Lessons from Bankruptcy Drive Ecom Agency Founder

Josh Durham knows the downside of entrepreneurship. He founded an ecommerce company in 2015 and quickly grew revenue. Then it went out of business.

He told me, “We made weighted blankets. We scaled that business to about $6 million a year. Then it tanked overnight. It was brutal. I had to fire everyone.”

Fast forward to 2021, and Durham has bounced back. He launched a successful marketing agency, Aligned Growth Management, that builds on his ecommerce experience. He and I recently discussed his journey, from early success to bankruptcy and back.

Our entire audio conversation is embedded below. The transcript that follows is edited for clarity and length.

Eric Bandholz: Tell us about your journey to Aligned Growth Management.

Josh Durham: I got into the ecommerce game in 2015, when I started my first company. It was called Weighting Comforts. We made weighted blankets. We were the first weighted blanket for adults on the market. We scaled that business to about $6 million a year. Then it tanked overnight. It was brutal. I had to fire everyone.

Bandholz: What happened?

Durham: The market fell out from under us. We didn’t evolve on our product well. Manufacturing in the States was our biggest downfall. Our competitors had automated and outsourced production to China. They were making weighted blankets for $5 each. My cost was $40 to $50. Our margins vanished as soon as Target came on the market with their own version.

Bandholz: Sales just disappeared?

Durham: Yes. In the fall of 2018 we started seeing indicators. It was two weeks from Black Friday, and we didn’t have enough cash for payroll. Ultimately it was a poor product-market fit. Plus, we tried to go from $2 million a year in revenue to $10 million. That was too ambitious.

I co-founded the business with my mom. It required a lot of debt. We borrowed almost $1 million trying to keep it open. That was a scary situation. We closed in May 2019.

We sold the trademark and the email list to a digital marketing agency that used it as an in-house brand. But the proceeds were not enough to pay the debt.

Bandholz: You signed personal guarantees?

Durham: Yes, personal guarantees for a bank line of credit.

Bandholz: It’s like the faster you grow, the more money it takes for inventory. The more you tie your cash up, the less money you have for marketing. So you’re stuck with all this inventory but no capital to sell it.

Durham: Yes, it’s a vicious cycle. And then you do a sale every two weeks. It’s a spiral. It’s deadly.

Bandholz: You mentioned your mom. Was she carrying any of that debt?

Durham: Yes, she had a portion of that debt for sure. Vendors did, too. It was all personally guaranteed.

Bandholz: How do you pay off a million dollars of debt?

Durham: One bite at a time. I had to file personal bankruptcy in Tennessee. I filed in September of 2019.

Bandholz: Everyone talks about the winning stories. But yours is another side of entrepreneurship that’s worth discussing.

Durham: It was a dark, dark time. When you’re scaling a business, you have revenue coming in. It’s an exciting time. I made Forbes lists during that time. Then I was out of business within nine months.

It was mental exhaustion. I was trying new things every week to keep the business alive. Our overhead was very expensive. We shifted employees to part-time and tried to make our marketing more efficient.

I ended up in bankruptcy court. It was a sad experience overall. I had hardly any cash, just enough to live on for a couple of months. I needed a job. But the job became a healing experience. Just being able to settle down, focus on my health, get back mentally, and rebuild.

Bandholz: You’ve bounced back, dug yourself out of the hole.

Durham: After the bankruptcy I was trying to decide what to do. Should I start an agency or freelance with other ecommerce brands? But I met Peter, the CEO of Groove Life, which makes outdoor-focused rings, belts, watch bands. He said, “Why don’t you come work here for a year?” So I joined Groove Life as head of growth.

Bandholz: Groove Life is very successful.

Durham: For sure. The company’s strong product margins allow for a lot of ad spend and investment in acquiring customers. The founders have done a great job building a brand. They focused on the guy who loves to hunt, fish, and work with his hands. More blue-collar, middle America. Everyone else in the market focused on the CrossFitters, the fitness influencers, that kind of thing.

The company also has an amazing guarantee — a lifetime warranty. They stick behind their products.

Bandholz: How long were you with Groove?

Durham: About a year and a half. I was in a transition period. I got married last year and began rethinking my priorities. I love entrepreneurship. I’m passionate about it. I love providing value, creating financial freedom for myself. I love helping others. So I struck out on my own and launched Aligned Growth Management, a marketing agency.

Bandholz: Ad agencies, from a brand perspective, can be frustrating. Everyone promises to scale your brand like crazy, but very few can. How do you help your clients grow?

Durham: First, we try to set realistic, healthy expectations. We’re not going to create a big win from one tactic alone. That’s the trap a lot of agencies have created for themselves. It’s rarely one thing that drives the needle.

We try to add value beyond ad buying. There’s a lot more to growing an ecommerce business than just having the best Facebook ad. It starts with the product. That’s the biggest differentiator. A founder with a marketing mindset while conceiving the product sets up the business for success, versus creating the product and then figuring out how to sell it.

We focus on three channels: Facebook, email-SMS, and an ambassador program.

Clients with strong internal stakeholders see the most success. Instead of outsourcing all responsibilities to the marketing agency, they have their own strategy, game plan, promotional calendar. They have new products coming out with campaigns planned. Many brands have no real marketing strategy. They send emails campaigns randomly, for example, whenever they can get content.

Bandholz: Are there still opportunities to scale on Facebook with the loss of data?

Durham: Facebook’s on-platform reporting is bad with iOS 14 changes. I like to split performance metrics between a lead measure and a lag measure. Lead measures are CPMs, click-through rates. That data is not going to be wonky.

The lag measures are return on ad spend, cost per purchase, number of purchases, that kind of thing.