Bernie built an 8-figure electronics business, wrote the book “Flywheels and Feedback Loops: A Guide to Success for Amazon Private-Label Sellers”, and released the tools he used to automate the building of his own brand on Amazon. These tools are available at efficientera.com

In this episode, you’ll learn:

• How Bernie grew his team


• When to add team members to your growing amazon business


• When to buy and puchase more inventory


• Critical decisions that led Bernie to where he is today


• Payroll, accounting


• Why he started his e-commerce company, and where he is taking it to


• Hiring decisions


• Inventory control and strategic advice


• Where he see’s the e-commerce space going


• How he’s up against massive corporations


• His customer support is killer

And much more!

DAVID ALADDIN: Great to have you on the show, Bernie!

BERNIE THOMPSON: Oh, thanks David! Glad to be on!

DAVID ALADDIN: Can you take us to the beginning before pluggable, before everything? Where did your journey begin?

BERNIE THOMPSON: Yeah, you know, actually, I have actually always been interested in technology, so, I got a computer science degree, worked at IBM in the 1990s, and worked at Microsoft in the 2000s, and started an electronics company in 2009 selling on Amazon. And that’s led to that being a pretty successful business and also we developed a lot of tools to make that business successful and now I’ve got a second business offering that tools to other Amazon sellers.

DAVID ALADDIN: So, why did you decide to leave IBM and Microsoft in the first place?

BERNIE THOMPSON: Yeah, yeah, you know, I think, you know, every job has its pros and cons. Actually, I love big companies. Big companies are cool. You know, you’ve got a big support structure around you. You know, at IBM I worked on OS2 which is an operating system that probably everybody’s forgotten about at this point. And at Microsoft I worked on tail end Windows NT and Windows 98, and worked on tail end Windows XP and Vista. So, you know, I was a cog in a pretty large machine, but I got…my stuff got seen by a lot of people. But I love small companies. Especially when small companies are successful there’s nothing that beats it in terms of good experience.

DAVID ALADDIN: So, in 2009 you decided to quit and you started a startup that just started launching products on Amazon, is that before FBA was launched? I believe so, right?

BERNIE THOMPSON: No, actually FBA had already kind of been opened up at that point. So, we were able to bet on FBA from day 1, which was a key part of it. You know, I really wanted to focus on the technology, on the customer support, and not have to think about the other things. You know, frankly I am terrible at sales marketing. And so, being able to, you know, kind of hand that off to Amazon and the significant part of the logistics which is something I had really no experience in physical goods. I am a software guy. So, being able to handle in most of that physical goods aspect to Amazon, you know, it was a big deal. I mean, it really enabled me to focus on what I was good at and that probably made the difference in terms of the business being successful.

DAVID ALADDIN: And when you left your job, did you just put everything behind you and you just moved forward with the startup, and how much…how much capital did you have when you started the startup?

BERNIE THOMPSON: Yeah, you know, electronics is a pretty brutal category. You know, if you are going to do anything interesting or you know, even kind of innovative a little bit, you need to have pretty high MOQs and the average price that you are paying is pretty high. So, yeah, I mean, you know, it wasn’t quite a million dollars, but basically, you know, just under that was sunk into the business with cash by the first year or two. And it actually took five years to the point where I could get cash out of the business, which is, you know, it’s a long time.

DAVID ALADDIN: Yeah, I’ve started pulling out cash mainly cause…Yeah, my main income source now and in the event I get suspended, I want to be able to have some type of bubble to like just relax on and not worry about paying the bills or anything.

BERNIE THOMPSON: Yeah, no, it is tough. I mean, you know, we started in 2009, so here we are in year 8, and I’ve paid way more to the Government  in taxes, and I’ve got way more stuff sitting out in the warehouse, you know, that’s potentially unsellable if there’s an account suspension. There’s way more in either of those categories than the amount of cash I’ve taken out of the business so far.

DAVID ALADDIN: Let’s talk about the e-commerce company that you started. You started this company in 2009. Why did you go into electronics?

BERNIE THOMPSON: You know, I went into electronics because it’s my passion. So, you know, I…when I was working at IBM and working at Microsoft, what I was actually worked on, was device drivers and device technology. At IBM I worked on the graphics drivers for OS2. I worked on the original SVGA driver. In fact, as an intern I took the IBM VGA driver which was an assembly language and modified it to work with the new generation of SVGA cards, you know. And then, you know, later on in my carrier working at Microsoft I managed the USB and Bluetooth teams.

So, it actually starts with a passion for the particular technologies, the pluggable technology sales, which is basically USB and Bluetooth devices. So, you know, it’s quite different than a lot of other Amazon sellers. I didn’t do this as a money making opportunity first and then I picked what I did. I picked what products I wanted to do first and then just wanted a sustainable business that was profitable. And despite what I said about cash, cash is tough, but in terms of actual profitability, the business actually has been profitable every year since we started. Just the cash has to go back into the business because there are such heavy inventory requirements and you know the need to you continue moving new products while you are to keep up with the competition, especially, you know, the very fast moving competition from China.

DAVID ALADDIN: I came like from a software background as well and you know, switching to this e-commerce side of the business, take so much money to run these e-commerce businesses. I’m guessing going drivers to physical products must have been kind of like an eye-opening. It’s like: ah, I just sold a lot, but now I need to refill this inventory.

BERNIE THOMPSON: Yeah! No, it really was. I did realize how tough it would be on cashflow, you know. And Amazon, you know, has their landing programs which is not huge amounts of money, but basically, you know, I think out of the eight years we’ve been in existence, probably four of those years we took advantage of the Amazon landing to get over the holiday sales bubble on sale side and the Chinese New Year supply disruption that occurs every year. So, you know, that’s how we got through this. But, yeah, absolutely! I mean, I’ve been fortunate enough to do a lot of different things in my life.

You know, I had worked in number of chip companies; I worked at S3, the graphic ship companies in the 90s and DisplayLink, another USB graphic ship company in the 2000s. You know, and I’d seen…I mean, that’s perhaps an even more brutal business. In those businesses you have to sink a few million dollars into taping out a chip, you know, before you even get your first dollar of revenue. So, I’d seen a couple different businesses in terms of cash requirements. So, while I didn’t quite know what I was getting into, I had at least a little bit of inkling.

DAVID ALADDIN: I actually remember reading that in your book that you signed me, in the “Flywheels and Feedback Loops” with the Amazon loans that you are talking about just slightly earlier. You mentioned that you shouldn’t take out the Amazon loans due to the high percentage that they charge you?

BERNIE THOMPSON: Yeah, the rate isn’t super favorable. It’s the ease of the landing which is why you might take them and why we took them frankly. You know, if you go with the traditional bank lender, you are going to, you know, have a long process with a lot of paperwork and having to expose, you know, all of your financials to them, and they’ll have them all. But if you get them to say yes, you know, your rate is going to be lower than the Amazon rate. With Amazon it’s just, you know, they have a perfect inside into your…at least the Amazon part of your business. And they’ll just offer you a loan. They’ll just say: hey, we are willing to land you $200.000 and you just click okay, and click this agreement and boom-the money drops in your bank account. And it’s a short-term loan too. So, you know, once you choose your term, three months or six months, and pay it off, you don’t need to worry about it after that, where’s the bank it’s more kind of complicated long-term relationship.

DAVID ALADDIN: For me like the loan amounts are not like very large amount, but you are an eight figure salary, like how big of a loan did they offer you?

BERNIE THOMPSON: They have… The loans have not been too useful for us in recent years because they are just not big enough to move the needle.

DAVID ALADDIN: Exactly, yeah, it’s not worth it. But okay, cool. So, for five years you didn’t take a single dollar out of