Hippies Hope Shop launched in the summer of 2013, selling hippie-themed goods, with each sale triggering a donation to UNICEF. Business Insider featured the e-commerce startup that September.
At the time, the online business boasted nearly 10,000 Facebook fans - and they were its bread and butter. The shop was co-owned by Koby Conrad, then a business student at Boise State University and former credit union teller; his girlfriend; and a third unnamed partner on the East Coast. Conrad expected to turn a profit within a few months of opening and to hit $100,000 in revenues within two years.
Hippies Hope Shop went into 2015 having long since turned a profit, but with battle scars from a changing online marketplace and lessons learned about mixing business and romance.
"Starting a business with a girlfriend is a bad idea," Conrad says. "I knew it was a bad idea [at the start], and it was a really bad idea when me and my girlfriend split up."
He ended up buying his ex-girlfriend's shares of the S corporation and now owns 75 percent of the company. (Business Insider could not reach his ex-girlfriend for comment.) An angel investor owns the remaining shares, purchased for $30,000.
Other factors have kept the company from reaching the heights Conrad hoped for. He says the way Facebook supports "organic reach" has changed. That limits the number of hits Hippies Hope Shop has garnered from its fan base.
"In March 2014, we got about 12,000 hits from Facebook, and in August 2014 we got 850," he says.
Q: How did that affect your business?
A: We've been lucky enough to establish a solid brand with consistent sales and a wonderful customer base, but sales have slowed down, and I had to let our manager go. I knew that 100 percent of the blame was on my hands and my decisions. I ended up networking with fellow businesses and found my manager a good job, but it still sucks to have to let someone go.
Currently we have three part-time employees working for us. I am extremely lucky to have such amazing people that stick by my side during the ups and downs of this roller coaster.
Q: Are you doing anything to catch new eyes online?
A: Now that Facebook is effectively 95 percent less valuable than what it was to us before, we have created a huge focus on other social media. We've been building our Twitter, Instagram and Pinterest audience for a while now, but [recently] we have majorly vamped it up, accumulating over 12,000 followers between the networks.
We've also introduced a much stronger focus on our mailing list. The sign-up rate for our newsletter used to be about 1 percent. We introduced a few A/B [marketing] tests to help optimize the positioning and were able to bring the conversion rate up to 3 percent, which is an amazing boost in performance and will be worth a fortune to us as our list builds over the years.
Q: Did any of your business expenses surprise you?
A: Oh god, the IRS. I didn't expect how much taxes businesses have to pay for every little thing. I've gone through my life up until this point as an employee, so I never knew that not only do taxes come out of the paycheck that I pay my employees, but I have to pay taxes on top of the paycheck. So in order for me to hire someone for, let's say, $30,000, that really means I have to pay $30,000 plus taxes (plus benefits, plus mistakes they make while being new).
It adds up more than you think.
Q: Did you run into unexpected costs?
A: Thankfully, no. I use a Meridian accounting firm called AccountServ, and they are absolutely amazing. They've made sure not only that my books are in order but that I know exactly what I need to pay and when. I'm not the most organized person in the world, and having someone to help keep my expenses straight has helped royally in making sure that nothing comes up that I don't already know about.
Q: What tweaks have you made to keep the business financially healthy?
A: We've been focusing more on products that we handmade in-house instead of having to buy wholesale. This helps keep more of our margin inside of our company instead of having to hand it out to some supplier in Asia or Africa. More jobs stay in the U.S., and we have a healthier margin because of it, win-win in my book. We've also brought our shipping and fulfillment in-house as well, which also means that more of our margin stays within our company.
Q: How did you grow the business?
A: For the most part, an online brand isn't something that you really touch or visually see in your day-to-day life. I mean, when was the last time you saw a Netflix billboard or radio ad, right?
An online brand is about all of the ways you connect and interact with your audience, so I compare it to a spider web, where each of the threads is one of the ways you interact. They see us on Facebook, read about us on websites, see our re-marketing ads on blogs, receive our monthly email newsletter, read our tweets on Twitter, like our pictures on Instagram, up-vote us on Reddit, pin our posts on Pinterest and search for us on Google.
I mean, if you're not including porn, that's probably about 90 percent of people's Internet usage right there.
Make sure you have great product, build up each of these little threads, and the amount of people that find you and keep coming back increases and increases. As long as the market doesn't do something stupid, anyway.
Q: What was a make-or-break moment for your business?
A: Landing the article in Business Insider. It was business-focused, not even a culture piece about a hippie shop. It was strictly meant for business professionals who are definitely not in my target demographic, but the piece went viral. It was picked up by Yahoo! Finance, Slate Magazine, San Francisco Gate and over 100 other websites. Over 1 million people ended up seeing the article.
Two weeks after the article published, we brought on our angel investor for $30,000, but the [search-engine optimization] authority our website got from the hundreds of websites picking up the article was enough to establish us as a legitimate brand.
Q: If you could give fellow entrepreneurs one piece of advice - something that's not obvious, and they won't hear elsewhere - what would it be?
A: There is a difference between an entrepreneur and a CEO, even if the CEO is the one who owns the company. An entrepreneur is the one who creates and defines the business model for the CEO to follow.
Being a CEO is about running a company well. Making sure there is proper strategy, that the company runs smoothly, that the business model is being followed and adjusted according to market forces. He may have experts he consults with for things he doesn't "do," but he's the one that "knows" when it comes to the company.
An entrepreneur is about being messy. It's not about knowing what to do but messing up instead. You want to mess up, you want to mess up a lot. Mess up small-ly, and as often as you possibly can. Figure out everything by doing.
The mailing list works better at the top of the page than the bottom.
It's better to charge $19 for something than $19.00 or $18.95.
[Ask yourself], "Should we focus on Facebook because it has a higher [return on investment] or all social media because it's safer?"
Did we know how we were going to make money when we first started? Nope. It wasn't even a hippie shop originally - it was a social-media management company. We never dreamed we would end up making things like barefoot sandals.
Did we know where to get product from? Nope.
Did we know what our average order value was going to be? Nope.
Did we know how to hire someone? Nope.
It was all about making mistakes and learning, carving out that business model for our future selves to follow.