How a Spy Business Started Small and Grew to $3M a Year

How a Spy Business Started Small and Grew to $3M a Year

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Allen Walton is the founder of SpyGuy Security, an online store that sells security and surveillance products—like hidden cameras, GPS trackers, covert audio recorders, and bug detectors. A completely self-taught entrepreneur, Walton attributes his business’ success to the quality of its website and his accessibility to customers.

Walton wrote down his plan for this business on a manila pad. “I wanted to make a minimum of $30,000, so I could pay my rent and have enough money to eat. If it didn’t work out, my backup plan was to go and work at In-N-Out for $11 an hour,” he said. “A few months after I started, I was making $30,000 a month!” Now, SpyGuy Security is on track to make $3 million this year.

Starting Out

Why did you start your business?

Back when I was 21, about seven years ago, I was living with my parents and I wasn’t going to college. There was a local brick-and-mortar spy shop that I ended up getting a job at. About six months later, I was in charge of the entire store. It turned out our average customer was just an average person with some sort of struggle within their family or their business. There are all sorts of reasons why people need spy stuff, but you can’t really get it at Walmart. If you don’t have a local spy shop, you have to go online for it.

At the spy shop, I was getting all kinds of great sales experience and reading a ton of books about customer service. I eventually got really fed up with my boss, a middle manager who was micromanaging me and making it really difficult for me to do my job and get sales commissions. So I ended up reading “The 4-Hour Workweek,” which changed my whole outlook. I decided to quit my job and start up a small online store that I ran out of my apartment. I did that about two years ago, and now we’re going to be doing about $3 million this year.

How did you get the funds to get going?

I’m entirely bootstrapped. Starting the company cost less than $1,000—that’s for the website, LLC costs, logo design, and everything else I needed to get up and running. I didn’t start with a lot of inventory. I drop-shipped a lot of my products, which means the manufacturer shipped products for me once I sold them online.

Have you heard of business credit?

Yes. I have a ton of business and personal credit cards. Having a business card was extremely important to me when I first started out because I was having cash flow problems. When you have sales on your website, you don’t get that money for a certain amount of time. My payment processor, because I was new, had a seven-day payout. That means if I sell $1,000 worth of stuff on Monday, I don’t see that money until next week. It was a really hard way to run my business. I was growing so quickly that the processor actually shut me off, because it thought I must be doing something sketchy. All of a sudden, my cash flow went dry and I didn’t realize it until it was far too late. That’s when I signed up for my first business card. Ever since then, I use business credit cards all the time.

Managing the Business

What’s most challenging about running your business?

When I started the company, for the first year, it was just me being a scrappy entrepreneur and doing everything myself. It was really hard to do, because I’d take customer phone calls nonstop, I’d answer customer emails … I actually have live chat on my website that messages me on my phone. I’ve closed thousand-dollar orders while sitting at In-N-Out eating lunch on the live chat. I’d pack orders and drive to the post office, which would take up two hours of my day. Back then, it was a struggle to give up some control so I could get things done and grow the company.

Right now, it’s simply being in charge of other people: hiring people, training people, teaching them how to interact with customers, teaching them how to sell the product, and delegating. It’s so hard to give up the control to someone else. Managing people is definitely something I need to work on.

How do you finance your business to manage cash flow or growth?

I recently switched to this new method of financial management called Process First. The problem for most small business owners is that they pay themselves last. They take revenue minus expenses, and that ends up being their profit. This new method is flipping that over, so you take a certain percentage of your revenue, and you immediately allocate that towards your profit, so you’re making money. Whatever’s left over, you can use on operating expenses. That’s the way I’m running my business now. I’m making sure that my business is working for me, and that I’m not working for my business. I’m constantly getting money put into my personal account so I don’t have to live in fear of not having money to pay the bills.

Do you use trade credit from your vendors or suppliers?

No. I’d really like to convince them to do that for me, but they do not offer credit terms. I am getting into manufacturing my own product line, which involves working with companies overseas. What they usually do is ask for 30% upfront when I place the order. Then, once they create everything in the factory, it passes a quality inspection, and they send it out, they ask for the remaining 70%.

What’s the biggest mistake you made in your first year?

I hired too late. I probably should have hired my first employee about three or four months earlier than I did. I was convinced I could keep doing everything myself. I was greedy and wanted that little extra. I didn’t like the idea of handing over any money that I was making. That was so stupid, because by the time I really needed help, I was already four months behind as far as training goes, which made things even more difficult.

What’s the smartest thing you did in your first year?

I set up a great website. It’s something that’s really simple and easy for my customers to navigate. Most of the competitors in my industry have websites that are garbage. I bought a theme that was really good-looking. I slightly tweaked it with no coding skills or anything like that. For $140, I already had a better website than my competitors that had probably spent thousands and thousands of dollars on theirs.

When customers are shopping around, they can get the product from many different stores. How do they decide which store to get it from? Our usability is really good and we have a phone number clear at the top if there are problems or anything. That turns shoppers into customers.

What’s the most rewarding thing about owning a business?

I don’t have to answer to anybody. I can do whatever I want. I don’t have anyone telling me what to do. If I want to just hop on a plane and fly to Japan right now, I could do it, because I run everything from my computer. Being able to control my destiny and have complete control of my finances is great. I don’t have to worry about losing my job. It’s very liberating.

Future Plans

What does the future look like for your business?

I honestly don’t know. I started this business as a “4-Hour Workweek” idea. I just wanted this to be a small lifestyle business. Now, it’s so much more than that. I have to do some soul searching to find out what I really want, because I’m working a whole lot more than I’d like to.

What advice do you have for someone starting a business?

I would recommend getting any book that looks interesting to you and that has good reviews or that has been personally recommended to you. I say that because books are a screaming bargain. You can get a book used for $5 on Amazon or at Half Price Books. Even if you just learn one thing from it, it’s going to be incredibly worthwhile. If you read enough and read the blogs related to marketing and your niche, you’re going to get really good, and that’s going to show to your customers.

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About the Author — Ashley Sweren is a freelance marketing writer and editor. She owns her own small business, Firework Writing (http://www.fireworkwritingonline.com/), located in San Jose, California.

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