Lessons Learned From A $5M/Year Fulfillment Business [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.
Hi there, this is Nick and Parker again! We debuted on Starter Story in 2022, with a follow up in 2023. Now we’re back for more. Our business, OTW Shipping, began in 2020. OTW Shipping is a fulfillment center designed with ecommerce brands in mind. We want to feel as close as possible to in-house fulfillment, so brands can trust fulfillment to the experts and focus on what they do best - grow.
Since 2023, we have now expanded to an east coast location, in Hartford, CT and are already shipping over 15,000 orders/mo from there.
Tell us about what you’ve been up to. Has the business been growing?
Since our last interview with Starter Story, a lot of our work has been focused on improving our processes and finding ways that we can improve the experience for our clients. While our churn has been extremely low, we sent out surveys to our existing clients and found ways that we could make things even better.
The main areas we wanted to focus on were increased accessibility and visibility for our clients into how to do things and what the status was of not easily trackable components of the business (kitting requests, B2B shipments, etc).
We settled on Coda as a platform that we have been working with to build out this dashboard for our clients. This also helps our team internally to track SLAs around those types of processes as well. The internal side has an MVP live with our team and the external side should be live later this year.
Additionally, we just expanded to a new location that opened up the possibility of cheaper postage costs for a number of our clients whose volume skewed towards the east coast.
With that in mind, we are in the middle of transitioning to a new WMS (ShipHero) as well. ShipHero will better serve our multiple locations and help us serve our clients with more tools at their disposal and more well built and flexible software for our team to utilize in the warehouse.
So lots of things are happening this year and so far we have been able to obtain another 30% growth so far, with plans to get that number to at least 75% growth by the end of the year.
Profitability is huge. I would rather stay at our current size and remain profitable than expand to six warehouses, create more work for ourselves, if that meant killing most of our margin.
What have been your biggest challenges in the last year?
I think a few main things have presented huge challenges for us this year. The first challenge was expanding to a new location. This meant training a whole new team, investing a lot of capital upfront, and tying Nick up in a lot of work he did not have to do before.
On top of this, transitioning to a new WMS is a huge process. Not only did we have to test out a plethora of platforms, but we had to learn the new platform, generate SOPs around it, and now train our team and clients. Parker has headed up the migration process which involves migrating our clients over to the new software in sprints.
Finally, at the scale we are now operating at, the amount of client communication on a daily basis needed to expand to multiple individuals, so we are now training our first true CSM. With everything going on, there isn’t a lot of bandwidth going around, so it’s been a true test of how much we can handle at one time, but we’re holding up so far!
What have been your biggest lessons learned in the last year?
I think one thing we are learning now that we are in a good spot with growth is to not try and grow too fast. While progress is only made in bounds when you’ve got a fire lit under you, we don’t want to compromise on service to our current clients.
We are taking less clients now than we used to, and are being more picky. Some clients we have signed in the past in the name of growth have turned out to be very rude and unpleasant to work with and it puts a level of very real stress on the team.
On top of that, we’re learning that hiring good people in Connecticut is a lot harder than it has been in Utah. Utah also has a great app, Bacon, for temp labor that opens up to a much larger pool of “gig workers” that a traditional temp agency wouldn’t come into contact with. Connecticut only has traditional temp agencies, which have a higher variety of competence levels in the people they send across.
What’s in the plans for the upcoming year, and the next 5 years?
In the upcoming year, we are going to have to transition facilities as our lease is up in our Utah facility. That is going to be a big challenge with over 1400 pallets! We’ve done a move before, but at this scale it will be a multi-week venture. And naturally, we just want to keep growing and scaling our bi-coastal facilities.
In the next few years, we hope to be able to purchase or build our own building as well. This requires quite a bit of cash upfront, but we’re hoping our growth rate continues to remain at the levels it has been over the past few years and that should do well for us. From a personal perspective, we love the idea of a cash-flowing asset we could hold onto in the event we ever sold our business.
What’s the best thing you read in the last year?
We honestly haven’t read too much that stands out specifically. However, we are part of a group of 3PL owners that are in the “shmedium” range like us. There has been so much helpful advice we’ve garnered from there.
On top of that, following lots of experts in their fields on Twitter and LinkedIn helps us keep on top of new and upcoming things to watch for in the industry.
Advice for other entrepreneurs who might be struggling to grow their business?
While growth is important, I would think that with how uncertain the economic forecasts have been and continue to be, profitability is huge. I would rather stay at our current size and remain profitable than expand to six warehouses, create more work for ourselves, if that meant killing most of our margin.
So, outside of not finding PMF, if you are getting good business, but not finding the margins looking great, now would be the time to reevaluate. You first need to be able to analyze your business and understand unit economics. For us, we need to know what is our cost to pick and pack an order and how much are we getting paid to do so.
Are there areas where we aren’t charging enough? Are there areas that are simply unprofitable that we need to cut from the business? Are there certain clients that we need to adjust pricing because it is not matching the work required to pack their orders? These are the types of questions you want to be asking for your business niche.
Are you looking to hire for certain positions right now?
We are only hiring for in-person warehouse roles currently, so if anyone is in the Salt Lake or Hartford areas, let us know by sending an email to team@otwshipping.com!
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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