AS 66: Product DIY for Amazon Private Label with Filip
25 Oct 2016
Today I’ve got Filip Valica on the show, He has been a mechanical engineer for 12 years, designing, testing, and building products from cradle to grave. He has worked for a broad range of companies – from mom-and-pop small businesses to some of the largest corporations in the US.
What you’ll learn?
- How to design products for Amazon Private Label
- Design strategy
- How to build better products
- The entire cycle from beginning to end of product design
- Filip’s entreprenuership journey
- Working with existing cashflow
- Research and Development techniques
- Patents, Provisional and non-provisional, what’s the difference?
- How Filip went from a full-time enginner to full-time entreprneuer
- Design and Development Pitfalls
- Adding value to your ideas
- Investor discussions for products
- Patent risks and ripoffs
And much more!
Get in touch with Filip:
DAVID ALADDIN: Great to have you on the show, Filip! Can you tell us a little bit more about yourself?
FILIP VALICA: Sure! I guess in short I’ve been an engineer, as you said, thanks for the introduction; I’ve been an engineer for the last twelve years. I am married with one daughter.
DAVID ALADDIN: Awesome!
FILIP VALICA: And recently I was laid off for my full-time corporate gig where I was doing managing like RND teams and product development. And I’ve been, I guess, pivoting over to doing my sight business full-time.
DAVID ALADDIN: So, you’ve been an engineer for twelve years. I am an engineer as well, so I totally get it. Pretty much Filip has gone through some of the toughest educational courses the World has to offer! How did that go for you?
FILIP VALICA: I needed it!
DAVID ALADDIN: What was your experience?
FILIP VALICA: Yeah, I didn’t like it all, because I was… I am not a traditional student, I guess, that really enjoys school and does well. A lot of the guys that were in engineering with me, you know, loved all the theoretical type classes. And for me, I was just really hands on. And so, I either did really well in classes and got A’s, if they were like project based, or I got Ds and Cs if I just didn’t enjoy it, because I didn’t do the work.
DAVID ALADDIN: Was it… Didn’t Einstein get Cs as well?
FILIP VALICA: Yeah, I wish I could compare myself to that! But no, I mean, I think, you know, I didn’t… and I didn’t even know myself that much back then, you know. I definitely did it because I enjoyed taking things apart and putting them back together, and learning about how things worked. But there was a lot of other stuff that went into engineering that I just didn’t, you know, find valuable for me.
AVID ALADDIN: Just for the audience listening… The way engineering is setup, you are not supposed to get A’s on the courses. You actually do it, so that you… The average student, or the majority of students actually get Cs and Bs, and then you have that one student that’s allowed to get an A, and it’s pretty like stacked against the odds. So, I don’t know… Was it kind of like that when you were growing up…not growing up, but like in school as well?
FILIP VALICA: You know, I think some of the people that I went to school with did really well, they did exceptionally well, you know, they were really the type of people that could go out and drinking the night before, and party, and sometimes even go have a beer during lunch before the test, and still like wreck the curve. And was the guy that was like spending three/four hours a night on homework every night and just struggling to keep up in some classes, just because it was just so theoretical and out there, that I just couldn’t relate to it.
DAVID ALADDIN: Alright, well, I agree with you. I went into civil engineering and mechanical engineering and this podcast we are going to be talking a lot about product design and I guess… Mechanical engineering is more onto the design, they teach you auto cad, they teach you all the different software that you can actually develop products that you into the workplace. So, when you graduated college, what…where did you end up?
FILIP VALICA: So, straight out of school I went to actually work for IBM. At the time, this 2004, it was still…the market was still recovering from the Dotcom crash. There weren’t a whole lot of jobs for engineers, other than working in oil and gas. And I told myself I’d never work in oil and gas. And so, I thought, you know what, I am going to go and work with IBM. They did business consulting, basically a portal implementations for human resources. That’s where I ended up at. And I thought, you know, it is a great opportunity to learn and great exposure, because you are basically working with team that report directly to the executive group on a lot of large like fortune fifty companies.
DAVID ALADDIN: I feel like IBM is like…all they do is like focus on software that no one else want to get into. Like… you know, it is all enterprise, and it is very difficult niche type, but massive profits are involved. How big was the there that you were working on?
FILIP VALICA: My teams, all the teams I worked on, were really small. They were two to five people. But some of my co-workers that kind of entered the program kind of the same time, they ended up working on teams of twenty or thirty. So, would all go out together and explore the city together. And for me, I ended up working with the people that were all a lot older than me. They had kids and everything. And so, after we worked our eight or nine hour billable day, we still went back to the room and to wrap up some things, and they talked to their families, and things like that. And so, it was just a lot of, you know, time in the hotel room working out and getting fat.
DAVID ALADDIN: Alright, so, 2004! How long did that last, that gig?
FILIP VALICA: I didn’t keep up with the travel, you know, I hated the travel, so only lasted about a year and a half. I was travelling over 42 weeks a year.
DAVID ALADDIN: Was it within the United States or did you go outside?
FILIP VALICA: Yeah, it was within the United States, but ended up being in places where a lot of corporations have great tax havens, because that’s usually where the corporate is set up, and so it wasn’t anything romantic or exciting. It was at you know, in places where…you know, where it’s set up just because it advantageous for the company.
DAVID ALADDIN: I feel like hopefully a lot of us and our listeners, we are going to be like; yeah, we have tax heavens and countries…at some point or another, cause we are all working together to become a much bigger company than what we are today. Okay, so IBM 2004, and then you didn’t stay there the entire twelve years as an engineer, right?
FILIP VALICA: No, so, after about a year and a half I transitioned to going back into mechanical engineering. I worked for a mom-and-pop company that worked in like the emergency vehicle space where they did accessories for like the fire and ambulances, and other type of vehicles. Specifically for powering some of the exhilarate equipment like lights and fans, and other things that you need at a sight, jaws of life, that type of thing.
I stayed there for another couple of years and then went into oil and gas, just because I wanted more of a challenge, because, you know, once you start doing the same thing, you go through steps from, you know, A to D over and over again. And I was one of the only engineers in the company. There were only two other engineers, and one was electrical, and one was hydraulic. And so, I felt like I learned all I could and I guess the goal was to move on to other companies where I could just continually learn more and get, I guess, mentored by other people. And that’s kind of where my career took.
Once I went into oil and gas, I stayed in that industry and continued working in that up until, you know, the last month.
DAVID ALADDIN: Okay, and you said you do a lot of product development and design. What type of products were you working on?
FILIP VALICA: So, a lot of the products that I worked on were… had marine application, so things that went subsea. Specifically remote operated vehicles. And I am not sure if listeners a familiar with those. But he basically have a pilot that’s sitting on a vessel or a boat, and that is tethered to a robot that’s doing remote work miles below the surface of the water, such as turning valves, or assembling things.
DAVID ALADDIN: It sounds awesome!
FILIP VALICA: And I worked on a lot of the tools that there was robots use. I also…you know, going through oil and gas, you kind of touch onto everything. So, I’ve worked on wells, I’ve worked on, you know, equipment that gets used to, you know, install things and recover, and retrieve, so just a Variety of components.
DAVID ALADDIN: Were you actually like…Did you have to be on the boat like a lot of time to make sure that the product was working, or were you kind of like the guy they would call from on the boat?
FILIP VALICA: Initially, yes! So, especially as a junior engineer you get out there, and that’s where you get a ton of experience. And so, you are working six weeks on the boat and then you’ve got maybe six weeks off, or depending on the rotation, it changes for each company. So, you are working twelve hours day, seven days a week for six weeks, and then usually more because you might be the only engineer on the vessel, and then… But again, all of this depends on the company and how big it is, and how many personal you have.
DAVID ALADDIN: And so, let’s talk about the products that you actually built. Can we go into more specifics about that? You know, like the movie Avatar, I don’t know if you’ve see, I think the 2018 version is going to be all under water, that’s what I’ve read about, and they are going to be using submersible to film the entire show, the entire movie. So, one of these things… You guys are creating devices that work remotely tethered. There’s a lot of technology that’s involved. Is that like…? We don’t have to talk about the products that you are building specifically, but have you kind of pivoted into like the Amazon eco system with like similar design functionalities like that?
FILIP VALICA: Yeah, sorry, Amazon Eco-system meaning?
DAVID ALADDIN: The private label, like did you go into super technical, or did you go into something more easier?
FILIP VALICA: Oh, yeah! So, my personal products that I have at Amazon. So, I private-labeled one product. It is in the home and garden space. So, it is completely not technical! I actually went very simple with it.
DAVID ALADDIN: I agree! I think that’s the way to go!
FILIP VALICA: Right, because I knew the complexity of launching a complicated product, and I didn’t want that to be my first product out the gate.
DAVID ALADDIN: Let’s talk about complicated products. What was the most complicated product that you’ve designed in the past?
FILIP VALICA: Yeah, so, I can’t say I designed it by myself, because I think the most complicated products have teams of people working on them. But right after there were some issues with, you know, the oil spills that you heard about in the golf, there was a lot of loop within the industry. They try to prepare for those types of things and so, one of the clients that hired us wanted to design a dome that you can put over a future leak. And it will basically automatically correct itself based on tension, and keep itself level, and then flow the hydrocarbons back up to a waiting vessel.
So, it is basically a funnel that gets deployed over a leak. And it had some complex control system, you know, involved where it was taking readings from winches and there were, you know, eight winches on the dome, and so you are constantly getting data. And it was build foe Alaska, so it had some, you know, special requirements for working in the cold and things like that.
DAVID ALADDIN: Oh, I was just thinking about how that would look. I feel like… I am imagining like a big dome, there’s like a valve in it, and then they have some pipe that goes on top of it when they are ready to put the pipe.
FILIP VALICA: Yeah…
DAVID ALADDIN: That’s pretty cool!
FILIP VALICA: Yeah, pretty much…
DAVID ALADDIN: Okay, it sounds pretty simple! Just kidding…
FILIP VALICA: Yeah, on the service it sounds pretty simple. In practice, once you start to, you know, you want to maintain it, and has to be ready for the next two years, and how people are going to deploy it, and you’ve got to use it in sub0 weather, so things don’t work as well. You know, there are all sorts of complications. Plus you want to get data at a certain rate to make decisions, and if you’ve worked on control systems before, you know that sometimes you can chase that data meaning you can overcorrect and you know, it is basically like a sound wave, you just keep trying to hit a certain point in the system, but it won’t get there just because you are not getting data fast enough, or your algorithm that you are using to find that point that you are chasing to, you know, isn’t efficient enough.
DAVID ALADDIN: It is like… I feel like a lot of the products nowadays… It is a combination between physical and technology. Like a software that’s hocked up to it. And that just gets a lot more complicated. A lot of the Silicon Valley’s companies are actually focusing on those types of hybrid products, because the difficulty to compete with those types of companies is a lot harder. A lot of the California companies these days are building a hybrid between a physical product and the technology software that’s tied to it. And so it makes it a lot harder to compete with those types of startups. And I feel like eventually I want to create like some type of a smart product. Not the ones that get hacked by the millions. What do you think about that that just happened?
FILIP VALICA: Well, you know, that’s…
DAVID ALADDIN: That’s a development nightmare!
FILIP VALICA: It is! And it is…I blame, you know, the manufacturers that aren’t securing their equipment properly, or they are leaving…you know, they are not forcing the default password to be reset upon install. I mean, some of these are really basic things that you can do to help discourage that. So, it is a…you know, it is a huge problem. And there’s definitely available solutions out there to combat it, is it is just an implementation problem. And you know, a lot of the times… So, if we are talking about product development, lot of the issues that we face developing products aren’t related to the science or technology, it is related to the people that are involved and, you know, the failure to execute on something that we wanted to execute on, or someone making a decision to not do something that was agreed on. You know, it is not necessarily just a problem that doesn’t have an answer, you know, that can’t be Googled.
DAVID ALADDIN: Just to touch base on that. I actually currently have a product and it is designed well, but there’s something going on in the assembling process over in China where one of the…not one, but probably a small minority of assemblers are… they just don’t have the hands to assemble it. And so, we discover that was one of the vulnerabilities in the product defects cycle. I guess let’s talk about…
FILIP VALICA: So…
DAVID ALADDIN: Go ahead!
FILIP VALICA: So does that mean that you are having to employ children to assemble you products now?
DAVID ALADDIN: I hope not! Yeah… For the record, to my knowledge there’s no children working on my products! Let’s talk about products defects. So, have you ever had experienced…had a designed issue or…in your products where it became like a huge issue? Like you guys manufactured like X amount of units, and then you had to go back and…kind of like the Samsung 7 recall that’s going on right now?
FILIP VALICA: You know, we… Not in a huge amount of units, because what usually happens in the way in products that we’ve rolled out. Our industry is very risk-adverse. Especially because you are working at huge debts, and it takes a lot of money to get out there, you know, hiring a boat, and with all the people, and everything like that, it is just…it is…there’s a lot of check and balances that go before launching a product. And that includes doing some testing in a pool, for example, and going to a certain depth. And a lot of times the product will fail in the first hundred feet or something like that, in that depth.
So there’s some very process based methods that we used to launch products. Even outside of oil and gas, even at some of the moms-and-pops that I used to work with. I try to implement as many check and balances as possible, because… for the reasons that you mentioned, is because once you have a product out there that has all those issues, you know, you can have a mess on your hands.
DAVID ALADDIN: Yeah, well, I am having the exact issue right now. Basically the issue is I’ve ordered to many units and there’s a percentage of defects, so…lots of refunds…
FILIP VALICA: Yeah, you said like it was 10%… When I was listening to one of you recent podcast, I think you said 10%.
DAVID ALADDIN: Yeah, the things is I’ve priced it cheaper so that people are less likely to return it. But the ones that have any issue, I actually refund. I sent them one unit, or two units extra, and they are super happy about that. So, I am kind of going above and beyond so that I don’t have any bad seller metrics. But for anybody that’s ever had a defect in their product, it is…it’s a nightmare! I mean, Samsung, for example, it is costing them billions of dollars to recall all their products. And that’s just… Like we don’t have that! We don’t have billions of dollars just to take, oh, no big deal! So, it is just disastrous! Okay, let’s not talk about defects anymore. Let’s talk about design strategy. What kind of design strategies do you do?
FILIP VALICA: Yeah, so I think that’s a really broad question. We’ve got a… Or I’ve got a system that I put up on my site. And basically that system is based on all the other places I’ve worked at, I’ve watched how they took their ideas to market and how they created physical products. And they all had different tools and different names for things, and they might even had teams that were working in parallel to execute. But at the end of the day the followed a very similar process. And so I just basically wrote down this blueprint, this DIY product development map. And it follows like this rigid framework. That way, you know, you get ahead of yourself sort of speak. And you can catch the majority of the issues upfront.
DAVID ALADDIN: Do you have…Do you know the link for that? I am actually pulling it up right now.
FILIP VALICA: Yeah, if you go to theproductstartup.com and there’s going to be a START HERE button at the very front, at the top…
DAVID ALADDIN: Oh, I see it! A design making sale…
FILIP VALICA: Yeah, and if you scroll down to the bottom, there’s basically a little loop.
DAVID ALADDIN: There a big loop. Okay, so just quickly go over…quickly go over…Do you want to quickly go over?
FILIP VALICA: And I can, and I think that the jist is and do not freak people out. Everyone understands that initially you start with the design, and then you build something and then you sell it. And so those are the three major steps. And I think the problem with just keeping those three steps, is that it gets difficult because they are three big steps and people freeze, and because it is, you know, know what goes into that. And so what I did is basically I split those three into about thirteen individual smaller steps. And it sounds like a large number, but at least this way it is kind of manageable.
So, you know, you start with getting the idea, and you do a quick validation of you market, like a quick go-no go, go through creating your prototype, decide if you want to file a provisional patent application, and validate the customer needs, in other words make sure people want to actually buy what you are trying sell, go through the design a little bit, and then create the functional prototype where you check how it works and some of the benefits to your customers, and you validate those, you know, those benefits to your customers again.
Then by that point you might be able to file for a patent application, or depending on the time, how long it’s been, because you’ve got a year between filing a provisional patent. Then you can go on to designing for manufacture, which is a little bit more detailed, because, as you know, if you are designing a thousand from one thing, it is a little bit different, than designing one or ten of them. And then you go through soliciting funds and making, or manufacturing your product. And then of course marketing, selling and shipping it.
DAVID ALADDIN: I’ve actually, for people that are going to watch the video, I have it pulled up to the left of Filip. And his product development cycle is actually on point. I was just…while you were saying it out load; I was following kind of like the footsteps I’ve been going through. I’ve had the idea of validation of market. It sort of started okay, so I filed the provisional patent.
Then I got feedback from customers. And then I started redeveloping and redesigning, and creating a new model based on that. The only complication that I see here is when I file the provisional patent, and then I create a new model based on the feedback, the specifications are actually going to change slightly, so… And I have filed the actual non provisional patent, which is the full application of the patent. In that sense I am actually, when I launch the new product, I am not sure is going to be the same as the old, and the patent will actually change. Have you ever had that issue?
FILIP VALICA: Yeah, absolutely! And so this…And this chart is kind of misleading, because you’ve got arrows going in one direction. But really what happens is you know there’s going to be a lot of two step forward-one step back type of things. So, it is very iterative. And I think the one take away everyone should take away from this chart is that even experienced designers, experienced engineers, are going to…you are going to make mistakes during the design, you are going to make mistakes during creating the prototype. It is not really a mistake. I view it as additional data right, like finding your concept.
And so understand that this is not going to be a straight line. And to answer your question, if you file a provision patent application, which gives you patent pending status, for those that haven’t filed one before, you have one year of…to basically turn your idea into a full patent, to file a full patent application. So, this provisional application basically gives you that patent pending status. And so now you can start having conversations with people.
The flip side to that is if you…if the design changes substantially, as you said, if you create the mold and you have feedback from customers, and that feedback drove you to a new design, now you have to file another provisional patent application to maintain your initial filing date. Otherwise they’ll just use your final filing date on the patent that you, you know, you filed at the end.
DAVID ALADDIN: Interesting… What are your thoughts on provisional patents in terms of like defense?
FILIP VALICA: They don’t give you anything for defense upfront, but they are probably the best way to run. You know, one of the top questions I get is, you know, “I filed a 5 or 10 thousand dollars patent, you know, I paid a lawyer 5 or 10 thousand dollars, and what do you think my next step is?” And they haven’t validated the market, they haven’t created the prototypes, they haven’t done any of that other stuff. And it is actually pretty sad, cause in a lot of cases, and you can get your PTS status from this, US patent and trademark system, most of the patents end up sitting on the shelf. A great majority of the patents are unused. And I wanted… I mean, I heard somewhere in a book that I was reading, that was like only 5% of the patents that are filed are actually in use. So, people will rush to patent their idea before they test it. And I think that’s one of the major mistakes.
DAVID ALADDIN: I actually had this guy approach me related to my product line. And he actually was one of the…he was guy that just invented products. He never launched the mold, never created the actual physical thing. He was trying to get royalty on his product and he would just reach out to people who had similar businesses. And that was his business model. I thought it was pretty interesting. I look like super into it just because I was curious… His design was actually pretty good, so…
FILIP VALICA: Yeah, no, licensing is definitely the other rout that you can take. So, instead of where it says: “make” on the chart, after you go to “fund” you can put license. So, licensing just means that you’ve given another company the rights to manufacture and sell your product and you take a royalty, usually between like 1 and 10% of sales depending on what it is. I think… So, one path that you can take for that is you develop as much of it as you can yourself and by the way… So, I subscribed to the mindset that the ideas aren’t worth a whole lot, it is the execution that adds the value.
And as you go through this process, you are adding value to your idea. And so people will, again, people will send me an e-mail saying: “Hey, do you know where I can find an investor? I need 50 grants; I’ve got this amazing idea! But I don’t want to really give up a huge chunk of my company!” And that’s really hard, because I don’t think too many people will just roll the dice based on the idea that you have, it is about your ability to execute it and what have you done up until this point to confirm that it will actually generate revenue and profit of some kind, right?
And the only way to do that in my opinion is to kind of go through this process and add value to it, and validate the market, and do the design working, hash out all the details. And you can really do a lot of these stuff on a budget, so that when you get to the point where you’re either going to place some massive manufacturing order, or you want to license it, you have a really good idea of the market.
So you can have conversations with these licensing companies, and say: hey, I have X amount of people that are ready to buy this, or I know that this segment of the market will definitely buy it, because I’ve done some tests on it. And if you don’t get on this, I am going to go to your competitors next week, so I am giving you the first shot. And you are in a much better position than if you are just someone that puts together a one page felt sheet, doesn’t create a prototype, doesn’t understand the cost in manufacturing the product, or any of those numbers, don’t have any metrics in terms of how many people do you think would buy in that segment, and then you are just going to this people and saying: hey, take my idea of my hands for 5%. And then they’ll say: well, you know, actually we have that idea already in the works right now, or you know, whatever it is. Like they are not… It is a lot harder to make a sell.
DAVID ALADDIN: Speaking of creating the patent itself, in…just to refer back in episode 18 Secrets of protecting a product, you can actually… And this is what I did, because I don’t want to spend 5-10-50grand creating my patent. I used… I out-sourced to UpWork or freelancer.com. These guys created an epic provisional patent. One of the cool things when you file a provisional patent, it actually doesn’t get reviewed by the US PTO.
FILIP VALICA: Right!
DAVID ALADDIN: It is just submitted, and that’s kind of like your little timestamp for that patent. So, I would say create that wireframe patent provisional application and use an UpWork guy, cause I don’t have to spend like 5-10grand. And then the actual… Go ahead!
FILIP VALICA: Yeah, sorry, I was just going to correct that really quick. So, it 5-10grand for the full patent application. The provisional patent application is a lot less than that. If you go to a patent attorney for a provisional application, it is probably 800 to 1200 dollars. And if you DIY it is only going to cost you the fees. And I mean, I bought a book and did it myself. And it was basically 200 dollars in fees from the US PTO. So, yeah, agreed that you can use anybody for the provisional patent application.
DAVID ALADDIN: I went all out. So, when I went to get my actual patent, non provisional patent, the big main one, the lawyer from India, he’s actually a legit lawyer, he charges 600 dollars, so it is a really epic discount from the American lawyers, no offence to them, but they have got tough competition, you know. Okay, let’s do a little pivot, tired of legal stuff. Okay, so like what recommendations, what kind of things do you usually think about when you… Let’s say like I was building a pencil and like… Let’s say you are building a pencil. What goes through your mind when you are first designing and creating it?
FILIP VALICA: Yeah, so I think there’s a lot of things. I would first do a quick go/no go and Google, you know, pencil test requirements, pencil restrictions, pencil, you know, laws and regulations, and do a really quick, spending 30min or an hour, to see if I can find if there’s any type of laws that govern the manufacture and sale of pencils in my country. And so, for example, like children toys, there’s a law that says they must be made from certain materials, because they have high likelihood of being ingested, so… And you want to find out a lot of that stuff upfront as fast as possible.
So, if you do need like an FDA, a certification, or if you do need FCC testing because there’s an electronic component, than you know that upfront and you can kind of gather your cost for that. Personally, I wouldn’t go for products like that. My first product had a ton of those requirements.
DAVID ALADDIN: Yeah… So, after you suffer, you stay clear of it pretty much.
FILIP VALICA: Yeah, I mean, it is 15 to 20 thousand to test for FDA, unless you are using materials that already have been tested before within your product, and exclusively, and you can provide them with the materials safety data sheets and some of the other stuff that they would need in case anybody asks whether this is compliant. So, and that’s a grey area that I am not that familiar with, but it just something that I wouldn’t want to take on the first go. For me, I would want to get a product out there as fast as possible that would help fund some of my other products that might be more complicated.
DAVID ALADDIN: What’s your brand strategy? Like you mentioned you have one product right now. Are you trying to create products that are related to that? Or you are trying to create products that are just…you know, sell based on the metrics that you view…the analytics that you see? Or a combination of both?
FILIP VALICA: Yeah, so, the first product that I have actually started from another angle because I had all these ideas for a brand new scratch products that aren’t on the market yet, so brand new designs. And I pivoted it into starting with products that are already on the market and selling just to get a feel for Amazon selling process, and things like that, because that was new to me, and then… Now I am moving more into new custom design, hopefully having that product feed into the other. And they’re all going to be kind of similar. They are all in the home and garden space.
DAVID ALADDIN: See, like I actually saw this article on CNBC where this guy was… He actually filed the patent for…it was actually fork arm… I don’t know… Did you see that? He filed a patent for fork arm using straps. And the straps where patented, as his own design, except there was like fifty to hundred other listings that started using this patent to design. And the issue was that he was going to tank by lower prices. So, I guess that kind of goes back to the patent discussion, you know. I think the strategy is you actually have to just move very fast and you know, don’t be waste your entire business on a single product.
FILIP VALICA: Yeah, you could say that I think. I agree with moving very fast. Don’t let the patent holds you up. If that’s what holding you up getting to market, you need to just get it putted out there, because people will rip off your idea at some point. I mean, honestly, some of the ideas that I have I may even not patent because I don’t have the capabilities to go out there and protect my idea in all these different countries. So, maybe I’ll patent it in the US perhaps. But honestly, like patenting internationally for a lot of these thing. I am not going to raise millions of dollars to have an international company on the get go. And so, if I can’t protect it internationally, what’s the point in patenting?
DAVID ALADDIN: You have a valid point … like, there is a whole US patent protection and then that only protects you in the US and then you have to file a patent outside and I haven’t done that myself, maybe it is a mixture between laziness and just like “oh, I just don’t want to get into that”. Because who is going to … I feel like … I have like this feeling like who is going to listen to this international patent, you know, if … Forearm strap guy is having massive issues in the US from all these importers from wherever. What are your thoughts … let’s pivot into … let’s talk about 3D printing. Have you 3D printed your products that you have …?
FILIP VALICA: Yeah, actually I have a 3D printer myself in my workshop here but it is not as practical as people make it out to be so I do appreciate 3D printing for what it could do, it can get you really functional prototypes quickly, but there are so many other ways of creating prototypes that we all have access to, you know, you can go out … my favorite is going out to the dollar store and creating Franken-products from existing products.
Just taking pieces of one thing and then another thing; all these components that you will find in dollar store products are super expensive if you try to get them off the shelf by themselves. Now, because they are being sold at a loss, below the cost of manufacturer, at the dollar store, you know, you capitalize on that. I have created lots of things based on other parts; even in my day job working for small businesses, we have access to C&C equipment and machines and big prototyping gear and whatever. Usually, I start out creating a 3D model and then creating a prototype using Styrofoam or cardboard or things like that.
DAVID ALADDIN: That is a good suggestion. I myself, I took a bunch of products … I didn’t go to … Styrofoam – that is actually a great idea. And then I put them all in an envelope and then I also did sketches and I put that in the envelope too and I mailed it out to China. It is actually very cheap to the manufacturer and they knew what to do, it is awesome, they created very in-depth AutoCAD designs. I did some myself but, you know, going to do the AutoCAD yourself versus the AutoCAD that the manufacturer uses is going to differ because they know what their machines work, you know, there is cross sections that … like for example, I wanted to put my logo on a certain spot and they were like “no, you can’t because the mold is actually going to glue at that specific angle so you can’t do that”.
So like … there is a lot of different perspectives on how the product is actually going to come out due to the manufacturer’s limitations. And I like the whole DIY like … create that physical product sample just using a bunch of stuff because it is possible; I mean a lot of people forget how much tools we have at our own disposal. We are not saying manufacture the product, just create that first sample.
FILIP VALICA: Right and I think what you touched on is absolutely right where you need to evaluate your own skill-set and say are you the best person that should be creating the design for manufacture here. And if … in my opinion, you can certainly do what you did which is contact a manufacturer and have them create the design for you; in my opinion, I am biased, but I would prefer to own the design myself and I wouldn’t want to send it to a manufacturer because I would want our shop other manufacturers with the design and what is more likely to happen is that once they complete the design for you at that manufacturer, it is a lot harder to take that design and have other people bid on it.
So what I usually recommend is people that don’t have the skills to do AutoCAD or 3D solid modeling themselves – find somebody on freelance or find someone at your local community college, there are actually designers and engineers that finish senior projects at their college that need practical work experience that you could work out a deal with their college to use them for a semester or something like that. I mean there are all sorts of ways of getting that design help and this way you are basically working to someone that works for you that has your interest in mind instead of a manufacturer who might be trying to, you know, design something in the cheapest way possible or might be designing it that, you know, fits their equipment really well but as you said it doesn’t transfer to other equipment. And there is definitely a challenges designing for a manufacturer and that is, I guess, one of the … that is why it is one of those major steps in the process.
DAVID ALADDIN: Have you ever had a designer … like you gave your product specifications to a third-party designer and … like I feel like if I did that, it would be kind of cool to see what they would come up with too. They might have a certain vision for it versus your vision and sometimes what I have found is actually other people’s visions might be better unfortunately.
FILIP VALICA: Well … that is the advantage of working with people that have done this type of design before especially if you are in a certain niche and you targeted a designer that has worked in this specific industry, you know, they are able to give you some insights that you might not have had before. As is the manufacturer for sure so I am not discounting that; I think it is just an additional step for me, you know, once you work with a designer, you get the design to a certain point, then you have that open conversation with a manufacturer to say “what do you think about this” and I know, especially with manufacturers in China, it is really hard to get that feedback, they just want to make whatever you put out there, they are not as willing to have these open conversations as a manufacturer, local here in the states, would where you can sit down with him and say “hey, can you recommend any changes that would make this easier for you to produce or have less quality defects” for that type of thing.
DAVID ALADDIN: Okay. What made you want to pivot from the full-time … I know I am switching topics, I guess I have ADD … what made you want to pivot from that mechanical full-time engineer to the Amazon seller/podcaster?
FILIP VALICA: I didn’t get a check anymore from the company that I was working so that was pretty important. No, I got laid off from my work so I didn’t, you know, I couldn’t go back and do the fulltime work that I was doing but at the same time, you know, I started the site probably a year before that where I … my wife and I had our daughter in the hospital and I was sitting there in the hospital thinking, you know, I have always talked about doing my own thing and I have never done it and I have always done the safe path, you know, going through corporate and working the right thing and it was financially secure so to speak, right, because nothing is secure.
And I hated it and even though I did a lot of these things for certain reasons, you know, growing up I was the only child to a single parent and I watched my mom work two jobs and I saw the stress that lack of money can bring and I thought okay, you know what, if I take this secure job in corporate America and work the jobs that might not be, you know, entirely fulfilling but their safe and they pay well then, yeah, maybe that is happiness, right.
And so after 12 years I realized I keep moving further and further away from product development that I really enjoy and now I am starting to manage teams that do product development and do research and development and going out there and business development and selling things with the sales guys and is that really what I want to be spending all my time on. And then at the same time it was, you know, my daughter was born and I through 18 years from now, I am going to be saying I wish that I would have done something, you know, she is going to go off to college and I am going to be this bitter old man in the recliner.
And I didn’t want to be that way and so I resolved to just hey, you know what, I am going to go out there and I am going to create thing site where I put all this information out there because people in the meantime would run up to me, you know, like friends and family and say “hey, I have decided yeah for this thing and how do I get on shark tank” and that type of thing. And so I said “hey, you know what, I am going to throw up all these answers onto a site and I hope it helps somebody out.”
And then I started interviewing other small business owners that have gone through that process, that created brands and products for under 5 grand, 2 grand or 500 dollars and just saw how many people are doing it on their own that, you know, I thought hey, this thing could be a legit business because I really enjoy it and my background is in it and I need to pivot into that.
DAVID ALADDIN: I feel like the whole product development phase is so huge; I used to never want to get into it at all, I stayed clear of it because I always thought people were like super silly for, you know, putting inventory in their garages and hopefully trying to sell it on eBay. And then when I went to the storage, actually literally before I got into it, I was always wondering like how did these guys that have so much inventory on this shelf and then they have it in, you know, in Walmart and Costco, you know, how are they … it is because it creates so much wealth if you get the equation right.
The cycle that you were talking about; if you get that cycle perfectly, it creates like massive amounts of wealth really fast and it is similar to software in a sense because you just tell the manufacturer to make more, you know. You can have an infinite amount and the only issue is cash flow but if you solve the cash flow issue, you know, you can literally go … like I was actually looking at this thing with quest bars and probably they grew like 50 thousand percent year over year like a unicorn type of product growth. What are your thoughts on that?
FILIP VALICA: Yeah, you know, I think you are right in a sense that it can be very profitable if you get the mix right, I think it is really challenging though and in a sense I agree that it is like software development but at the same time, you don’t have all these upfront costs that you do for inventory and mold fees and tooling. And so I think software developers are really in … that’s why I think we see so many new apps coming out is because the cost of entry for software is just incredibly low right now, you know, including shares server time, you know, on AWS or whatever your platform you are using.
And that is why all these SaaS apps came to be, I think, is because it was like you said, you can hire a lawyer over in India for 600$, developers were being outsourced from the beginning as were engineers, you know, I trained my counterpart across the world in more than one company to take over my job. And so I have seen outsourcing for since almost I started working back in 2004-2005, started the takeover the market so you have to have this mentality where “okay, I am going to be the owner now of something that creates wealth for other people” whether that is software, it is a physical product or it is a service.
DAVID ALADDIN: I loved talking about the entrepreneur … I want to pivot back right into you again. So you have left this job and now you are in the wilderness, so to speak. How is it going, you know?
FILIP VALICA: Oh, I mean it is … on the one hand it is scary, right, because I didn’t choose to leave on my own terms, I left because I was forced out, the company literally closed its doors and I had to lay off everybody on the team first so it wasn’t pleasant. The flip side to that, I think, is that I saw that it was coming, you know, we saw that the industry – oil and gas – has been dropping pretty steadily for a while and so we were able to save some and we definitely live below our means which is something a lot of people don’t talk about but to me it is just huge of breath of fresh air and this relief.
You know, when we paid off our house, it was just one of those things that, you know, if something happens, if I get hit by a car, my wife is going to be okay with our daughter or if upper management or the executive team decides to push down some rule that is completely against my ethics, I can walk and I am not behold to this company anymore. So that … on the flipside is that we were in a really good position to take my leave of absence from work, to be let go. The upside is now that I am getting to put all my creative energy into my side hustle, whereas in the past I was basically working on it from 8 o’clock at night to 11 o’clock after our daughter went to sleep.
DAVID ALADDIN: I don’t have a daughter, I still don’t have a daughter and it was a lot of work, I don’t even know how you do it with the daughter because I know people that have, you know, regular jobs and they still have a difficult time finding time for their … So your side hustle is actually your full hustle now, right?
FILIP VALICA: That’s right. And one thing I would like to add to that is, you know, when we first had our daughter, my wife had some post-pregnancy complications and I ended up giving her a bottle and changing her diaper every two or three hours. And at the beginning she wasn’t sleeping through the night and so it was a lot but you have to adapt and as an entrepreneur, you need to reprioritize. And so I learnt that, for me as an engineer, I have definitely been rewarded for creating products or designs that were as perfect as possible and so I have a little bit of a … you know, the perfect is the enemy of the good, I still have this pursuit of excellence that maybe I need to kind of shed a little bit.
And so by having my daughter, it forced me to be cognizant of how much time I am spending on all these things. And so I built a work bench in my workshop here in less than two hours just to get it done because it was a tool that would help me do some other things and normally, it would have … I would have spent the weekend on it and it would have been something that you post on Instagram. But now it is just like “hey, you know what, I need to get it done” and I have learn to raise myself, you know, to give myself these one hour limits or on tasks and see if I can do this in 50 minutes the next time or whatever it is because otherwise, for me, I will definitely put in way more effort than I need to on a task.
DAVID ALADDIN: Yeah, I mean … I feel like when you get putting, you know, put into a situation, you figure out a way, especially if you are forced into it. So right now, you know, you don’t have consistent income because you are working for yourself. If you don’t mind me asking, when you quit your job, how much money did you have saved up?
FILIP VALICA: Ahm, I will put it in terms of living expenses. We had probably … so I wasn’t ready for the question so I am doing now the Math …
DAVID ALADDIN: Not including like your house equity and stuff.
FILIP VALICA: No, right, right. In cash we probably had 10 months of like monthly expenses saved up.
DAVID ALADDIN: That’s really good, yeah.
FILIP VALICA: And then I probably had an additional year that I didn’t want to touch; that additional year of funding was my Amazon private label stash that I wanted to … that I was comfortable enough to say “okay, I am going to use these money as my virtual MBA, as my way to learn everything I can about PL and Amazon stuff and I want to pay for mold fees and things like that”. And basically I said if I lose that money then …
DAVID ALADDIN: How much was that amount? Outside of the living expenses?
FILIP VALICA: You know, it was enough … I would say it was around 50 000.
DAVID ALADDIN: Aw, that’s awesome. I am asking because it gives me a good perspective on like, you know, how much time you have to work with and also how much money you have to work with to get your business off the ground. For example, I started off … I was like kind of naïve, I quit with 5K, I think I had 6000 to my name and then I had 20K passive income coming in yearly and then I knew if I just worked on it full time, I could triple or 4x or 5x and I actually ended up working … And then my private label journey didn’t actually begin until I had about 15K from a freelance project and in the pre-show we talked about how you are supplementing your income with freelancing. Can you talk more about that?
FILIP VALICA: Yeah and so … on the trail end of your answer you said you had about 15K when you started and that is about 15K when you started and that is about what I put in from my first purchase because I didn’t want to put my toe in the water, I bought a 20 foot container of product as my first purchase.
DAVID ALADDIN: You did ocean shipping the first time?
FILIP VALICA: Yeah.
DAVID ALADDIN: Wow … I feel like ocean shipping is the secret to logistics I guess.
FILIP VALICA: Well my margins wouldn’t work otherwise unfortunately because I was in a tight market and I was … the product space that I was competing in was pretty competitive and I just had a hard time coming up with an idea because all my ideas were brand new and so I couldn’t come up with an existing idea that had low enough competition for me to enter and so I picked something that I knew basically was a sure bet because it had guaranteed sales, so to speak, every month. And I said okay, I am going to get into this but I will get into it strong, I differentiated the product and what was being offered in terms of the design and the style but not enough for me to pay mold fees and bought a full container and shipped it. And now I just actually bought my first 40 foot container.
DAVID ALADDIN: That’s awesome. So let’s talk about your first shipment. Did you have to put it in your garage? Is that what happened?
FILIP VALICA: No …
DAVID ALADDIN: Shipped straight.
FILIP VALICA: No, I shipped it to a warehouse in California that I used to hold then shipments to like on it or you know, some of the other warehouses.
DAVID ALADDIN: Oh nice. I am doing like a mixture of both. I am kind of storing some of it in the garage, then some of it in another garage and then some of it in Amazon. You know, when you are starting off, I feel like you have to figure out your own logistics that would apply, that would save you the most amount of money. Speaking of, shipping ocean, I actually … what are you doing for fork arm, I actually just set up an air freight because I am trying to stay in stock during the holidays. Have you … I guess … is this your first year going in or second year for Amazon so to speak?
FILIP VALICA: No, it is a first year. I started …
DAVID ALADDIN: So you don’t have any experience … the fourth quarter and craze.
FILIP VALICA: No, no, I am familiar with it and I misses … there have been some delays between some quality stuff and some other things with the manufacturer. I have had probably three week delay in getting product out so I think I am probably going to miss my window to get product in for Christmas unless I UPS it in which I might still do but it is really going to eat into my margins because I am used to doing LTL. So that said, I do have a large enough stock right now so I might … I am definitely not going to hit the 4x inventory that I need but I will probably …
DAVID ALADDIN: Is that the role?
FILIP VALICA: Well some of the sellers and I don’t know how it impacts all the categories but I think I will do okay up until Christmas and worst case, if I see that I am running out of product, I am just going to hike prices to level out the demand.
DAVID ALADDIN: My thought on this was even if it cost a lot like 3x or 4x the amount of cost of air, even if I didn’t make as much of a profit, it would still begin in the hands of many customers that would spread the word about it. And then after that quarter the word would be spread faster and so that’s why I went all out on the air free shipment and then the rest of it, I shipped via ocean which … we will see how that goes.
FILIP VALICA: Yeah, let me know how that works for you and if you are able to track that, you know, I did the join my VIP club, you know, to get … to be put on my list for discounts and things like that and on the box and I will tell you the engagement on that is a fraction of a percent …
DAVID ALADDIN: Really?
FILIP VALICA: It is basically not even worth putting it on the package … I get so few sign ups.
DAVID ALADDIN: Interesting… I have got quite a lot of sign ups doing it that method, I would say you might need to kind of revise, you know, your VIP a little higher, you know, give very small minor product out for free or for free at a random time rather than just get discounts because sometimes people are just like “meh”, you know.
FILIP VALICA: Yeah, yeah, that might be true.
DAVID ALADDIN: We have got about 10 minutes left. What have I missed and can you tell us a little bit about how to contact you as well.
FILIP VALICA: Yeah so I think the one major thing that we haven’t touched on that I think is probably the most important part of this process is understanding your audience. You can make the right product for the wrong audience and it will not sell. And as you have probably seen, you have seen products that aren’t that great of an idea but they are marketed really well and the audience has opened up and it is targeted really accurately but they just go fly out the shelves like the squatty potty for example which by the way was all marketing because that product existed in that space for decades.
If you go to medical supplies storage, you can find a stool to put your feet up on if you want to use that on the mode … like that is not a legendary idea, right? But what they did was they flipped around the concept that this is not for people that have a medical issue, this is not for people that might be of a particular demographic, this is for everybody because everybody wants to poop better, right? And that was their direction with the marketing and so as an engineer I will tell you, the critical thing that you can do is make sure you have the right audience because if you are not talking to the right people or if you are not getting the right data back, right, you are asking people if they will buy this and they are all avoiding you or they are saying no or they might be your friends which means you are asking the wrong people because they want to support you more, then they tell you the truth sometimes, you know, friends and family will do that.
So it is all about making sure that you have got that alignment and testing it as much as you can upfront because before you make that purchase on Amazon fortunately you don’t have to worry about that as much because … well, there are a lot of these tools that will get that data for you.
DAVID ALADDIN: I think the golden nugget that you just mention … in a simplified version is sometimes taking a step back and attacking the problem at a different angle means all the difference, you know. For example, I send out to many emails to my customers; one email went out 10 days after they received the product which in response the customers would send an email back which decreases my metrics because Amazon actually doesn’t want you want the customer reaching out to you technically, it is actually a bad metric if the customers respond to you too many times and too many customers respond to you.
So by just eliminating that last email, it actually decreased my customer response rate and the customer service that I actually had to give out so. In terms of product just tackling the potty thing at a different angle, they were able to sell so much more and golden nuggets like that mean all the difference in creating a successful brand or not. I mean it all goes back to the forearm lifters, you know, the one thing I noticed with the CNBC article, the guy was actually just … he was selling literally just one product and based his 4 million dollar yearly revenue on that one product and he never decided to expand and then when he decided to expand, it was almost too late, he already had fired 20 employees.
FILIP VALICA: Yeah absolutely, you know, I have worked with business owners that did the same thing where you are used to wearing all the hats yourself and you have got one or two key POs coming in from major buyers and that is all you are selling to and you have hard times getting bank loans that way because that is a monster risk because like you said, if one of those POs goes, you are toasted. And nobody wants to lend money to somebody that is high risk like that and so my advice would be diversified, creative product line and not just a variation in terms of size and colour but something a little bit different that maybe is complimentary.
DAVID ALADDIN: Before we cut out, what are your … outsource, what do you use for automating the business? Kind of like shortcuts and you know … those are like shortcuts, like, making the business faster?
FILIP VALICA: Yes, so I am actually really cheap with that because I wanted to keep my burn as low as possible, especially with my monthly services so I have used Review Kick for the automated emails and things like that and to launch the first product, obviously that is not possible now with the changes in Amazon in terms of sending product out there for review.
But I still use it for sending my automated emails; I do use Jungle Scout for gathering information, the web app and that is pretty much it I think. You know, I don’t … I mean, I have got things that are tied to the product start up where I have got web hosting, podcast hosting, a convert kit which is actually pretty awesome because it couples the advantages of like lead pages along with pop up forms and other type of, you know, email services for like Mail Chimp and things like that so it combines all that together.
DAVID ALADDIN: How can people reach you by the way?
FILIP VALICA: You can reach me at theproductstartup.com and from there, there is going to be a link that says “start here” so you can get access to the DIY, the product development walkthrough that we talked about, and you can also listen to the podcast on iTunes on The Product Start Up podcast.
DAVID ALADDIN: Awesome Filip! Thanks for coming on the show, it was great to have you; I feel like we got a lot of golden nuggets and a lot of product development design information out. We will definitely have you on the show again, maybe like in a year, to check up on how you are doing.
FILIP VALICA: Awesome Dave! Thanks for having me on, it was a blast.
DAVID ALADDIN: David Ala
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