The 5 Key ways Tai Lopez used to grow his business
REV founders Alex Mehr & Tai Lopez image: REV
When Tai Lopez started Retail Ecommerce Ventures (REV) in 2018 he had a clear expansion plan.
If you are an ambitious small business owner and are looking to make the step up to the next level then you may well find that the methods he used will work for you.
In this article, we’re going to look at the key ways that Lopez used to expand his business and show how they can be used in your company.
You may find that one of these will do exactly what you want, or you may decide to combine the methods but whatever path you choose, we’re sure that these expansion ideas will help you achieve what you want.
In this post;
- Acquisition of a whole company
- Acquisition of just the IP
- Building your product roster
- Partnerships/Joint Ventures
- Building a platform
- Organic expansion
Acquisition of a whole company
Buying a complete business is arguably the quickest way to start up a business from scratch or expand your current enterprise.
It means that you buy the whole thing, lock stock and barrel. One day your a single small business and the next you are a group!
The advantage is clear, speed.
Buying a whole company gives you an immediate jump in turnover, means that you are up and running straight away and you suddenly have access to a whole new set of customers.
This is exactly the approach that Lopez took when he bought Franklin Mint, a company that was trading but wasn’t achieving stellar performance.
The aim of buying a whole company is to either add on something that will act as a cash-cow and give your group access to ready funds for further expansion or to purchase something that you can build up to be bigger and better than it already is.
There are some drawbacks to this, however.
Of course, buying a business that is operating is going to cost more than starting from scratch and there may be some legacy items like debt or poor reputation that may hangover.
The lawyer’s fees will probably make you cry and as Forbes reports, most acquisitions fail to achieve what was originally planned.
So the key for small businesses here is to be selective. Remember that for a trading company you will be paying over the odds so make sure it is something that is going to add real value to your group very quickly.
And don’t overestimate the benefits you’ll gain from integrations, as they rarely pan out as expected.
Acquisition of just the IP
When Tai Lopez bought Modell’s out of chapter 11 bankruptcy back in July 2020 the fanfare suggested that he was buying the whole company but business analysts quickly pointed out that he’d done something much more canny than that.
In fact, REV had purchased only the Intellectual Property(IP) of the business leaving the debt-laden, brick and mortar side behind.
What REV had identified was the parts of the business that were adding the value and the parts that were dragging it back.
Modell’s was a particularly well-loved supplier of sporting goods but it had become tied into long and expensive store leases at a time when online sales were booming.
By buying the name, the trademarks and more importantly the customer lists, Lopez was able to bring into his stable the value-add assets and then turn these into a new online-only company.
The downside of this is that you may well lose knowledge and experience of the business from staff that leave through the bankruptcy process but if you already understand the business you should be fine.
So the message for small businesses that want to expand is to remember that whatever the size of your target, you don’t necessarily need to buy it as a whole when it is in bankruptcy or liquidation. In fact, you can often cherry-pick just the bits that are important to you.
Building your product roster
The REV group has bought a series of different companies across a number of retail sectors.
From Modell’s sporting goods, through fashion retailer Dressbarn to electronics supplier Radioshack, the group has started to take something of a haphazard feel.
But the REV strategy is simple, buy a series of non-competing brands that can then be introduced to existing customers of its stablemates.
For example, someone who buys clothing from Dressbarn may also be interested in food from Farmers Cart (another of REV’s brands) or sports equipment from Modell’s and so you’ll find cross-selling on all of the company websites.
By buying only one of each brand Lopez has ensured that there is no customer cannibalisations with companies in the same group each vying to sell a dress to the same customer!
Building a complementary but non-competing product roster in this way is an excellent method to grow your business and doesn’t necessarily require you to go out and buy up a whole company.
Think about ways that you can introduce complementary lines into your store or add on services that your customer list may also be in need of.
Although we have spoken of REV as being a one-man-band it is, in fact, a triumvirate of three experienced executives.
As Executive Chairman, Tai Lopez is joined by CEO and ex-NASA scientist Alex Mehr, the founder of dating app Zoosk and who sold that business for a cool $258m.
Also on the board of REV is fellow Zoosk founder Shayan Zadeh, who now acts as CEO of Dressbarn.
The development of the group with executives that have complementary experience has brought in the benefits of a partnership that is also available to smaller enterprises.
As well as a partnership of humans, the group also runs its brands in many ways on a joint venture basis.
Development of operational assets like websites (see Platforms) and marketing are done between the brands as in many ways the way that they do business is very similar.
For smaller businesses that have smaller resources, a joint venture or partnership is an excellent way to build but share the cost and risk.
Finding a business that has a service that could help buyers of your goods (think carpet fitters or kitchen installers), or even entering into a marketing agreement with a supplier could help here.
Building a platform
One of the interesting aims of REV is to produce a platform rather than a website.
What this means is that just like Amazon, they intend to allow third-party sellers to use their website to sell their goods.
REV will have no involvement in the process as all the listing and fulfilment will be carried out by the seller, just like Amazon.
This means that REV takes a commission for every item sold but does little of the work save for marketing.
Now we’re not suggesting that small companies could set up an Amazon-style sales portal overnight but the principle is still the same.
Could you carry items from fellow entrepreneurs on your website for a fee?
There would be no cost of stocking, you don’t have to process the sales or deliver the items, all that is handled by your colleague company.
It’s a great way of increasing your turnover and offering a wider selection of items for your existing customers but with little risk and no cost to you.
Since buying Dressbarn REV has built the business using its online sales experience to the extent that it is now experiencing a 165 per cent increase in turnover and is forecasting sales of $165m.
This kind of organic growth (often referred to as bootstrapping) is incredibly valuable for businesses and whilst it doesn’t have the cachet of buying out a household name there is a lot to be said for it.
Simply growing your business by giving your customers the products and service they require is an excellent way of fostering customer loyalty.
You don’t need to go out on a limb and use up your cash reserves (or even go into debt) to fund the purchase of another business.
And you are doing what you know. There’s no need to get involved with Joint Ventures or partnerships, the business is all yours.
The downside, of course, is that it takes longer but you may decide that this is a small price to pay for the reduction in risk.