DRIVE STARTUPS We Present Latest Startup News, Tips & Inspiration
Reader Resource
Apply now to be an Entrepreneur 360™ company. Let us tell the world your success story.
Get Started »
As a teenager, Mike Wittmeyer loved online poker. Because he was too young to play legally, he’d earn money and convince his 18-plus buddies to get him in on the action. Then he’d quickly lose all of his cash and have to start the cycle all over again.
This wasn’t working. While Googling for strategy tips to reverse his losing streak, he came across a completely different — and unexpected — way to make money online. He discovered a network of developers and websites designed to surface when people Googled queries such as “play online poker” or “online poker sites.” Those sites would direct prospective players to the actual game sites and send commissions to those developers with each referral.
What he discovered — affiliate marketing — was far less sexy than poker, but possibly a more winnable game. So, the high schooler gave web producing a try — a path that would lead to building referral sites for an online company that sold gold and silver, and eventually founding his own precious metals retailing company, JM Bullion. This company brought in $661.3 million last year alone.
Related: This Bakery Chain’s Incredible Story Began With a Brain Tumor and Nothing to Lose
Wittmeyer was never a master poker player. Like many entrepreneurs, he isn’t even the best business strategist. Still, he’s a gambler at heart, and knowing when to fold — or when to take a chance — helped this CEO maximize opportunity. Here are some of his best lessons on weighing risk and opportunity.
1. Go all in.
Wittmeyer’s parents convinced him to enroll in college in 2007 — even though his affiliate marketing work was going well and he was reluctant to put it on the back burner. The move didn’t last. Halfway through his sophomore year, he dropped out, placing his bets on entrepreneurship full-time. He thought he’d focus on poker affiliate marketing, but he had become uncertain about the future of the poker industry due to heightened regulatory pressure. So when he found out that an industry leader was looking to buy his network of websites, he went all in, taking a payout in the “mid six figures.” He was 19.
It was the right move. The federal government crackdown on the poker industry for bank fraud, money laundering and other illegal activity only continued.
Still, there was no going back. “I had all of this freedom,” Wittmeyer says. “I had, for a 19-year-old, a lot of money. I was just trying to figure out what to do next.”
2. Play the hand you’re dealt.
Wittmeyer needed to change industries, but it wasn’t easy. An attempt to apply the affiliate model to online printing (e.g. business cards) was, in Wittmeyer’s words, “a colossal failure,” thanks to big-time competition from established companies such as VistaPrint. Being 19 and not needing to work didn’t help any, either.
Meanwhile, a friend was setting up an affiliate program for a large online precious metals retailer. This was in late 2010, when gold and silver were both on a tear thanks to unemployment, government debt and a weak dollar. Wittmeyer knew nothing about the markets, but he signed on to build sites that would rank high when people Googled “buy silver” or “buy gold.”
Then one day, the retailer decided it didn’t want these marketing services anymore.
“My partner fortunately said, ‘We should just try retail ourselves,’” Wittmeyer says. “I thought he was totally crazy, because all I had ever done was the affiliate marketing stuff, which is complicated in the sense that you have to figure out how to rank in Google and whatnot, but it’s very simple in that you don’t deal with any customers and you have no staff. And everybody told me, ‘Retail is a nightmare,’ but he convinced me to do it.”
Related: How Retailers Are Thriving Despite the Supposed Death of Their Industry
In November 2011, JM Bullion launched. After a slow first two weeks, orders started rolling in from all over the country.
3. Play the long game.
That Christmas, a month into the venture, Wittmeyer’s co-founder made a horrible discovery: The company had more than $30,000 in credit card chargebacks.
“If you’re going to steal someone’s credit card or what have you and make a purchase online, gold is the perfect thing to buy, because it’s essentially cash,” Wittmeyer says. “You can get it and just take it to a pawn shop and sell it.”
Wittmeyer was two weeks shy of his 22nd birthday and still learning the industry. He and his partner hadn’t properly screened the clients. They were out all of the money for the fraudulent purchases because they had already shipped all of the product.
Still, he had put a lot of effort and money into the company and decided to give it one more shot, given the traction that JM Bullion had already gained. “I had to refinance the whole business and put a bunch more money in just to get us back to where we were,” Wittmeyer says. “I never saw it becoming what it is now.”
4. Play the players, not the cards.
Credit card fraud was just the beginning. Just like on that fateful Christmas Day, the co-founders logged into their bank account and got another scare: A notification that the company had five days until all of its accounts would be closed.
The precious metals industry was under scrutiny, and banks were growing wary of risk. JM Bullion’s long-time Pennsylvania bank had sent a warning letter, but Wittmeyer never received it. At the time, the company was already processing hundreds of orders per day.
They convinced the bank to give them a two-month extension.
Over the next two weeks, the inexperienced twentysomething co-founders failed to assuage the fears of 25 different financial institutions. Then Wittmeyer had an idea: He had previously ordered from a competitor in order to gain some insight into, for instance, how fast it shipped its products. The order had been payable by bank wire, so Wittmeyer contacted that bank.
“I called them up and said, ‘Hey, I do the same exact thing as this client, would you have interest in taking out another client in this industry?’” Wittmeyer says. “And fortunately they worked very, very quickly, got us an answer, came out to see us and went through all of the due diligence as quickly as they could.”
With two days to spare, they completed the account transfers.
“That was probably our greatest challenge,” Wittmeyer says. “That was the only time I think that I was actually worried we were not going to make it.”
5. Keep a poker face.
In its early days, JM Bullion struggled to keep up with sales. Without much capital for inventory, the company often operated in a short position. “We would just sell things to people and then have to go find them once they paid us,” Wittmeyer says.
This gamble alone required keeping a certain measure of calm and composure. JM Bullion counted on the fact that its customers did not expect the same expediency from online bullion sellers as they might from mainstream e-retailers such as Amazon. This bought them some time and allowed them to operate on working capital.
Related: 5 Ways Mark Zuckerberg Took Risks, for Better or Worse
It also raised eyebrows. In 2012, as the business hit its first $100,000 sales day and then its first $1 million month, the company’s credit card processor became concerned with the rapid growth. The processor worried JM Bullion wouldn’t ship goods to customers and cut off the merchant account. Wittmeyer needed to quickly — and calmly — explain that his team couldn’t acquire goods to ship to customers until it had money from the customers.
“I think internally I was definitely probably freaking out like anyone else would, but at that stage we had already gone through the credit card fraud incident,” Wittmeyer says. “I’ve always felt that, if there’s something that’s up to us to fix, I can fix it. I get more worried about things that are out of our control, i.e. market forces or if there was some legislation that changed our industry.”
6. Always think at least one step ahead.
The commodities that JM Bullion deals in fluctuate in value, which means that monthly revenue does as well. It’s a balancing act of managing staff and inventory. Summer 2016 was a slow period that required some creative cost-cutting, but the week of the November 2016 U.S. general election, by contrast, was a busy one.
“There’s a lot of potential volatility on the horizon, so that’s caused a pickup in activity from our customers,” Wittmeyer says. “In our business, essentially, any volatility is good.”
Whenever it’s possible to predict what’s on the horizon, Wittmeyer has learned to act. A few years ago, Amazon trained consumers to expect free shipping. Wittmeyer viewed this as an opportunity, and JM Bullion was the first precious metals ecommerce company to offer free shipping on all orders. Despite the low sales margin in the industry, Wittmeyer knew his competitors would find a way to implement the perk eventually, and he wanted to attract new customers by being the only one to offer it.
“Mike was able to build all of the relationships and the infrastructure necessary to facilitate that move,” says Robert Miske, a wholesale trader who’s been with JM Bullion for four and a half years. “Mike stays aggressive no matter when it’s slow or when it’s busy.”
Source link
