Mike Faith founded a headset company and experienced explosive growth, selling $3 million in the first three years. Then he hit a bump in the road. To get the company back on a path of consistent growth, he raised money and acquired Headsets.com.
Learn how Mike Faith creatively financed the domain name, what benefits it provided to his business, and how he made a generic word memorable.
In ten years, Faith grew Headsets.com from zero to $30 million in annual sales. Even during the lean dot-bomb years, Headsets.com doubled their sales year-on-year.
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I love to chronicle how great companies have acquired great domain names. I do this not for the investors who watch the show, but for the entrepreneurs who are selling products or services and want every opportunity to dominate their market. A product-, service- or industry-defining domain name has great benefits. This is the focus of today’s show.
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Michael Cyger: Hi everyone. My name is Michael Cyger and I’m the publisher of DomainSherpa.com, the website where you can learn how to become a successful domain name investor or entrepreneur directly from the experts.
If you’re like me, you get motivated by hearing success stories. If you can learn the strategy and tactics behind those success stories, then you can apply them to your business and improve performance. Not every tactic works for everyone, of course, but being exposed to them offers you an opportunity to leverage the experience of others without having to reinvent the wheel.
That’s why you watch DomainSherpa.com, and that’s the same reason I watch Mixergy.com, published by Andrew Warner. Instead of featuring domain name entrepreneurs and investors, Andrew focuses more generally on startup entrepreneurs and how they got a new idea off the ground. In most cases Andrew doesn’t touch on how domain names have helped companies become successful but every once in a while he does, as we’ll see shortly.
As you know, I love to chronicle how great companies have acquired great domain names. I do this not for the investors who watch the show, but for the entrepreneurs who are selling products or services and want every opportunity to dominate their market. A product-, service- or industry-defining domain name has great benefits.
This is the focus of today’s show, which is an excerpt from a recent Mixergy interview. My sincere thanks to Andrew Warner and Mike Faith for allowing me to excerpt and share the relevant parts of their Mixergy interview on DomainSherpa.com.
In this first excerpt with Mike Faith, founder of Headsets.com, Mixergy host Andrew Warner learns that Mike started the company with only $40,000 and two part-time employees from his other business venture. While Headsets.com was mentioned as the business name, it initially started as an offline company, relying on print-advertising in the Wall Street Journal for sales leads.
Andrew Warner: [Got you. Wow! So that’s the business you had and then] there was an issue that made you think of creating Headsets.com or an opportunity. What is the opportunity that you caught?
Mike Faith: Yeah, I had some people on the phone and we had headsets and they didn’t work very well. And they when I tried to get support and send them back, I couldn’t get there. And based on that data point of one which is me, and that’s usually been enough in my life to make major decisions. I thought, hey if I can’t get what I want with headsets, there’s an opportunity there. So six weeks later, I started a business selling headsets.
Andrew Warner: As I understand it, the business started with about $40,000 that you gave two of your employees who were working at Office Time Savers. And that initial funding is what launched the business.
Mike Faith: Yeah, that’s it. Forty thousand dollars and that took us through about three years at which point, I did a very small angel round which was the other part of financing the business.
Andrew Warner: The $40,000 was supposed to go where? What was the investment in?
Mike Faith: I bought a few computers, enough to hire people on for the first few weeks. And that was it really. The rest of it was kind of customer funded because I cut a deal where we paid the supplier in 60 days. But as people bought headsets, they’d give us a credit card. So the more we sold, the better our cash flow go. I can remember I think it was about 3 months into the business and we had about a quarter of a million dollars in cash. And it was a positive cash flow business.
Michael Cyger: Even though Mike Faith’s headset business had phenomenal growth — reaching 3 million dollars in sales within three years — its path to today was not without a few bumps. In the next segment, Andrew asks Mike what happened and what Mike did to get the business back on the growth path.
Andrew Warner: I heard that the business you started it, within three years, you got to three million dollars in sales. That brings us to roughly the year 2000. Then the business started to stagnate and you came in to fully run the company now. It wasn’t your side thing, it was your full time thing and then revenue grew. What do you do to increase revenue so quickly?
Mike Faith: So there were a few things I did at that time. I negotiated the headsets.com domain and I did a small round of $625,000. I went and knocked some doors and raised some money and the other thing I did was our focus had been a little bit more towards price up to then. I really kind of almost overnight switched it to a very high customer service focus, where we no longer monitored how long someone was on the phone for, we just wanted what the customer thought in terms of how they rated us and really switched around every nuance in the business to be around focusing on having the customer happy at almost any expense. Those were the three things that I did over short period.
Michael Cyger: While purchasing a category-defining domain name is not a panacea for all the troubles facing a company, Mike Faith did credit the purchase of the Headsets.com domain name as one of the key tactics to turn-around his company at that time. So let’s turn our focus to the actual acquisition of the domain name Headsets.com.
Most business owners think of a great domain name for their business, reach out to the current owner to inquire about purchasing it, and are shocked when they learn the asking price. It’s the same if you were to go ask the owner of a waterfront mansion in California or the owner of a penthouse on the edge of Central Park how much you would have to pay them to buy their home.
But Mike Faith is relentless and — after raising a small round of funding and focusing the company to improve the customer experience — had the cash flow and ingenuity to make the purchase of Headsets.com. Let’s hear how.
Andrew Warner: The company was named Headsets.com from the start?
Mike Faith: Actually, that domain name was owned by another company. Which, perhaps, is where the star-key was if you look back to 1997. We bought the domain in 2000. I say bought, again, we did a ten year lease where we paid most of it at the back-end. We have always been able to finagle deals where we bridge our cash-flow by paying people later and getting the customer money to come in earlier which has enabled us to grow without a lot of outside cash.
Andrew Warner: I see. How does that work? You offer the owner of Headsets.com money every year until you pay off the ownership of it? And, until you do, it is considered a lease. Which, actually is good for you, because then you get to write off the cost of the domain all at once every year like that.
Mike Faith: You have got it exactly right. Yes. That’s right, Andrew.
Andrew Warner: I see. So, you get to spread the expense over all of those years that you are paying for it as opposed to putting the cash up front and getting the expense over the years.
Mike Faith: Right. We weren’t in a position to put the cash down then anyway. That purchase, or the lease of the domain, as it was then was probably one of the best moves that we did. It gave us a lot of credibility with manufacturers. It put us on the map. Also, as Google begun to become a bigger force and they ranked domains, the name that your searching for, so well it became very useful to us there. So, that one paid for itself several times over and still is.
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Michael Cyger: So while they may have had the money to purchase the domain name at the time, they instead expensed the domain name over 10 years at a rate that their cash flow allowed. As Mike Faith put it, with some creative financing they owned the category-defining domain name, which gave them more credibility with manufacturers, ranked their website higher in search engines and paid for itself several times over. As he said, it was one of the best moves that he made.
In an interview with Mike Sullivan of SullysBlog.com in July 2010, Mike Faith said they received about 18,000 visitors per week (source). This traffic includes type-in, organic search engine referrals and paid advertising.
In this last segment of Mike Faith’s interview on Mixergy, Andrew Warner asks Mike to recall one marketing campaign that took his “plain vanilla” named company and made it memorable and appealing to mainstream media.
Andrew Warner: You know the silly thing that you did that got my attention was Jason Saddler, the guy that wears people’s shirts. What did you do? His whole business is – I remember I interviewed him in the early days when he came up with this idea and he was actually generating revenue with it. I said come on here and teach us. Day one of the year, anyone who wants him to wear a t-shirt on social media, etc. pays him a buck. Day two it’s two dollars, etc. and then he did something wacky that you jumped in on. What did you do?
Mike Faith: Yeah, he put his last name up for bid and so he said he’d change his last name from Saddler to what anyone ever paid him to do it for. So I remember I was in New York my marketing guy called my from San Francisco and said, “Look, this guy is selling his name. I want to buy it.” And I’ve learned the art of not always saying no too harshly. So I said to my marketing VP, I said, “You know, I’m not sure. Can you talk to our CFO about it,” thinking I know my CFO will say no. And he said, “Mike, I already spoke to him. In fact, it was his idea.” So I said all right. So I thought I had been snookered on that one. So next thing I know, we bought it overnight because it was the last night and it was $45,500 and my phone didn’t stop ringing with press wanting to ask us questions about why we did this and I think it was one of the most interesting publicity moves we had ever done. We had a lot of press on that. It was really worthwhile.
Andrew Warner: I saw he got a lot of press on it too and he really did change his name I think. Didn’t he do a video where he went to show how he changed his name on his driver’s license, et cetera?
Mike Faith: I don’t know about the video, but he told us lots of stories about what happened in that, so it’s very interesting. “Hey, my name is Jason Headsets.com. It’s kind of weird, isn’t it?”
Michael Cyger: In these four excerpts, we learned
1. Starting and growing a business doesn’t require the category-defining domain name,
2. But buying the category-defining domain name can give you credibility with suppliers and customers,
3. There are creative ways to acquire a category-defining domain name besides simply paying the asking price, and
4. Even though you may have great search engine placement and conversions, don’t underestimate the value of offline marketing and mainstream media coverage in your business marketing plan.
The full Mixergy.com interview is available at the URL listed below. In the full interview, you’ll also learn:
* How Headsets.com acquired its first customers via print advertising
* How the addition of Tootsie Rolls in order packages helped grow the business
* Why they both sell products and buy advertising on Amazon.com
* Why diversifying into other areas like airplane headsets didn’t work for them
* How to be gracious with people and ruthless with giving away your time
* And much more
If you thought DomainSherpa had a lot of interviews, go check out MixergyPremium.com. They have more than a thousand interviews and courses on every aspect of the startup life cycle, from developing a minimum viable product, to acquiring customers, to earning your first dollar. I’ve been a paying Mixergy Premium member for years, and I constantly find ideas that I can use in my publishing and ecommerce businesses.
If you enjoyed or disliked something about today’s show, please post a constructive comment below. I’d love to hear what you think.
Thanks for watching. See you all next time.
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