Scaling Our Way To $3M/Year With Our E-Commerce Fulfillment Center [Update]
This is a follow up story for OTW Shipping. If you're interested in reading how they got started, published over 2 years ago, check it out here.
Hello again! Remind us who you are and what business you started.
Hey there, Nick and Parker again! Back in 2020, we started OTW Shipping, an eCommerce fulfillment center (AKA 3PL, although we are just one type of 3PL company) out of Salt Lake City, Utah. For any eCommerce novice out there, our clients will send us their inventory and we'll store it for them in our warehouse.
We integrate with their selling platforms, like Shopify, so when they get orders we can pack and ship them out. It all seems simple on paper, but across countless clients and high order volume, it can get very complex. We try to keep it simple. Our goal is to provide small and large eCommerce brands with top-class fulfillment and a level of communication that feels like your own in-house fulfillment team.
After launching in November of 2020 with nothing but student debt to our names, we accomplished $1M in revenue in our first 12 months, shipping out over 120,000 packages.
We are now into around 20,000 square feet in a new warehouse, and already close to capacity once again. In 2023, we are expecting to achieve well over $3M in revenue and reach over 100 clients.
Tell us about what you’ve been up to. Has the business been growing?
Since we last had our write-up with Starter Story, we’ve increased our volume to 40,000-50,000 orders per month with approximately 75 clients across several verticals.
Our staff has grown to a team of roughly 10 full-time workers and multiple part-time team members. Our warehouse manager runs the show, while we have a few team leads who share the load with a mix of regular work and high-level tasks. Then we have our pickers and packers who do just that for most of the day. We also use a gig-work app for ad-hoc projects and temp labor. We’re in about 20,000 square feet in Utah and already close to capacity, with an East Coast location on the way.
From a sales standpoint, it’s still just me (Nick) running sales, but our lead volume has grown significantly. We tried ads out with a 3PL agency for a while, but that was not very fruitful. Our bread and butter has been organic.
We’ve focused on being a resource for others, as well as our clients, and this has led to a great reputation full of 5-star reviews, and referrals from others in the space. This includes building out tools that brands can use whether they’re currently interested in 3PLs or not. That way, later on, when they may be considering a 3PL, we are in their mind.
At the moment, we have around 3 resources in this regard. Some are actual tools, while others are long blog posts with lots of concepts spelled out for sellers’ benefit. We determine what tools to build out based on a mix of input from leads/clients and matching it up with high intent or high volume search terms.
Here is just one example: a 3PL comparison template that simplifies the process of comparing a variety of 3PL quote structures. It’s garnered hundreds of downloads and been shared across various popular sites.
That, along with trying to help anyone who may or may not be a potential client in numerous Slack groups, Reddit forums, etc. has been monumental in establishing our name in the space and giving others a good first impression of our company.
One cool side note is that we hired Nick’s brother, Nate, to help manage day-to-day operations with clients and find ways to optimize the warehouse flow.
Please keep your day job as long as possible. That extra cash will go a long way towards your comfort when you do go full-time on your business.
What have been your biggest challenges in the last year?
As we’ve grown, our biggest challenge has been finding great employees in the current labor market. We don’t care about experience for our warehouse positions, but we do need people who have integrity and care about their work. This is something we’ve found is not very teachable, and is tough to find in some of the relatively lower-wage positions that warehouse work entails.
As we’ve scaled, we’ve needed to hire employees, but we didn’t want to hire bad employees because that hurts the team more than it helps. So, we’ve been in the position of having few options in terms of new hires, but consistently needing more hands on deck in the warehouse. It’s something we’re still learning to balance, but we’re planning on being a bit more proactive about it in the future.
Another difficulty has been cash flow towards financing a second location. While we have the money to do it, we don’t want to bleed cash for months while we fill it up and we don’t want to put ourselves in a risky position should the economic climate change.
At the same time, we don’t want to get too small of a spot where we have to move in a year or two as that is very time-intensive and expensive to do. So, we’ve been looking at alternatives that keep us asset-light for a little while, such as a sublease where we can avoid the need for a forklift until we’ve got enough pallets to cover some ground in a larger spot.
Lastly, just having enough time to get things outside the day-to-day done was a big challenge this year. We hired Nick’s brother, who has experience in the supply chain, to help manage the day-to-day and allow us to start to improve the company in a lot of areas we hadn’t had the time to address before.
I’ve seen people cling on to side hustles for too long that otherwise weren’t successful. Sometimes things don’t work. I’ve failed at numerous ventures before having success with OTW Shipping.
What have been your biggest lessons learned in the last year?
One thing we’ve done a better job of is being very picky about the brands we take on. Sometimes, it can be down to something as simple as they were not being very respectful on a sales call, and we don’t want to potentially put our support team on the line with someone who won’t be courteous to our team.
For the most part, though, it’s doubling down on what we do well, and referring out leads to other good 3PLs we know for things we don’t specialize in. If we’re trying to do everything, we’re not doing anything well. It makes it harder for us to design processes, harder for our team to follow them, and harder to scale with new employees having to learn countless exceptions to the rule to stay afloat.
Another thing we’ve learned is how to go back and revisit our pricing and make sure we’re not bleeding money for work that would otherwise slip through the cracks. Now that we have some time to dig into the details, there are lots of small areas where we were losing money that we are now able to identify and adjust for.
What’s in the plans for the upcoming year, and the next 5 years?
We’re pretty excited for the next few months here at OTW. Quarter 4 is a busy time of year, which is something to look forward to. What we are excited about though, is our upcoming East Coast location. It has been on our radar for a while, and in Q1 2024 we plan to open up a second location for bi-coastal fulfillment.
There have been some ups and downs over the last year or so, but we feel we have been building a solid foundation upon which we can expand hard when our second location is up and running.
5 years down the road still seems so far away, but it is crucial as a young entrepreneur to plan that far ahead. It helps you focus on the financials and projections and make sure you are setting goals to achieve.
I feel like it can be easy when things get up and running to just ride the wave and get complacent, so things like a 5-year plan are a great way to avoid that. Within the next 5 years, we plan on owning all of the industrial space that we take up as part of a longer-term personal endeavor to grow passive income.
What’s the best thing you read in the last year?
Honestly, we have been a part of a 3PL group for a while that has been helpful in learning lots of tips and tricks. We’ve got a great group that can put aside competition, as there is more than enough business to go around.
The insights from there have probably saved us 4 or 5 figures this year and a few potential mistakes.
Advice for other entrepreneurs who might be struggling to grow their business?
This is going to be controversial, but know when to quit. I’ve seen people cling on to side hustles for too long that otherwise weren’t successful. Sometimes things don’t work. I’ve failed at numerous ventures before having success with OTW Shipping.
Also controversial, but if you can, please keep your day job as long as possible. That extra cash will go a long way towards your comfort when you do go full-time on your business. Once you can replace your salary to a meaningful extent to where you have some runway, then go for it. You will sacrifice some productivity in those first few years of doing both at the same time, but building things “slowly” isn’t a bad thing if you’re building a solid foundation.
This last thing is less controversial. When things are going well, that is not the time to step off the gas, but the time to look to improve in areas that you normally don’t have time to take care of. The nuance is in the details and it can make a big difference in your bottom line when you can cross your Ts and dot your Is.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
