An inside look at a basement business

Three years ago, I sold Vitabase, a nutritional supplement company we had built from the ground up. When I sold, I assumed I was out of the health business for good. However, there were a few websites not associated with that sale that we held on to and we moved that business into the basement and gave it to the kids to manage. In addition to that, we still do our own fulfillment for music on this site so we fulfill that out of the basement too.

The need to ship music has gone down over time as CDs have gone obsolete. In fact, 80-90% of the sales on this site now are downloads so we don’t have to fulfill them at all. However, for various reasons, we have seen lots of growth in those supplement websites that remained after the Vitabase sale and all those orders have to be shipped.

Today, the kids still run the business and it is up to about $750,000 in annual revenue. The manager of that is my 14-year-old Kelsey. She manages the warehouse, including purchasing and fulfillment. Here is a picture of her doing her thing.

She is assisted by my two youngest children (ages 12 and 11) who stock shelves and pick orders. They are kids so we have to be careful. We use bar code scanners to ensure that orders are picked correctly (every product is scanned to make sure it matches the order).

So how is a business of $750K run by 3 children, the oldest of which is 14? First, Kelsey is just good. Second, it is about the systems. The systems are the secret sauce and I am going to explain the systems we use in this blog post. I apologize in advance for those that have no interest in this kind of topic but I know some of you will be interested.

First of all, remember that I am a software guy. I wrote code in my early career and I can still write code. I do my own websites (WordPress / PHP) and I also manage the code for an Access customer order database that we wrote 15 years ago and have maintained ever since.

That being said, I actually spend very little time coding these days because there is just no point anymore for a business like ours. With few exceptions, the software I need has already been written by someone who is selling it as a service. Here is a fairly complete list of the software services we use.

• WordPress / WooCommerce: Free (the backbone of the websites we use)
• Plugins for WordPress / WooCommerce: ~$400/year (various extra features in the websites that are not free)
• ShipStation: $600/year (a complete cloud-based shipping solution)
• Finale Inventory: $2400/year (cloud-based system that keeps track of inventory with bar code scanning, including automatically building the purchase orders to replenish things as they sell)
• QuickBooks Online: $120/year (cloud-based accounting)
• QuickBooks Payroll: Free through my Bank of America account
• Pingdom: $180/year (monitoring websites 24×7 to make sure they are up)
• SendGrid: $120/year (email sending service)
• MailChimp: $1800/year (email marketing service)
• Microsoft Office Pro: $180/year (cloud-based Access and other office software)
• Freshdesk: $240/year (cloud-based customer service ticket system)
• Pathwright: Varies based on number of students enrolling (online education)
• Adobe Connect: $500/year (online video conferencing platform)
• Braintree: Free though they take a percentage of revenue (credit card/Paypal processing)
• RingCentral: $500/year (cloud-based routing and processing phone calls)

If I add all these services up, the total is somewhere in the neighborhood of $8,000/year. That is only 1% of revenue, but if it seems like a lot, think about how much time it would take me to write all that code myself. Actually I couldn’t; it would take a huge team to do and would still not be very good. Paying the companies that develop and (just as importantly) maintain this software is a no-brainer.

Very often, the trouble comes in integrating systems but in our case, we have picked software on purpose that plays well together. For example, an order that comes into any of our WordPress websites is automatically sent to ShipStation which automatically sends it to Finale Inventory which helps the kids pack the order and then tells ShipStation the order is packed. When ShipStation generates the mailing label, it automatically sends a notification back to WordPress with the tracking number.

The only real integration I have had to write myself is integrating our custom Access order database with the various systems. For the most part, the various companies we use provide API’s to make it very simple.

To be honest, I have just fallen in love with cloud service-based software services like this. Most of the services have mobile apps where we can check almost anything about the business on my phone from anywhere. If Kelsey is out and gets a call about an order, she can quickly get the tracking number from a mobile app from ShipStation. If Marla needs to do customer service while on a trip, FreshDesk has an app where she can completely handle customer issues from anywhere.

I think Kelsey probably works about 4 hours a day on the business and my two younger children work about an hour each. Considering the revenue, it is probably almost unheard of to work that little, but it works because of the software involved and the way the software integrates together to make a system.

I am not going to claim that this is easy. I sort of make it sound easy but remember that I have a lot of experience in this area. Don’t get the idea I am telling you that you can set up a substantial business in your basement over the weekend. Setting all this up is time consuming. However, if you want to sell something, it is definitely doable and there are all kinds of tools to help you.

In the meantime, my kids are bugging me to build a warehouse so they can move out of the basement and they want to start a full blown shipping fulfillment business. I may do it for them.