sounds awesome.

Dan: Pretty funny.

Mike: I’m going to see that myself, but yeah I mean it’s something you had no experience in. I'm in the same struggle because I can't say that I’ve never owned a gun, but I don't have a gun presently, and I'm not of military background or an expert or anything by any means. Where do I find a guy that can help me with that?

Dan: Yeah, so there's an entire I think in almost every niche. Now there might actually be no exceptions, but my guess is that there are close to no exceptions. But in almost every niche, there is a category of persons who are A, there’s two qualities here – well three sorry. A, they're extremely good at what they do; they're in the top let's say 5% or maybe 2% of their skill serving the world. Easily recognized as such, easily able to garner respect.

Maybe they are going to be on the front of Time Magazine, but like in their domain, they are not a joke.

Mike: They're like the expert.

Dan: Yeah they're a niche, a really, really robustly niche expert. Maybe not famous for it, but I'm just saying they're good at what they do, that's number one. Number two, they are interested in teaching, having their name out there, building their name a bit, and sort of being more exposed as an expert in this space. Maybe they're doing a couple of little YouTube videos on the side, maybe they're doing a couple of little interviews every now, and again on like some niche magazines, websites, or whatever the case may be.

Maybe they get paid to do some private lessons at a couple of different gyms and they have like a really — not a super professional, but they have a little website where they kind of advertise their private lessons and their teaching and stuff. This is just martial arts, but you can extrapolate this into literally anything Mike. So, I don't know if there's expert coloring book people, but you get what I'm saying. In other domains there are.

So they're really good at what they do. They have a yearning to get themselves a bit more exposure even if they're not necessarily business people. And number three as like a really important trade here, they aren't spending 80 hours a week really growing their own business in this space.

Generally Mike, these are people who maybe don't want to take on the extreme headaches and horrendous financial risk of being an entrepreneur. It's definitely not fun and games. It's definitely not very interesting for people who like seeing their kids a lot, or like other things like that at least in my experience. I don't have kids right now, but it is what it is.

So with that being said, they don't want to take on effort. So what that means is they would like to teach, they would like exposure, they'd like to be paid for it, but they have no need to grab the steering wheel of your company and tell you what to do, does that make sense?

Mike: It totally makes sense yeah.

Dan: So generally, here's the way that I work this out. Now anybody listening can take what I'm talking about and find your correlate to my concepts, and just smack it on your niche. There's a correlate to these concepts, just smack it on your niche. Here's the concept. The concept for me was, okay, martial arts instructor type people. I would ask them, I’d get on the phone. Normally I get them through a referral or I’ll find them on the internet, I email them back and forth for a while, I get them on the phone.

And by the end the convoy, I’d say Jim look, we are definitely looking for experts right now. And here is the thing, we might create some courses and they're all going to be pretty experimental. Some of them might do well; some of them might not do well. I've definitely experienced both in my life. I'm not looking to have you waste your time and get nothing if this thing flops. But let me ask you this, I want to be able to compensate you for working with us, what are you charging per hour when you're doing private lessons? They'll tell me a number, let's say it's $150, let's say it's $200, let's say $70.

What I would do is this Mike, I would say, okay, well look Steve, look Jeremy whatever the person's name was. I would like to pay you twice that hourly rate, and I will also pay a camera guy to hang out with you, and we're going to do three hours on this particular topic with the goal of having an hour and a half of keepable footage, and I'm just going to pay half of it upfront, and then once the filming is done I'll pay the second half.

And normally it's like, okay, if you're one of those people Mike that has those three categories, three qualities I talked about, that is exceedingly appealing. That's twice the money you'd normally make and your face is going to be in front of a whole bunch of other people. And now notice Mike, this doesn't involve a revenue share for two really important reasons.

Number one I mean like equity or kind of equivalence of equity really implies a lot more contribution and content to be honest. If the hard part was finding experts, I don't know, it just wouldn't be business. We'd all be [inaudible 00:38:42]. So it is what it is. There's paying a couple hours man, that's like it's nothing. It's like I haven't celebrated Christmas in eight years, you know what I’m saying, like give me a break. So there's that.

The other thing is if the product doesn't sell and it's a rev share, or if it takes you six months to start selling it and it's a rev share, now all of a sudden they're sitting over there getting paid squat for their time, and they are a real professional. So my goal was to find people, pay them 2X, and make sure I put their name in their website within the product, but that was it. It was half up front, half after the filming was done. That was the arrangement.

So I tell anybody to kind of work with a similar agreement. Mike I got to tell you, if I had 12 different revenue shares, and I was trying to Science of Skill, how appealing do you think that is to a buyer?

Mike: That's definitely not going to work, plus just kind of the headaches of having to deal with all those personalities and relationships.

Dan: Give me a break. You don't want to tie yourself in bed. The goal is to give them more than what they normally get paid, be fair, be upfront about it, and make sure you list their name just like you promised in all the products. And I got to be frank with you man, nine out of ten folks of this kind that you talk to, they're going to be happy to do that, and they're going to willfully accept that upfront PayPal payment, and they're going to have a blast doing it.

And luckily we had great relationships, they were our instructors, and that's the way that we worked it out. Revenue share would never work if you want to actually sell your business and get a cash out, it's not going to work for you.

Mike: I totally agree. Awesome man, well I could keep on going for hours and hours.

Dan: I know.

Mike: This is awesome. I got to fly out to San Francisco and have lunch with you or something, this is awesome.

Dan: Cool man.

Mike: I do want to end with one last question because we talked beforehand. And besides the fact, this has been so interesting; I can’t begin to imagine what you're going to spit at me with what you're working on an artificial intelligence. I mean you sold your business. We already kind of talked about that real quick — early 2017, and you even said like your original plan was to go do this other thing, you just needed the cash to be able to do it. So talk to us about what you're doing now. It's probably, like I said, it’s going to blow my mind. I can't wait to hear what your hopes are.

Dan: I'll do a really quick and short breakdown of it. So since selling Science of Skill, essentially Tech Emergence the business that I'm working on now is it covers kind of media and market research around artificial intelligence. Specifically Mike where does AI apply in business?

So curiously, I was a marketing guy, I was an e-commerce guy, and now I get to do a lot of deep dive studies on where is AI making a difference in marketing, not just at Amazon and Target, but at other companies whether it's brick and mortar retailers, whether it's online retailers, how is Harley Davidson getting better segmentation and targeting with some of their online advertising with different AI applications, what's going on in their databases to allow that to happen and to have more let's say up sell revenue based on different strategies or vendors that they're using.

And so I'm getting to kind of study e-commerce and marketing from a different view, and some other niches as well, or some other sectors I should say as well like healthcare pharma, finance etcetera. So that's kind of what we work on now. We hope business leaders make better decisions about AI. We really want to be the place on the internet where you do that. And fortunately I still get to focus on stuff that I'm passionate about around marketing and ecommerce as well.

Mike: Very cool. Awesome man, you had mentioned a couple of articles and stuff that you have written on a personal blog. I’ll get those from you, and we’ll put them on the show notes so people can get to learn. And is there any way people can if they want to find you, what's the best way to get a hold of you?

Dan: Yeah I'll definitely zing [ph] those articles along. I think some of the stuff that we've done on kind of the marketing industry with tech is pretty cool. The other article is more on how we built a business. You and I only scratched the surface, but I've actually written a pretty long piece on that. So I think that would be helpful.

But yeah in terms or reaching me, just @danfaggella for Twitter is a pretty easy way to grab ahold of me, but otherwise just Dan@techemergence. I’m always kind of riffing in chats with other ecom folks, because a lot of people are somewhat familiar with our tales. So if people have questions, let me know you heard about me through Mike and feel free to be in touch. Yeah, that’s the easiest way to reach me.

Mike: Awesome, well thank you so much for time today man. It's been a pleasure, it's definitely got a lot to think about when I go walk in the other room with this sound file to my director of e-commerce and say, listen to this and make it work.

Dan: Cool man excellent. It's been a real pleasure on my side too. I’m glad we got to meet.

Mike: Thanks so much.

And that's a wrap. I hope you guys enjoy that episode as much as I did recording it. I want to thank Dan for coming on the podcast again, thanks so much my friend. I hope I get to meet you in person someday. You are definitely a diamond in a rough. Man I just enjoyed that interview so much. It was everything I could do to contain myself and be respectful of your time; I wanted to do it for another hour or two. I just loved the conversation. You're a brilliant marketer, and I wish you the best of luck in your new endeavor.

And as a reminder everybody, you can go to EcomCrew.com/117 to get to the show notes for this episode, leave us a comment. Hopefully Dan will come back and review those and offer any other insight that he has, just super awesome interview. I loved doing it. And one other reminder, if you go to myecomcrew.com, you can get to our new portal that we have, a truck full of all kinds of free stuff. We just added our Amazon mini course, and we're working on all kinds of other content.

Just a little secret from behind the scenes, I’ve recorded a ton of stuff for this already, but it takes a ton of time to edit the video. We have a super high production guy now, Dave [inaudible 00:44:04] who's been helping us behind the scenes is doing an amazing job. He's a long time supporter of the podcast, a friend of the podcast, a friend of mine, a friend of Dave Bryant and I.

He's done an amazing job, and you guys can see those videos now on myecomcrew.com along with all the other talks I've given. I think everyone I've done so far was recorded and put up there. And there's so much more that we're going to be doing. It's all free folks, myecomcrew.com. So until the next episode everybody, we’ll be back then, happy selling and we’ll talk to you then.