College Friends Start Utah Fulfillment Center

Notes from Chris

Episode 2068

YYou know the old adage: don’t work with family or friends. You might have even heard it from me! Well, today’s side hustlers had heard it all before too… but decided to go ahead with their business idea anyway.

Nick Malinowski and Parker Barnes are friends from Utah. Nick graduated college recently and landed a job as a data engineer, while Parker is still in school working towards his degree.

Parker had a bit of experience working for a towel company packing orders in the warehouse where he saw first-hand how to run the business. He thought the concept was fairly simple and figured he could start an e-commerce fulfillment center out of his college house’s garage.

Meanwhile, Nick had worked in a fulfillment center one summer during high school, so he knew a bit about the business as well. But they didn’t know if the concept was as simple as it seemed on the surface, so they dug in and did some research about operations, costs, and competition.

After going down the Google rabbit hole, they learned that the fulfillment market—officially known as 3rd-party logistics—was pretty saturated. There were a lot of companies that did it. Good news was, the industry was fragmented and undifferentiated. That meant there was still room for someone new in their area.

Nick and Parker decided to cater to small businesses and startups, which appeared to be underserved. Their research showed that this target market was usually stuck with poor support and high order minimums, so they set up with an emphasis on better customer service. They knew they wouldn’t be able to compete on price because fulfillment is labor intensive, so they had to stand out in other ways.

But they had a big problem: they didn’t have any warehouse space. Furthermore, they didn’t want to commit to a lease when they didn’t have any clients. A real chicken and egg situation. Nick and Parker had to get creative ... and quickly.

After 500 cold emails, 200 Facebook messages and 50 Reddit direct messages, they secured their first clients, which included a local Utah Kickstarter that had secured 3,000 orders, a German map company, and few smaller brands. This gave them enough projected cash flow to lease some warehouse space that they found on Utah’s version of Craigslist. Luckily, the space came with racking already installed and a forklift the landlord let them use.

OTW Shipping was launched in November of 2020 and had positive cash flow two months later.

Nick and Parker were bootstrapping the business with their own money. All in all, they spent about $5,000 on legal fees, packaging, a security deposit for that space, and warehouse management software.

The first big hurdle they had to overcome was postage, which they had to pay themselves for the Kickstarter project with 3,000 orders to ship. Because they knew they’d be getting repaid soon, Nick and Parker borrowed $10,000 from their parents as a three-day loan. This was easier than applying for a credit line increase from their bank for such a short period of time.

To get more clients, they searched terms relating to fulfillment every day and responded to any posts using those keywords by giving helpful advice. People then messaged them for more details, and they’d go from there. The process worked so well that they’re still getting leads from comments they left on Reddit a year ago.

They also use SEO. One of their competitors has people searching for pricing and reviews every day. So Nick and Parker use keywords from those searches to get leads. They create content using their own analysis of their competitor’s services and pricing, which leads people to their business instead of the competition.

Building a business as friends has its challenges, but Nick and Parker make it work. They’ve found their friendship has helped them be better partners because they trust each other and can call each other out when needed without fearing any repercussions. As they put it, nobody’s going to get fired for being brutally honest. Having different viewpoints gives them a balanced perspective.

OTW Shipping hit $1M in revenue in its first 12 months in business, moving over 120,000 packages. The business recently re-located to a 20,000 square foot facility and Nick and Parker are on track to triple their revenue in the next year.

They now have two full-time employees, as well as a few part-time workers, and they’re serving over 30 clients. Nick and Parker are looking forward to running the business together for the next few years and then selling it for a new adventure.

 

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MENTIONED IN THIS EPISODE:

• Learn more about the two friends from their website, otwshipping.com.

SEE ALSO:

• Mom-Founded Startup Rents Infant Gear to Tourists: Busy mom in Chicago uses a peer-to-peer sharing platform to earn extra money for her family and help visiting parents get all the baby gear they need for their trip.
• Clothing Store Salesman Invents Baby Harness, Earns $100k Per Year: An innovative salesman creates a baby harness that benefits both parent and child, all the while creating a six-figure side income for himself.
• Paralegal Starts Side Hustle During Maternity Leave: After starting her hustle with a friend, this new mom buys out her co-owner and begins earning $10,000/month selling baby items.

Inspiration is good; inspiration combined with action is better. Now get back to work!

Yours in the revolution,