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AS 50: Caleb Roth sells over 17000 different books through Amazon Book Flipping

01 Sep 2016

We had Caleb Roth come on the show today.  Caleb is a purveyor of fine books who specializes in data and software.

In this podcast you’ll  learn:

  • All about Caleb’s journey from quitting his job to starting his own business
  • How Caleb is expanding
  • The direction of physical books vs e-books
  • How to sell books on Amazon FBA
  • How to grow a book empire
  • Buying books in bulk vs. using scouts
  • How Caleb left his job and pursued his book business
  • Flexibility with his business
  • Scaling a book business up
  • Diversifying book business
  • Categories Caleb sells in regarding books
  • How he is creating systems and tools to grow
  • Paretto’s Principle and how it applies to Calebs business
  • How to grow a book business, sources, Goodwill, online and more
  • Scanning tools, software tools

And much more

Contact Caleb:
https://eflip.thebookflipper.comhttp://thebookflipper.com/

David Aladdin: And today on the show, we got special guest, his name is Caleb Roth. Caleb is a purveyor of fine books which specializes on data and software. Welcome to the show. Can you tell us a little bit more about yourself?

Caleb Roth:  Yeah Dave thanks for having me in, I am coming to you live in Denver, Colorado. Actually my internal clock is way messed-up. I just got back last night from a week in Czech Republic visiting my brother and so I’m past asleep half way to our podcast. It’s not you, it’s me.

David Aladdin: Ahh, cool so.

Caleb Roth: Yeah, I’m in Denver, I have a website called the www.thebookflipper.com and I built a business kind of like you did, I quit my corporate job about a year and a half ago and built a lifestyle business at this point but I’m working in transitioning that more into a scale-able business where I can remove myself in to the equation.

David Aladdin: What are you doing before that?

Caleb Roth: I’ve worked in a medical device, I’ve worked for Johnson and Johnson Division doing hip and neuro replacements.

David Aladdin: Actually, by I play soccer I used soccer wraps a lot.

Caleb Roth: Nice.

David Aladdin: So, and then, what made you decide you wanted to switch over?

Caleb Roth: I’ve always been an entrepreneur, I’ve never really wanted to do the corporate thing but had an opportunity out of college you get that first job, you know, the internship at first, lasted for a year. They liked me, I didn’t have a great, you know, idea yet to go on my own and figured I’d learn while working for another company and that 1 year turn into about 5 years and a half actually, and got married just over 3 years ago now and the job was awesome. When I was a bachelor I got to travel the country, I was on the road probably 80 to 120 days a year all over the country even a few trips outside the country. So it was a great gig. But as I got married, it’s tough on the road a hundred days a year and be away from your wife.

David Aladdin: What did she say about you switching. . . switching into entrepreneurship life.

Caleb Roth: Well, she’s more the grounded one and I’m kind of the big idea guy. So I would have been like you did just to throw the towel and I love your story, you know, you went into your boss, negotiate a race and the next day came in and said I’m done, see yah. I didn’t quite go as aggressive as that if it’s just me I might have but with my wife, being more grounded, she’s like, Hey prove it and you know let’s built something on the side, and that so we said out to do and that’s what I share to my blog. It’s kind’s my story of saying, Hey, what’s a goal? For us it’s just a hundred books a week. I started with books, and actually I’m still with books and we’ll get into that more in a conversation today.

But the idea was what if we did a hundred books a week, is that a scalable business, I that something that, you know, you don’t sell a ton of books they don’t have a high turn rate like a lot of other inventory does. So, if you got a hundred of books in inventory you might sell 2 or 3 a week you’re not going to pay a mortgage, you know, and pay for around a beers with that, but if you can get a thousand books of that, what does that look like, what about 5000 books, what is that look like, and you know you map a spreadsheet you got a plan and say, Hey, let’s just keep doing this, a hundred a week and maybe more if we’re able and let’s build this on the side and we did that.

David Aladdin: Without going too far hand. What number of books are you currently? Like to that.

Caleb Roth: We get about 17,000 inventories right now.

David Aladdin: And that’s within a year and a half, correct?

Caleb Roth: Yes. Actually about 2 years now.

David Aladdin: That’s incredible. Okay, so let’s go back. So your wife was actually very supportive of your decision to switch. What would you do with your . . . because when I quit my job, It was actually extremely hard for me that I’d go to my boss, you know I literally printed out every document I could find on should I quit my job. I still have the binder of just like hundreds of papers printed out of all these people that have done it, and you know, and what happened like before and after it and they were all saying now, you know it was the hardest decision at the time. But they don’t regret it, you know. Now and they’ve surprised in to earlier and do you feel the same way? And.

Caleb Roth: Oh yeah. I mean. I agree with you as far as leaning up to, it’s tough because the, you know the, our society says you do the secure thing, keep the job, work 40 hours 60 hours for the man. Do your thing. I was fortunate enough J and J still has pension, so if I’d stuck with it, now, I don’t think that I’ll last 30-40 years but they will have to buy it out at some point if they do transition away.  So from that standpoint, you know, it’s very difficult. My father-in-law has worked a great job, and my dad worked a great job for the last 30 years and so it’s actually harder to go to them and say, Hey, I’d going to step away find me a safe secure, a 6-figure job. And pursue my own business.

David Aladdin: Yeah, my dad was totally against then, my mom was actually like the ones who pushed me through that, okay, so.

Caleb Roth: Yeah, were you scared before, I mean this.

David Aladdin: I was terrified.

Caleb Roth: Where you afraid of like what your boss would say or just as if you could make it on. Where was the fear?

David Aladdin: The weird thing was I had no doubt that I’d be able to make it. The problem was convincing others that I would be able to make it but then you always have that split second where you’re like. What if it doesn’t work out, well you could always get back to the job, there’s no hurt there you know you have the degree; you have the credentials to go back in.

Caleb Roth: Yes, so your fear wasn’t based on the lack of, you know, confidence in your own abilities, it was more of a people pleasing mentality, right?

David Aladdin: Well, I had like abusiness going in on the side, so I was working on it, you know, 6pm to 2 am, so were you selling books like while you were in the corporate job.

Caleb Roth: Yeah, and we initially merged fulfill everything and so we are actually going home at night. And shipping books out or if I was on the road, my wife would have to shipped them out while I was gone, and then we switched over to the FBA and let Amazon do all the logistics and that was really the turning point for us.

David Aladdin: I thing like if you have at least 15. I would say around 15% of your income you know doing 2-3 hours a day then if you took 8 hours in a day and try to drive that 15% to a hundred percent. I think it’s totally do-able especially if you’ve committed a hundred percent focus in to your endeavor.

Caleb Roth: It is the trick is you got to have a little bit of a nashtag saved up because business takes a lot of cash-load. Cash is the king; it’s a life blood of your business. Unfortunately, most Americans and most people live paycheck to paycheck even if they are making figures 6 figures

David Aladdin: How was your nashtag, what did you have?

Caleb Roth: May I, when I quit my job I doubled in my Real Estate too. My wife and I owned 4 rental properties, 9 or 7 units at the time, we have 3 duplex and a single family home.

David Aladdin: Wow.

Caleb Roth: So we have some cashfull of that which helped probably in the bank when I actually walked away maybe 20 to 30k.

David Aladdin: That’s cool.

Caleb Roth: So, it was a huge amount. Yeah, we actually sold of all the way of the Real Estate so much of a headache. For now, at the stage of our lives so, actually we cashed out, moved out to Denver. Real Estate is much more expensive out here, and so we actually used that money to put a down-payment for a house out here.

David Aladdin: Very cool. I’ve always consider a Real Estate, there’s so much unknown I don’t know about it, it’s a different specialty area.

Caleb Roth: Well. When you’re down in Florida, Real Estate, is pretty cheap as well.

David Aladdin: The town I live is insane actually it’s almost California but maybe I don’t know how to speak to you.

Caleb Roth: You’re on East Coast there?

David Aladdin: No, West Coast. So I’m in Napels.

Caleb Roth: Okay.

David Aladdin: Basically, a lot of the CEOs of like major companies all around the US come to retire here. So it has increased housing a lot.

Caleb Roth: Yeah, what’s an entry level house cost in the area like a three bed room, 2 baths, 1200-1500 sq ft. what is that going to run you.

David Aladdin: Probably around 5-600.

Caleb Roth: Yeah, that is California. Here in Denver, you are looking at low threes, just to get in the door anywhere.

David Aladdin: I was looking at the Palo Alto there is an article yesterday that was in the new and it was insane the prices; everybody was moving away because it was like 6000 for a rent, but not sure. Okay so, you started some books, 1.5 years and after quitting and the first 3 months how did that look like?

Caleb Roth: I’m really into turning points so actually was fortunate I did a couple of career hops so you talk about the fear of trying to quit to your job. I was kind of in your boat. I was trying to figure something out. We could always live cheaply, live within our means and we lived in Indiana at the time it was very cheap, you know, nice entry level home you are talking low ones and so you’re in a door a lot cheaper, your living cost is a lot cheaper and you can always just cut back on food and travel on whatever else and make ends meet if you have to.

So you can get by just fine with 30 or 40 grants or 25 to 30 grants income each year. So I was never worried that we wouldn’t make it happen. But I actually switch from a marketing gig to sales training. I love to teach, I love to coach and so I switched over to a sales training jobs and way back and forth, you know, do I make this transition. What will my boss think I was in a great team at the time and actually my boss talked me into staying, after I announced that I was leaving his team and then I realized I needed to do what was right for me and so I went back in and said you know I know I said I was going to stay but I’m not.

So I switched teams about 9 months later the opportunity to move to Denver came up as a Sales Rep, and you know, I’ve been working with the guys out here quite a bit. I love Denver, my wife and I, it is just a great area, lots of sunshine, no humidity, no bugs, it’s just a beautiful area, lots of outdoor biking and hiking and freebies and everything you can imagine.

So we wanted to get out here and they said, “Hey, what it is going to take to get you out here”. Thinking it be a dollar figure and I said, well you know take care of me financially, you know we’ll figure that out. I said I want flexibility, I want to work 2 or 3 days a week and build my small business on the side and so we’re actually able to work out of deal where I worked Monday and Wednesday and I that was it. I had the rest of the week to work on my own business.

David Aladdin: Sounds like something from the Ferrari workweek.

Caleb Roth: Oh, I love that book, I left in Paris.

David Aladdin: You probably have a hundred of copies of it in your book warehouse?

Caleb Roth: Not quite, I got one. I’m still looking at it on my shelves, I read it every once in a while. So that was ideal and actually only 4 months later I found out myself, you know, just thinking about my own business it was actually right about mid- August last year we were in the middle of textbooks season and we were selling books like hotcakes, had our best month by far and I was kind of the point to say alright, we’re making this work we got enough other ideas let’s branch out completely and that’s when I quit the sales job.

David Aladdin: Wow, okay.

Caleb Roth: So yeah I didn’t take a ton of risk. I built something on the side. I did something half, you know, part-time and I was able eventually to kind of make that transition rather than just cutting all ties and jumping in.

David Aladdin: Okay, let’s talk about books because you’ve got a specialty in books, a lot of us consider books as a category to sell in.

Caleb Roth: Nope, yeah. I’m fine keeping it that way.

David Aladdin: Well, you know, books it’s not. . . I don’t want to say, it’s not exciting but you probably get very excited about it. But for most of people don’t think of selling books and you sell books 24/7, so what got you in the books initially, and then let’s just start there.

Caleb Roth: Well, I have done books way, way, way back before smart phones even existed. My brother is a programmer, we had some software with, you know the old slip phones and we didn’t have quarty style keyboards back then it was just I9 or whatever they called it. And we were actually, just type the ISPN and send it to an email address and it would send it to Amazon return the API information and actually texted back to your phone and the whole process took like 30 seconds. So we dabbled with books, my brother and I way, way, way back probably 12, 13 years ago. And kind of put on the back burner in college obviously textbooks are expensive, you look for opportunities to, I ended up selling books for people on commission because the books are 5-10 bucks they’re selling for 30, 40, 50 on Amazon, and so I would just offer a service and sell them on consignment and kind of got back into that way, and then forgot about it.

So I always dabbled, I knew there was money there. Books are simple because they’re everywhere, fresh stores, library sales etc., you know people view book as a commodity at best or liability at worst. They are expensive, they’re heavy, they take up a lot of room and so you could almost give books for free. If you know where to look and how to ask a lot of questions and they’re really easy to look up on Amazon. They’ve all got for the most part ISPN and you could look up the valuation, and you’ve got computers in your hand now as you know if people that do retail, arbitrage etc you can scan a book know exactly what it’s worth and send it in, and you just got to build an inventory.

So most people start with books because it’s kind of the gateway drug of Amazon it’s easy to learn, you don’t need to get a lot of capital to get started, you can find books maybe not in your neck of the words if real estate are so expensive but you can get them at first stores, well no you, you said you can find them on first stores about 25 cents/ piece.

David Aladdin: Yeah, there’s a first store on the side town we were just we wanted to check it out a lot and did some sick deals, but I just wasn’t in the book section but that was all, I was thinking about. Oh men, that book sells for this.

Caleb Roth: And I saw you, so we talked a couple of months ago, we tried to get down on the show, get some car issues at that time and ended up pushing at the back till now, which is cool, I guess it’s fun on the 50th.

David Aladdin: You’re the 50th? And you’re on the first facebook live too.

Caleb Roth: That’s a big deal.

David Aladdin: You know, I’m surprised you announced that, the 50th podcast.

Caleb Roth: I don’t know there is something about the human mind that likes nice round numbers.

David Aladdin: That’s why your 17000 books, right?

Caleb Roth: Exactly. And you don’t get that on your own. We’ll talk about how to scale it up.

David Aladdin: Let’s talk about that. How do you scale up to 17000 books?

Caleb Roth: Well, you can either work your tail off and trade time for money or you could figure out other ways. There’s two main ways to do it, 1 is the bulk books, so you get books by the truckload from a recycler, on fresh stores you know, the good will in your area probably only put out maybe 10-20% of all the books that are donated, and the rest they either throw away, give to a recycler or sell by the galore which is just 4ft by 4ft by 4ft box full of books.

So you can buy their donations that they can’t handle and go through them yourselves. I don’t do that, Greg Murphy, great friend of mine, he shares a lot of his information out publicly as well he kind of shares his bulk operations. These guys are cranking through. I think last I heard 40,000 pounds of books everyday.

David Aladdin: Oh my gosh. That is insane.

Caleb Roth: We were talking truckloads and truckloads and it’s a different business model they’re going through and they’re buying everything and maybe, maybe 10% of the stuff actually worth listing on Amazon, the rest of it is just junk and so they sell some of that in their warehouse and I think that’s where there business is going to selling them you know a buck a book to the community. He’s over in Ohio and then they got to figure out what to do with the rest. They either sell it to other people that are smarter than him and figure out how to make money out of his rejects. Or they sell it back to recyclers just for scrap and then they turn it to toilet paper.

David Aladdin:  I was thinking they could move to a very cold city and just create a fire for everybody.

Caleb Roth: You know, there’s just something about burning books, the people don’t. They don’t feel good.

No.

David Aladdin: There’s too many movies that they pick burning books just like the bad guys so.

Caleb Roth: Well you look up to the history, you know, Germany burned a lot of books to try and destroy people’s cultures and to hide the information, the Catholic church has always been about a hiding information historically, and so burning books just has a lot of bad connotations with it. But we live in a society where we’ve throwing away books by the thousands of pounds every single day and you know were just filling our  landfill with junk that could be recycled that could be turned into other products.

David Aladdin: Let’s talk about books by the truckloads because that’s actually something that just, you know, doesn’t go through my mind. How would one get a truckload of books from goodwill? Is that like some type of connection that you have within good will?

Caleb Roth: You know there is and again I’m not the expert so I haven’t done this so take everything I say with the grand assault and I’m by no means an expert here but basically you just get a relationship with the manager at the goodwill and say, “Hey I know you get a lot of donations, you can’t put under your shelves so what do you with them”. A lot of these places they just, you know if you show up some of them you can probably work out deals and they’ll drop them off at your warehouse if you can do that or you can send a truck yourself but they’re again I said earlier people view books as a commodity at best and a liability at worst.

These books are heavy and if you are talking galore to books is probably a thousand plus pounds and you know that’s a lot of work to try and move around; you got to have forklifts or palette jacks or trucks and big equipment and so if you could show up and say, “Hey I’ll take these off your hands, 50 bucks a galore and I’ll show up and pick them up and you will never have to worry about it”. Done and done it’s just that you’re just a trash service essentially they don’t even know what you’re going through and making a bunch of money potentially.

It’s not easy money you know but we built books as a lifestyle business. Do you the goal from day 1 was to quit our job and build a business so we succeeded with step 1, we quit our job, it is a great lifestyle business, my wife and I probably only go out 4 hours a week and actually source books and we live in Denver. We got fresh stores everywhere there are probably 50-75 fresh stores within an hour drive of our house. So we’re extremely spoiled here. We get lots of access to books and you know we can go out and find books in a half day of sourcing and spend another 2-3 hours listing the books and that would essentially take care of our living expenses for the week.

It’s a great lifestyle business we actually went down the Florida, my brother rented a house in April and we went down and spent 2 or 3 days in Orlando, Pensacola area and just head up the fresh stores, listed all the books and then Amazon and then we spent a couple of days on the beach and kind of vest the Pensacola with my brother, we did some fishing and just relax and so it’s a great lifestyle business, the books pay for your trips. You can keep your business running even while you’re on vacation.

Now the question is: Can you take it to the next step? So, any business where you’re working half, half a day or full day a week and there paying for all your expenses that’s great. The question then is like the problem there is then you stops working, the income stops coming in, so you have to figure out a way to replace yourself.

David Aladdin: So how do you do done that?

Caleb Roth: So bulk is the one way because you don’t have to be involved. You set up the operation but it takes a lot of cash. You got to get a lease on the warehouse, you got to make sure you got the loading dock, you need to set up the assembly lines and computer systems, find ways to list the books efficiently and then hire people to do it. So you go from starting up a regular book business just yourself between software, scanner and you know a couple of other tools to get started, you can get started with 500 bucks. But if you’re going to do bulk, you got to have thousands of dollars and again a lot of people are in that position to do that without borrowing and leveraging and possibly getting into a very risky situation.

So, we haven’t gone the call ground although we’re considering it. The other way to do it is to hire a team, so again it’s a cash flow game and getting in to the books takes a lot of. . . we are fortunate because we didn’t need money back out right away. So as we built our book business and had 500 books in inventory we weren’t taking money out to pay the bills, to put food on the table, we were rolling it all back into business and even a year into our book business we still hadn’t taken a dime out for our own money because we had enough set aside and to other you know still the full-time job and everything else. We didn’t need to take any of that money, we were able to keep snow balling it and that’s huge if you’re able to take out as little money as you can because it will just cripple the growth to your business.

David Aladdin: That’s the same with ours too.

Caleb Roth: You know cash is king if you, you know, you keep the business pay your bills first of all if you have employees, pay them from day one. Make sure you’re taking care of them. You know they’re the life blood of your business and if they’re not happy, and if they’re not operating in your business it’s not going to work out well. So pay your people, pay your bills first of all, #2 pay back into the business and then #3 if you have to take money out for your own living expenses but if you don’t have to that’s a huge plus.

So we went out and you know I love to mentor, and coach and so we started to find in a lot of people that either were afraid of risk or didn’t want to figure out but, it’s not just as simple scan of book and see if it is selling for 20 bucks and buy it for a dollar or two, there’s a lot more that goes into it, you know understanding sales rank, understanding which books that are actually going to sell and we were able to kind of use the data, I am a huge data junky. We were able to use a lot of our data to kind of set up a system around the entire process and then teach that.

So we put on the whole training series together, we started reaching out to people, our people would reach out to us and say, “Hey I like the idea of Books but I don’t have any money to get started and you know, Can you teach me the system” and so we just started to bringing them in on as you know commission-base, I started with my brother-in-law he was looking for a little extra income and so we set him up and say, “Hey you know we’ll pay for your scouting up and we’ll buy the books, you know we’ll do everything we’ll take all your expenses for you and then as books start selling and well take the commission and give you the rest”.

So we kind of play with that model, figure out exactly what worked tweaked it over time and then able to build, been able you know the scouting thing probably about 15 to 20 people at this point.

David Aladdin: That’s awesome. So you take the commission of every scout, correct?

Caleb Roth: Yes.

David Aladdin: That’s awesome. It’s a win-win.

Caleb Roth: It is, it is the real estate model we put us both on the same team, we worked hard to figure out the model. The kind of the basic model right now is that you know at least what other people are teaching in the industry and there’s nothing wrong with it. It is, you know they say, their basic perimeters. I need bulks under 3 million sales rank, and they got to be selling for 11 bucks on Amazon. So you say your basic rules, then you say, “Hey you are allowed up to spend up to 2, 3 dollars per book. I will pay you a dollar, flat rate commission on any book that meets their criteria. So that’s a good way to do it, its easy if someone goes out to a library sale and gets a 200 books they make 200 dollars it’s very simple to calculate because I built a tracking system that actually does all my accounting, it does all the data from my business.

I was able to set it up and say, Hey you know we can do that model if you want, if you just want quick cash that’s great and we’ll do it but if you want to get a commission on what sales; so again it’s a 10 dollar book you are going to pay him a buck, that is great, they might as well just take the money but if they are finding a 50 dollar books and you’re only giving them a dollar, they kind of feel like, “Hey wait a minute, this isn’t a fair arrangement and again your taking the risk of the table, the book may never sell but we kind of worked out a deal where if they sell a 50 dollar book, we’re taking 10 bucks and they are going to make 30 bucks after fees.

It kind of puts them, you know their driving the business; we just kind of provide the mentorship, the training, and some of the initial resources and again there’s some economy scales as well. If all of our 15 scouts were going to go open their own Amazon account, they are going to be paying 40 bucks a month for the pro account, instead of that we’re paying one 40 dollar a month fee and we are able to spread that out of over 15 people. So their some economies that can be built in same thing with the listing software, all those things that goes into it, we’re able to kind of help mitigate those risk and cause upfront.     .

David Aladdin: Say like today, how many books were dropped off by the scouts?

Caleb Roth: Well, we actually work remotely, we don’t have a lot of people in like the Denver area per say. It’s not like they can be in Florida, in Indiana.

David Aladdin: So you got like really solid skill ability there.

Caleb Roth: It is. You know it’s not all. . . we haven’t made a ton of money of the scouts, we’re just starting, you know to go. It takes a little bit to kind of get over show that initial cash flow hump and a lot of people. . .  probably half the people we hire end up physically quitting within a month or three. And so there’s just some effort that goes into it and you know understand that but there is a way to scale. So they find the books they list them, we pay for the shipping, we pay for all others software, we pay for the materials.

David Aladdin: Let’s talk about the rules that they have. What categories they are not allowed to go into? What books should they not buy?

Caleb Roth: You know, we have a 100% books, we do a few CDs as well, so I guess, maybe 98, 99% books, I’m not a opposed to looking at other categories although with the recent brand restrictions that have just been coming out the last week or two. I’m pretty thankful I’m in books to right now.

David Aladdin: Yes, sure.

Caleb Roth: I may explore private label, I may explore bulk books, I may explore other categories down the road but for now, there’s a lot of upside I’m having too much fun, so why bother switching. But in general, non-fiction is where you want to you know stay with, there is some money in fiction but you have to know what to look for. We look for technical stuff, recent items, texts books for sure although they have gone out of date very quickly.

David Aladdin: Did you say you have a warehouse? Or you just forwarded them all the way to Amazon right away when you get them.

Caleb Roth: Everything’s forwarded to Amazon, we don’t have a central warehouse at all.

David Aladdin: Okay, do you think you would consider a Central warehouse? At some point or.

Caleb Roth: Yeah. If we get in to bulk if we could, the other thing is then people wouldn’t have to list their own books, we actually ship them in all to the central warehouse and just hire a team to list them.

David Aladdin: I think that might be the next move for you, because I mean. . .

Caleb Roth: It may again there is economies of scale, right now we’re in Denver and there’s no Amazon warehouse that do books anywhere near us. Most of our books get shipped back to Chicago actually. So we’re paying about 30-40 cents a pounds for shipping rates where we are. Our scouters in Indiana and Michigan are paying maybe 15-20 cents a pounds.

David Aladdin:  That makes as a big deal.

Caleb Roth: It is a big deal. And if you ship by the palette and if you could kind of bulk up and do like at least a truckload or LTL type shipment, you’re looking like paying like 2 cents a pound.

David Aladdin: You done palette loads yet?

Caleb Roth: I haven’t, if we did a warehouse, we would.

David Aladdin: Is this something you know there’s always something different about palettes? I think it takes longer to Amazon.

Caleb Roth: Actually, just recently did a palette shipment. And the time for them to receive it, you know, you got to make an appointment, they use UPS freight and there’s at least an extra 6 day delay going into the warehouse.

David Aladdin: Yeah, I could see that what you will gain from a cash flow prospective but if you’re paying a 2 cents a pound I don’t know what your cost saves you realize, I don’t know if you actually calculated it out per pounds, but if you’re cutting down to 30 cents a pound, 2 or 3 cents a pound, that’s huge.

David Aladdin: Interesting! Okay. My next question is actually you’re 17,000 books right now, do you think you’ll be out around 34,000 next year like double your size, or..

Caleb Roth: It’s not linear. So had just came from through textbooks season, we got  maybe 2 weeks left and then you know, they kind of  fizzle out as all the kids go back to school and buy their books. So we definitely have a lot higher demand. We typically sell 12-13% of our books every single month. So if you got an inventory of 17,000 you are probably selling 1700 give or take maybe 2000 books, we probably sold 3500 books last month because its textbooks season so the twice the normal rate and it’s a lot work to, give back-up and fill another 3000 books.

So you eventually going to either unless you keep growing, you know if you do a hundred books a week at some point you reach a point where you are, you know, just the anatamasamato. If you go back to the math term but you eventually reach a point where you’re basically selling a hundred books a week and you’re list in a hundred books a week so you are staying even with your inventory levels. So we keep scaling, I think we listed a little over 5000 books last month between all the scouts. We started working out some bigger deals with some larger players as well and buying their books that they don’t really want. So we’re begging the data, we got some other software and we can get to that a little bit but we basically been tracking the entire book market for the last several months and we know what every book is worth on Amazon, we know how many times it’s sold, we know what the average price is. So we basically can build a hit list of books that we know we want to buy for a buck or two or three or five and we’re able to use that data and leverage it and find partners that don’t have the data and we can essentially buy over books from the thousand from them that are really good books.

David Aladdin: Interesting point you made. You know, all of these comes down to big data, you know understanding that data and then how you can execute and seems you got a pretty good niche and those tools are only going to get better.

Caleb Roth: Yeah, a lot of it is data. The important thing is what you do with it. And then it’s just a matter of reaching out, networking. You know there’s some people that operate that you know the whole Amazon gamer all of businesses is you do some game. So if I teach you something, it’s only going to minimize my potential profit because you take some of that market pie; I don’t operate with that philosophy.

David Aladdin: Yeah, I don’t either.

Caleb Roth: There’s so much to learn from other people. I have a blog you know some people call me a guru I wouldn’t go that far. I really just built a blog just a way to share a little bit because as you share a stuff, you learn in yourself, but also as a way to network and meet other people and I have been able to meet lots of different individual businessmen that have different takes on how to run a book business, or playing the game differently, they’re wholesalers, there’s college bookstores, they’re people that buy back textbooks from professors, there’s so many ways to play the game and it’s just intriguing you can learn from them. You can ask them questions and say what are your pinpoints, what are the sticking point, what are the problems that you have, and then maybe I may be able to solve that with my data, my experience and we workout a win-win scenario. So there’s a huge amount of value from networking and trying to learn from others and then possibly help each other as well.

David Aladdin: Before we get go more into tools, what do you think about the whole e-book versus paperback or hard cover. I feel like the book is back you know like I order books all the time.

Caleb Roth: It is.

David Aladdin: I don’t really prefer the e-book feel of it.

Caleb Roth: The e-book feels are really meat segment out of the market two-fold. One is textbooks because they’re just so dang expensive, and publishers are just coming out with new editions to keep the prices high. And so e-books from publishing standpoint they can kind of control the flow of those and actually make a smaller profit per e-book but make it every single student and essentially eliminate the third party used book market where you know, we’re making tons of money and the publisher are losing out on that. So they are trying to push it. The other way that makes sense if you gone on vacation, you could throw 50 books on an iPad and travel for a month and never run out of reading material. But, we all spend way too much time kind of on computers now.

David Aladdin:  I think that’s the thing, we hate looking at the screen.

Caleb Roth: Yup. And even though kindles got a great, you know they got incredible with like there paper weight or whatever they call that technology it doesn’t even look like a screen. But I’d rather turn the page, I’d rather mark up the book, and daggle some pages and so I’m still old school that way and you know the market data is actually showing that physical books thus the demand is going up.

David Aladdin: Yeah, I think you’re in a good spot.

Caleb Roth: I would agree, you know, unfortunately a lot of our eggs are on Amazon’s basket were working hard to diversify away from there just because we are playing in there sandbox; they can change the game at any point in time. So there’s obviously some concerns there, you know will books be solid and a strong business in 5 years probably would they be good and still sustainable in 20 years I don’t know. But it works today and I don’t see it dying tomorrow. So we are going to keep running with it as long as we can.

David Aladdin: Well, in 20 years, they are obviously going to just implant books into our mind.

Caleb Roth: Exactly! Who knows where technologies going. The rate of change is just incredibly increasing. So again you learn business skills, you apply to market. I’m not passionate about books, I don’t sell books because like them, I do enjoy reading. I just do it because it is a vehicle we built a business around.

David Aladdin: Actually, I was saying to my girlfriend like as I want to build a library in the house, you know, it kind of like immerses you inside of all the education and all the books the stuff that would actually read so that would be pretty sweet.

Caleb Roth: Yeah, make sure you had a leather bounce section too to make it look like you are really knowledgeable.

David Aladdin: I was thinking about getting the gold books.

Caleb Roth: There you go.

David Aladdin: No, I was actually thinking about just having a bunch of kindles all stacked up.

Caleb Roth: Make your bookshelves a lot easier to move that’s for sure.

David Aladdin: So you mentioned diversifying of the Amazon. Have you started that process?

Caleb Roth: We have and again a pretty much our business is related to book still so we got in a one, I sold some software that helps people earn income but is related to books as well. I’m an Angel investor a start-up company that also they’re aiming to take on an inventory lab and be an inventory management system that help you list books or anything quickly and manage all your data see your key matrix in real-time that sort of thing, but again that’s related to Amazon but is not quite me selling physical products, it’s providing services to other people. And then we’ve also partnered a lot with college bookstores and kind of done some acquisitions for them, they so need a lot of used books, they either buying back from the students but they don’t get all their needs met through that, and so we’re able to come in and partner with them and say what are your needs, what do you want to pay for the books and then we go out and find them for them, either through our scouters we find the stuff online, we’ve got software to help us do that for example.

So we’re trying to get of Amazon on a little bit you know we are actually buying books on Amazon or from physical sources and selling them back to physical retail establishments. So it kind of diversifies a little bit a way versus everything being sold through Amazon.

David Aladdin: Okay, let’s go back into scaling your business and you mentioned you used scouters, what software tools did you use to grow out faster?

Caleb Roth: And if you are going to scout for books there’s really only one software out there that pretty much all the book-sellers use. It’s called the FBA scan. I think I recommend that to you, as well as you are getting started with books. A seller tool is the name of the company there, I’d love to create my own scouting software at some point but it’s low on my list priorities. But there’s only so much data that Amazon gives you. You will see the current sales rank, you see the prices, those are helpful but there’s a lot of other data points that would be useful and I’d love to build something better at some point. For list in our books, we use Exceller list now we used my own spreadsheet I have created and we actually did everything Google drive. So people listed the books, they kinda created links form. They could go research the prices, priced everything out and upload its Amazon and then allowed us to manage from the central location. We could what our scouts are listing, we can troubleshoot issues and then kind of manage the process and the company that I was in angel investor that called Exceller list and we’ve actually just this week were going to be switching our whole team over to using them to list our stuff.

So it’s going to be a much easier, it’s web-based interface rather than a spreadsheet, it’s going to be a lot easier to list a books, see the data. For me managing the business I can go in and look at the average rank, the average list price, all the key matrix that I need to see and then make sure I’m paying the scouts based on what they’re selling. So I’m, pretty excited about that. So that scouting, listing from a management standpoint, I track everything with my own spreadsheet as far as I know, how much to pay the scouts, what is sold, you know what their matrix are, you know average list price, are they listing too many cheap books, are they listing too many books with high ranks. So we can kind a look at that and troubleshoot and help them run their business a little bit better.

Then we just kind a built several YouTube videos that are hidden that we give our scouts access to get a whole page full of videos of training videos.

David Aladdin: Did they list the books that they find there on their account or to your account?

Caleb Roth: They list it in our account. Yup, so kind of the ideas they buy the books with their own money. We provide the training, we shorten learning curve, we pay for all their software, we provide all the tools to get them going. Basically, they have them find the books, pay for their books and list them and we pay for the inbound shipping and we manage the business from there. So, we will re-price, we will take care of customer’s complaints or issues or refunds that come up. We essentially manage the business all they have to do is focus on finding and listing books.

David Aladdin: How do you manage like the quality that they send in or at least the quality that the post, because I guess they could affect your, like, could affect your seller account if they do something.

Caleb Roth: Yeah so two questions there. One; are you talking like the actual condition like in their sending in just water-damaged books and just junk or they are sending in books that really aren’t likely to sell.

David Aladdin: Actually, the condition there, say, they don’t want, you know, make you mad so they have this poorly damaged book that they bought and then they list that as new. Have you had that issue?

Caleb Roth: We haven’t yet, but we always teach them, you know, one we don’t touch anything that’s water-damaged, we try to stay away from stuffs that’s just terrible. I found a condition that doesn’t matter that much. It’s a customer expectation that they do. So we teach them to under grade, so if their book is between good and very good, we tell them just to downgrade and call it good and list it and move on.

David Aladdin: That’s a nice good secret kind a like. You know, just actually rank your books low, so your customers gets surprised better looking book.

Caleb Roth: It is, you know stuffs still like the crack. But if you’re selling prime it is actually really easier; another secret that some people figure out is you can just go in and pretty much get feedback or removed automatically. I don’t know how long this will continue to last but first of if it is anything related to the fulfillment, so if it’s a late delivery, if the package was damaged on the way, if anything along those lines happen, Amazon will just take care on the feedback anyway and just say it’s their fault. But it’s kind a of a lesser known secret again for now, we will see how long it will last but pretty much any feedback. We try and do by the customers we reach out but you still get, you know, take of the customers you cannot please them no matter what you do, you give them refund, you take care of them, and they’re get mad for whatever reason. But Amazon would typically remove that feedback to if you sell FBA.

David Aladdin: Could you be more into detail about that, let’s say if I get, are you talking about product reviews?

Caleb Roth: No, I’m not concerned with product reviews, we’re selling of one of book it doesn’t reflect on my book, I’m talking of product feedback. So one star you know, on the feedback. So, if we get, you know, less than positive feedback we’ll reach out to the customer, will look at it, see what could be done but I’m not going to spend a lot of time working on that, again, it might be 10-15 bucks, it’s not a big deal, I usually just refunds and just say, keep the book sorry for the trouble and move on and then see if they will remove the feedback. If they won’t, you could literally just copy that order number, there’s a contact link for Amazon say, Hey I got a problem with an order or with fulfillment, you plug it in and it say, Hey what do you want to do with this, you say I want to remove feedback and then at least at my account they pretty much just remove it right away.

David Aladdin: Actually, I just notice it today, I had someone leave me a one star review based on the shipping and Amazon actually they have some type of algorithm that detected it and removed it by itself.

Caleb Roth: That’s pretty nice. There are third party software’s that do it as well.

David Aladdin: You know. It kind of negates itself.

Caleb Roth: It does and it probably just worth doing it yourself, if you’re selling a thousands of items and in a lot of stuff it might not be worth it for you to poke around and deal with all that, but for us it’s on the homepage. You know, as we’re clicking through maybe once a week , we’ll go back and can look at our feedback and just make sure it’s still 5 star, you know it’s a 100% and if it’s anything less than that we’ll try to take care of it.

David Aladdin: So what is book look like a 4th quarter?

Caleb Roth: Really books are centered around textbook seasons so the bulk of our sales happen in kind a August-September as the fall semester kicks off, there is a nice little bump up with Q4, you know, people are buying books as gifts, but again they’re probably buying new books, it’s kind a weird to give a used book to a friend for a Christmas gift. We don’t sell a lot of new books. So I can’t really speak to that. Do you notice, I’m a little uptake in December and then, you know strong sales again in January and February for textbooks seasons and then March thru like June, you know it’s a lot slower. People are still reading books for vacation but it’s more like fiction at that point, we don’t sell a lot of technical textbook type materials. So our sales are much lower through the summer and then they peak up quite a bit in the fall and the spring.

David Aladdin: So your 4th quarter just happen pretty much?

Caleb Roth: Yeah, it is just as good as it gets. We again 17,000 books in inventory and we sold I guess there are probably about 3500 when the dust settles and yeah we did very well.

David Aladdin: I guess you think you’re going to have way more than that by next, next coming into the fall.

Caleb Roth: Yeah, for business to keeps going to that direction and we’re looking to get another partnerships with like college bookstores and then maybe kind a become a wholesaler, buy back their books or just partner with, you know, bigger companies and if we can land a few of those accounts we could be, you know, our average scouts does a 100 to 200 books a month. So we have 15 scouts give or take, we are probably getting anywhere between 1500 and 25 to 3000 books every month, listed by them. We kind a moved away, my wife and I still go out and scout, we still try and do maybe 200 books. We’re only working about half day a week on that part of business because that’s trading our enough time for money, we’d rather do something that’s scale-able.

So we’re, we’re probably listing as a team now and anywhere between 2 and 4000 books a month and if we are to land some bigger accounts I could see us getting enough up to 5 or 10,000 books a month.

David Aladdin: It’s awesome. I love the whole concepts of scouts of just having people work for you a commission-based. I think that finding the scouts themselves is probably your biggest struggle, correct?

Caleb Roth: It’s not really hard, we haven’t really market it, we don’t really have a section on our website, say, Hey we have an official scouting program, we just have people reach out because we have a website where we’re involved in the community and people say, you know, Hey I’m struggling to get started and I don’t have the money to pay a 40 bucks a month for a listing software, for scouting software, for Amazon’s fees you could easily have a 150-200 bucks a month in fees just right off the bag, if you are going to you know, get all the bells and whistles and that’s a lot of money for someone that’s just looking to get started and maybe doesn’t have a lot of cash ready to go. So we kind of absorb that.

I go back and forth I don’t know if we really go, I see us growing our bigger partnership and trying to land bigger accounts rather than our scouts that does 100 books a month. I liked that because I love helping other people start their businesses and let them realize what could happen and kind a run through the business side of things and really just get them excited about a small business. I don’t know why anybody would necessary work for me because you know I’m the entrepreneur I don’t want to work for anybody else.

So my natural band in to say, Hey I would go learn someone else’s model and do it for him, but there’s a lot of people that are either afraid of risk or just want the expertise or someone to kind of guide them and I think we feel a decent snitch that way. If we wanted to we could put craigslist ads in all markets all over the country and we could probably draw them up another 50-100 scouts within the next month or two, no problem. I think finding people wouldn’t be that hard if we really wanted to grow that piece of our business. But I see us doing more of our data and more with our partnerships.

David Aladdin: What do you see the data going? In terms, you know of selling more books, what’s the strategy there?

Caleb Roth: Well then there are two basic philosophies. One; whether you’re work in yourself or working with scouts, you got to get efficient, kind a horn in your skills, learning what to look for and so we kind a set up and I share in my website as well kind of our basic rules, so if the rank is less than a million, you know, that sounds high but for books that just means it hasn’t been sold in 5 or 6 days. So if the books are less than a million and maybe less than 2 million, we want to see it selling for 10 bucks or more that’s the piece of it. Once it gets to higher rank like 3, 4, or 5 million we want to see the book yet, 30-40-50 dollars for the less price. So we start to look for different things that way and that’s the first piece of it is getting smarter with your data and if you do that, you know our average sale price for the year is a little over 22 dollars I think. So you know we’re cherry-picking only the best of the best. We actually look at our data from time to time, you’re familiar with the 80-20 rule.

David Aladdin: Yeah, Paretto’s Principle.

Caleb Roth: Yeah, exactly!

David Aladdin: Best rule ever.

Caleb Roth: Yes, this is kind of the fundamental concept to the 4 hour work week, you know, a lot of what you are doing has leverage. Sorry, a little of what you are doing has leverage and it has a lot of results, and a lot of what you are doing, you could probably cut it out and wouldn’t affect anything. So for us, we started looking at our list price, we list our books by hand and then we let our repricer take over to several months of being on the market, so we try and price according to the market and wait to get the sales rather than chasing the next sale. But we found that, I just pulled the data before our call, 23% of the books we listed. . . so pretty much 1 out of 4 or 1 out of 5 of the books that we’re finding were listing for less than 10 dollars, and by the time we factor in that maybe only 70 to 80% of those books actually sell and you end up dropping the price on some to get the sale. And on the 10 dollar book you’re not making that much money, on an 8-dollar book or 7-dollar book you’re losing a lot in inbound shipping to Amazon, Amazon’s fees, storage fees, etc. and there’s very little room for profit especially if you’re paying a buck or two for the books.

So 23% of the books were less than 10 dollars. And it was only 6% of our profit at the end of the year. So you start looking at those and say alright we could actually work one day less a week or you know, if you’re working 40 hours a week you could cut a quarter of those hours and you will still end up at the end of the year with 94% of your overall profits. So that’s like a no brainer so  just start buying smarter, be better with your data and say alright, if I’m going to build something’s that’s scale-able, I don’t want to waste my time so selling 5 and 6 and 7 dollars books and making mere pennies.

Now Greg, guys that do bulk they already bought the book upfront, they’ve already invested in the warehouse and the labor, if they can make two pennies or even a penny of marginal revenue they should list it and do it the different game. I think Greg’s average sale price is probably 10 bucks if not 8 or 9 dollars but he can afford to play that game because it’s not his time being traded for money. He’s built a system that does it for him. So, I’d love. Go ahead.

David Aladdin: As I say, there’s ton of room for scaling, you know, I would, if I was to do it I would go for the bulk round and I’d have like this thing, you just put a huge case of books and it would auto scan it and that would be very cool and then it would list it from there, you know, read the ISP number and then upload the listing over there and so the goal will just be figuring out how to get as many books as possible and just scan them and list them automatically to Amazon.

Caleb Roth: Yeah, you’re talking about building a funnel where you just focus on finding truckloads of books.

David Aladdin: Yeah.

Caleb Roth: That’s kind of the elusive way of what people are trying to do, if you could figure out something that would flip the book over and scan it through and throw your label on it and throw it in the right palette box to send off to Amazon and remove all the human elements that would be huge.

David Aladdin: I would say like 6 scanners, all in one machine and whichever side the labels on it would scan and I think that would be the way to do it rather than try to flip it over and then because I’ve seen like, I don’t know if you seen that Google machine where it scan every page of the book. So the technologies are there to do anything you want with the book. It just scan like a million of books all at once, you know and then uploaded it to Google books.

Caleb Roth: Yeah. The technologies are fascinating and if you were able to do that at what cost? I mean you are talking a million dollars plus to build some sort of automated mechanism. And if you could do that, then by all means off you go.

David Aladdin: No, you’re the book guy.

Caleb Roth: So there are two basic strategies, one is cherry-picking and kind a go into scout road building a team that way or just do it to yourself and the other is the bulk mentality where you just suck every penny you can and try to make a profit anywhere that you can. And I would love to use the data to partner with bigger companies and basically have them do the filtering for me and make it worth their time, fit in to their work flow and then  just essentially be buying the books in bulk but only get the best ones and so that’s kind a of a tricky subject that’s not just you know as simple as calling a librarian and say, “Hey I want your old ladies running your library sales and I know there’s younger people that run them to, I don’t want to offend anybody but typically these library sale are run by old ladies that are volunteers and they are not going to figure the technology out .

So it’s not just as simple as just give them a scanner and say, “Hey scan these books and if they meet certain criteria, I’ll buy it, you know you got to find a better sources and find ways to provide value and partner with what they are already doing but that’s why I see our value going, it’s using that data to essentially buy pre-selected books that we know are worth selling.

David Aladdin: So, we’ve got about 7 minutes left, is there anything that I left out in the interview, I think I covered every single think.

Caleb Roth: Sweet! So we talked about scaling, yeah, you know the first piece is don’t be afraid to risk, you know you could be like Dave and quit your job and just jump in and figure out from day one. You know, you built something a little bit on the side you know you had the confidence that you could do but there still the fear is there, I think a more conservative approach being a married guy and trying to make sure I’d keep the in-laws satisfied, you know, you keep my families satisfied and make sure that I can build something that’s there. So you can really manage your scenario, your situation, to where you kind a step back and scale up your business at the same time.

So you don’t have to be afraid of risks to be an entrepreneur, you just have to be willing to you know, work harder on the sides, spend less than your making and give yourself  that option to build something. So step one, is figuring out, if it’s a lifestyle business that’s what I was at first, then step two is how do you scale it. The other piece that’s important when we talk about it, but you have to define success when you started out. So no matter where you get in business, you’re always going to be the American ways which is just more, you got to keep up with the jones, you got to figure out, there’s always people that sell more than me. I actually share my sales figures, two reasons one if I’m selling a way more than you, you just look at as bragging or maybe you see it as a way that’s you can say “hey that’s what’s possible”. So maybe it’s motivating but I don’t want to come of this as arrogant or proud and “Hey I’m better than you because I have more sales”. Two, there’s always people, they’re going to be much more advanced than selling way more than I am, and they might look at me and go “who are you, you got nothing.” So sales are misleading, it is really what is profit at the end of the day. There’s people selling millions of dollars but their margins maybe minimal and they might not be making much for the effort that they’re putting into it or maybe they have 30-40 – 50% margin and they’re killing it and that’s great.

But you have to define success early, if you don’t there’s always the mentality you just have to get more. So success for us from day one was to quit our day job and we did. Now we are not going to stop there and then challenges is that no matter how good we did last month was our best month by far. We had an awesome month on Amazon and some other book sourced as well outside Amazon and if I’m not careful the challenges to just to have keep building more, more and more versus saying alright if I’m going to define success as making X amount in profit and if I get to that point now I can figure out do I want to give money away if I make more, invest in other people’s businesses, you know, Angel Investing or helping other people startup stuff, you know you got to define success in different ways, if your success is just dictated by the dollar value, I think at some point there’s just less and less satisfaction that comes from that.

David Aladdin: I agree, just for the record you know, I don’t post sales records number either, I have the same, actually I have the same belief that you do around that merely because there’s always bigger fish in the sea also and you still don’t want to come off as bragging. There are some people that do it, it is what it is.

Caleb Roth: Well a lot of it can be motivation to this guy as they share the numbers and they’re literally they have honest intention and they’re sharing what’s possible and I think that’s great, the other people that are just try to brag and you know the bigger fish look at that and just laugh, but we are all at different points in our journey. I’m a year and half- 2 years in and my numbers are going to be different to someone who is 6 months in or 10 years in for that matter.

David Aladdin: Well, it was awesome to have you on the show, I appreciate.

Caleb Roth: I have a facebook page you know, YouTube channel and all that kind of stuff, and if you’re interested in books, you are interested in to getting into the Amazon. I think books are a great way to start again most people that’s gateway drug books they moved the glamorous things and like private label and wholesale, retail overcharge for example. But for us, books is where it is, we’ll be willing, we’ll be somewhere else so couple of yours down the road and get bored doing the same thing, we’ll keep moving but there’s a lot of runway, a lot of space yet. So we’ll keep going. Alright if you got ideas or you got ways to use data, you got things that consider out I would love to chat with other business people learning from them and sharing if I’m able then I just looking to get started, the blog is a great way to deal because lots of great resources on the web and it’s just a great community. I’m happy to help people, you know get started whether taking step 1 or step 100, you know hope that I could help you and you could help me it’d be great so if you have ideas by all means just reach out let’s connect.

David Aladdin: Awesome man! Well, thanks for coming on. Everybody thanks for tuning in live. David Aladdin and Caleb Roth out.

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