How I Turned A $5K Investment Into A $7.2M Apparel Brand

Jonathan Waldmann
Founder, On Cloud Faith
$5K
revenue/mo
3
Founders
11
Employees
On Cloud Faith
from Las Vegas
started May 2022
$5,000
revenue/mo
3
Founders
11
Employees
39
followers
1
followers
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How I Turned A $5K Investment Into A $7.2M Apparel Brand

Hello! Who are you and what business did you start?

Hi everyone! My name is Jonathan Waldmann. My then-girlfriend (Ilona), her mother (Sonja), and I started our business in 2012. We started in a one-bedroom with loft apartment in Gaithersburg, Maryland. Our first online business back in 2012 was on Etsy and is still going strong. That is a very diverse shop where we have different product categories that we cater to. We have travel shirts (custom for the destination), party shirts, bridal shirts, and engagement shirts. What makes us different from many other stores on platforms like Etsy is that we can offer customization and still keep the cost low (and Etsy provides a great customer base).

We have recently opened a new independent e-commerce store called On Cloud Faith which caters to a specific demographic of religious and faith-based clothing. We realized in going from larger platforms like Etsy/Amazon, it is easier to navigate specific niches with directed advertising and can focus the ad spend than having a more diverse e-commerce store.

Since we started in 2012 we have made 7.2 million dollars in sales. And that is from starting with a 5,000 initial investment (and mainly for products and equipment that weren’t even used at the beginning, since we changed how we were manufacturing back then).

on-cloud-faith

What's your backstory and how did you come up with the idea?

Back in 2012, we were on vacation down in Florida and Ilona had come to us and said that she had an idea. She found a new website called Etsy where you can make items and sell them (previously it was mainly only for vintage goods). As crazy as it sounds we began by selling Gimp bracelets and headbands that we would make by hand. It was extraordinarily time-consuming and the profit was not great. So she was on the lookout for ideas.

With that, she landed on the idea of crystalized wedding apparel. At the time (back in 2012) crystals were “all the rage” and it was what everyone wanted. So, we purchased some blank shirts and crystals and started making out own (again). Eventually, we found suppliers that either already had the custom designs made or were able to customize them for us.

From there we evolved to screen printing but decided that it wasn’t a great fit for us since you had to have a separate screen for each design/color you wanted and at the time we were still in a one-bedroom loft apartment.

So after more research, we decided to start with vinyl. It allowed us the most versatility for color/design combinations and allowed us to be completely customizable. From there we grew to add more genres to the bridal category that we had – travel designs, holidays, pregnancy, etc.

At this time both of us had graduated from college and were doing this full time. We re-invested all of our profits back into our business because when you can buy more or larger quantities the price goes down (as most know) and that increases the net revenue.

Ilona had always known that she wanted to have her own business. One of the greatest aspects of working for yourself is that you are beholden to no one (except yourself) and there is something that is very freeing about that. Not to say that there aren’t a plethora of challenges that come with working for yourself – financial stability comes to mind– since you cannot be dependent on someone else for your paycheck but have to put the work in to make it happen.

Our days have mostly consisted of 16-18 hour work days where we did everything. The most time-consuming was answering customer messages. This isn’t something that we were able to outsource – even later when we grew Ilona was still the one doing the messages before we hired someone else to do it – because it was such an integral part of the business.

Etsy created a community where answers were expected to be prompt and at all times of the day. Weekends were no longer sacrosanct and messages were answered throughout the day. Non-stop. The problem was that if people weren’t answered to then it was most likely that they would find someone else to shop with.

The second problem that we discovered was that people didn’t read. No matter how simply you put the information that they either requested or that you required 7 out of 10 times you would have to message back requesting (or giving) the same information again. That was extraordinarily time-consuming.

Being dependent on someone -Etsy, Amazon- is always a situation where you never know what’s going on and you always feel like there is a guillotine over your head just waiting for any kind of infraction to have it come down and close your business.

Take us through the process of designing, prototyping, and manufacturing your first product.

In 2012 we started with $5,000 on my credit card. It was both an easy and difficult design to do. We didn’t know where to begin, what to get…

We purchased our first order of bulk shirts. I remember the boxes coming to our apartment (our UPS driver Steve was always very kind). The color was not one that we wanted (grey) and we wanted to return it. The company we ordered it from accepted the return but charged a restocking fee. That is something that hurts right when you start and don’t have unlimited funds.

We started with screen printing which worked for us at the beginning but we discovered so many difficulties that we decided to move from it. We had to “burn” the screens in our bathroom (the process of using an emulsion on the mesh screen to put the design on it) and since we were starting out we had the most basic tools I remember that once you started you couldn’t have any external light come in so you couldn’t leave the room and the humidity from the light and the temperature just kept on going up. The ink was a mess and it just didn’t have the results that we wanted.

Vinyl had its problems as well. Starting with a basic cutter (this is before Cricut) gave us our headaches. There was a time when the blade would just randomly make consecutively larger boxes cut out of the design it was going through (ruining the design and vinyl). My, now, father-in-law suggested that it was a problem with low humidity around the electronics so I remember sitting there as the design is being cut with a spray bottle misting the air above the machine so it wouldn’t cause problems and waste the vinyl (cutting out part of the profit for the order).

Ilona has been our graphic designer and inspiration for almost every single of our designs. I am amazed at how she can constantly and consistently create best-selling ideas.

on-cloud-faith

Describe the process of launching the business.

Since Etsy allowed for an easy start-up process there wasn’t much difficulty with “launching” our store. There has been a steep learning curve associated with them and unfortunately, there are ever-changing ideas at the company that cause you to have to rework your store constantly to keep up with how their algorithm works.

However, with Etsy being a platform that people would go to browse and shop, getting customers was never all that difficult. Once Ilona and Sonja figured out the best way to create our listings we’ve always had customers come to our products. Not to sound boastful, but we’ve always had nicer pictures, better designs, and better quality than most of our competitors.

Don’t try to rush things and grow more than you can or need to. Take your time to be comfortable at each stage of growth before you move forward to the next one.

Our initial $5,000 investment was all that we needed to start our business. No loans or outside investment was used. That is something that we were and are still extraordinarily proud of.

Since launch, what has worked to attract and retain customers?

We’ve tried throughout the years to go off Etsy and build our website (using Shopify) but customer acquisition was always something very difficult. We were able to drive quite a lot of traffic from promotion ads on Instagram accounts but then after that was working quite well Facebook purchased Instagram and then their algorithm changed and the number of views dropped drastically (for example, a post that we did would have 20,000 views and several hundred comments would go down to only several thousand).

Facebook ads were also very similar to ours. I remember constantly getting calls from Facebook to try different campaign methods (like a conversion campaign) and what I remember was that they never worked. I don’t know if much has changed but back then the “like, comment, subscribe” method of Facebook ads was the one that had the best result for us in driving traffic to our website and Etsy.

In addition, the cost per “action” was only about .02 and the reach we had was always great, the cost per “conversion” was always in the $15-18. Now when you sell a product that goes for several hundred dollars that might not be an issue but when you sell a shirt for $18-22 that becomes a major problem.

Going back to Etsy always seemed like the easy way to do it. They provided the traffic to the website and people would search for products, find us, and then purchase. But being beholden to someone is never a great feeling (much like when you are working for someone else), especially when they are not transparent about what they are doing, what they are changing, why they are changing what they are, etc.

So we are now again back to our store off of Etsy and are trying to drive traffic through both paid advertising and organic SEO. That is something that will take quite some time to achieve but it is what we believe will be our future.

We would love to consider a platform like Amazon to have our products listed but we can never seem to get past the now 17% referral fee that they want to charge. When you already have to lower your price to maintain an approximate range to your competitors (as well as the rising cost of goods due to global supply chain costs rising) we can’t justify paying Amazon such a huge percentage of any profit that would be made.

How are you doing today and what does the future look like?

When we started out we were able to charge anywhere from $24-28 for a shirt. That was the competitive cost back then and ours were about 60-70%. With Etsy growing (which is a great idea) there came more shops that would always undercut the ones that had always been there. The problem with that is that those shops never lasted long (most likely when they realized they needed to pay their taxes and never had enough profit to be able to do so).

When they showed up everyone else was required to lower their prices. That’s happened multiple times now and our margins have dropped to anywhere from 30-45%. That is a major decline in profit. To compensate for that we’ve had to increase our number of sales to do so.

What I will always say is nice is that our ad spend has been quite small since Etsy brought most of the traffic to us we haven’t had to pay for it.

Year over year we have been constantly growing at a rate between 10-25% revenue.

We’re hoping that with our newest venture off of Etsy that that rate will go up since we can price our products as they truly should be priced and not compete with other sellers who are just trying to corner the market with lower prices. That will bring, however, ad costs and customer acquisition costs that we are hoping will not have gone up much from when were first doing Facebook/Instagram ads.

We’ve purchased and are now using 4 Direct Garment printers so that we are now able to directly print on each garment using 256 colors rather than the 1, 2, or 3 that come from vinyl and the 4 that are more common with screen printing. We can do a rainbow of colors all within 30-55 seconds on each shirt. This increase in “printability” has allowed Ilona to create much more intricate designs that we weren’t able to before.

We have recently started a faith-based religious clothing brand called On Cloud Faith that we are very proud to be promoting since it is about celebrating faith and religion with very positive sayings and designs.

Next, we will be very soon opening an online brand called The Guys World that will focus on products geared towards men (and women/men looking to make purchases for their friends/family/significant others).

Through starting the business, have you learned anything particularly helpful or advantageous?

One of our regrets was not starting our website sooner. SEO takes a long time to achieve large results and that is something that we are late to the game with. But, the saying goes, better late than never. So we’re starting now and starting it right but it would have been much more beneficial to have started sooner.

Of the things that were out of our control was depending on a platform like Etsy (or Amazon). They have the right to do anything that they want whenever they want. I remember several years ago right around the time when Christmas shopping was at its peak they decided to futz around with their search algorithm. We don’t know what they were doing or why (no transparency) and it created problems for (as far as I know) the majority of the sellers that were on there. Being dependent on someone is always a situation where you never know what’s going on and you always feel like there is a guillotine over your head just waiting for any kind of infraction (perceived or real) to have it come down and close your business.

What platform/tools do you use for your business?

In the past when we tried to go and do our website I would set up our store using Magento (this was before Shopify took off and became more mainstream). That was a challenge in itself because I had to learn HTML and CSS3 to be able to do any form of customization.

Now we simply use Shopify as our selling platform due to its ease of use and super fast customization options.

For shipping, we use Shipstation for all of our shipping needs. Of the many different programs that I’ve tried in the past, this is the one that I found works the best. Now all can provide shipping and shipping accounts for reduced rates) but this one has the easiest workflow for automation and customization to get orders out.

For our email lists, we use Privy. This allows for seamless integration with a newsletter popup with a discount code. It allows you to create everything in their system and it automatically adds it to your website.

The last tool that we use is SEMRush. This is a more expensive software that we use but it has so many important functions that are a must for your website. It allows you to track your website backlinks, keywords, and traffic– as well as your competitors. There are so many features in there it is a must-have for any SEO development for your website.

Advice for other entrepreneurs who want to get started or are just starting out?

One of the things that we learned was that having your own business takes time. It takes time to do right, and it takes time away from other things that you might need/want to do. You will be working long hours and most of the time it will not be fun. But what you have to do is have pride in your work and know why you are doing it. That more than compensated for the long hours.

Don’t try to rush things and grow more than you can or need to. Take your time to be comfortable at each stage of growth before you move forward to the next one. You don’t want to grow too quickly and not be able to do what you need to at that level.

“Price fighting” with competitors is something that you shouldn’t do. We’ve seen many businesses try to start and they must be thinking “If I lower my prices low I’ll get so many sales to compensate for that… that has to work right?” What we’ve noticed is that it doesn’t. Those companies that did that never lasted more than a year and just caused more harm than good to the ones that are still there, because once you’ve lowered your prices you can’t raise them (unless everyone would agree to do so which would be as about as lucky as winning the PowerBall.

Are you looking to hire for certain positions right now?

Right now we have an amazing team that’s able to handle all that we need but we are always on the lookout for talented people who can bring their skillset to the table. If there is someone who is versed in SEO/PPC we will always listen to them as we would rather have someone in-house rather than outsource to an external company.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!

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Jonathan Waldmann, Founder of On Cloud Faith
Pat Walls,  Founder of Starter Story
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