Lessons Learned: Paddle Board Company Encounters Sharks, Success

Imagine seeing a group of sharks. Can you lose your nerve?

Stephan Aarstol nearly did. He had nothing to lose but rejection by pitching his enterprise, Tower Paddle Boards, to the wealthy angel investors around the TV series Shark Tank.

Aarstol, who grew up in Washington, received a B.A. in business at Western Washington University in Bellingham and an M.B.A. in the University of San Diego, Calif. in 1999.

He heard about Internet advertising during his five years in AuntMinnie.com, an internet portal for the radiology market.

A keen poker player, Aarstol created, in 2003, BuyPokerChips.com, selling high-end poker chips directly to customers, sourced from producers that made chips .

“It was a highly automated business, earning half a million dollars annually for only 10 to 15 hours per week, run by me and another worker to deal with the shipping, customer support, marketing, and the site,” stated Aarstol.

He also set up other market sites selling children’s developmental toys, and drink tokens, in addition to an online marketing firm.

In early 2010, he travelled paddle boarding in La Jolla, Calif. and observed that the broad age range of fans — and a gap in the online sector.

Aarstol applied his poker chip business model to Tower Paddle Boards, which he started online in June 2010. Gross revenue for this year was $3,000.

Gross earnings for 2011 had reached $100,000 from June, when he pitched his company to the TV series Shark Tank, which is made up of panel of wealthy investors, who listen to solicitations from companies seeking funding.

Billionaire Mark Cuban saw potential in Aarstol’s company, investing $150,000 for a 30 percent share.

Cuban’s participation and the resulting publicity helped increase gross earnings to $1.7 million in 2012, $3.1 million in 2013, and approximately $5 million in 2014.

“We have been profitable since day one,” said Aarstol.

Shopping Carts; Order Management; Hosting

Aarstol has employed shopping cart supplier Volusion for more than a decade for each his site companies because he appreciates its ease of use and array of templates.

“I have always had a terrific experience with Volusion for our shopping cart, order management, hosting and processing. It is a comprehensive ecommerce solution which costs only $150 per month per site,” Aarstol stated.

“We would not use anything else.”

Web Design

In 2010, he compensated Volusion $1,200 to hire a designer who had worked on his other sites six years before, to design the Tower Paddle Boards site, integrating some of Aarstol’s beloved elements and functions by his other companies.

In 2013, Aarstol held a website redesign competition on 99designs. Com, a design market. The purpose of the redesign was to increase Tower Paddle Boards’ conversion speed.

“We selected the golden design package and received about 30 designs. From these, we chose a winner to redesign the web site,” stated Aarstol.

The project cost between $2,000 and $3,000. Conversions increased by almost 50 percent by enhancing the product detail pages with larger images, revised button positioning, bullet point overviews, including videos, and client testimonials.

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Credit Card Payments

Aarstol uses credit cards and PayPal, but prefers clients to use PayPal, which costs less than credit card payment processing.

“PayPal is a complete no-brainer for ecommerce businesses, especially if they do business in different countries. About five percent of our business is international,” said Aarstol.

He makes his paddle boards easier to manage — the average selling price is $700 — by providing funding through PayPal Credit, which allows qualified customers to purchase now and pay later.

“Since we implemented PayPal Credit in 2013, people using it spend an average of 36 percent greater than clients paying by other procedures,” explained Aarstol.

Employees

A year after launch Tower Paddle Boards, Aarstol hired his first employee.

“She did everything — answering phones, helping arrange shipments, building up our advertising and social networking efforts,” Aarstol stated.

Tower Paddle Boards currently has eight full-time workers working from its San Diego, Calif. warehouse, office, and manufacturing facility.

Search Engine Optimization

Stephan Aarstol

“I cut my teeth on search engine optimization in my first job and continue to do it myself,” Aarstol stated.

He started to advertise on AdWords in 2014. Now, 5 to 10 percent of earnings comes from paid press — Facebook advertising and AdWords.

SEO is lots of upfront work, but if you examine the perpetual price, it pays off,” Aarstol stated.

Shipping

Until 18 months ago, Aarstol did the transport from a”fairly spartan, windowless” 750 square foot place in San Diego, Calif. that served as his warehouse, open-space office, and showroom.

“Then we started a separate warehouse and small manufacturing facility for custom boards, also in San Diego,” Aarstol stated.

He uses UPS and U.S. Postal Service for shipments, and provides free delivery for all online orders over $50.

Product Sourcing

In the U.S., most customers start paddle boarding by leasing boards at beaches, lakes or rivers.

“We used to do weekly rentals, but it was little quantity, so we’ve discontinued this. If somebody’s interested, we guide them to local rental companies which carry our boards,” Aarstol stated.

“If they love paddle boarding, clients can then purchase their own board from us for about half the price of a retail outlet.”

Aarstol sources most of his boards from Asia but has started to create a little run of high-end, custom-made planks in his San Diego facility.

“We utilized PayPal Working Capital to borrow $25,000 to stock up on inventory,” Aarstol stated.

PayPal Working Capital gives companies that currently process payments through PayPal access to the funds they need more quickly and easily than conventional loans.

“They provide customized loans according to your company’s PayPal cash flow history. So it wasn’t tough for us to get,” Aarstol stated.

Inventory Management

Aarstol oversees Tower Paddle Boards’ stock on Excel spreadsheets.

“We know about what the requirement is going to be in our peak season of May to September, but it is still really challenging when we are growing month-to-month,” Aarstol stated.

He believes just-in-time stock management functions for mature businesses, but is not as predictable for startups.

“We now build up bigger than average inventory buffers over anticipated demand and utilize funds from PayPal Working Capital to buy inventory and inventory,” Aarstol stated.

Accounting Software

Aarstol uses QuickBooks and utilizes an accountant and bookkeeper.

“QuickBooks could be incorporated with Volusion but we have not taken advantage of the plug-in yet,” Aarstol stated.

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Social Media

Tower Paddle Boards has social networking accounts with Twitter (10,100 followers), Instagram (9,100) Facebook (6,290), Pinterest (3,070), and 21 videos on YouTube.

Aarstol believes successful social media takes a compelling value proposition.

“If you’ve got 10 times the value proposition of everybody else out there, people will find your product,” Aarstol stated.

“We see social media as word-of-mouth advertising empowered by technology. If we treat our clients really well, they’ll spread the word.”

Aarstol also utilizes social media to react to customers immediately with any queries they may have.

“Clients can reach us any way they prefer — by telephone or via Twitter. We mostly use social media to discuss interesting content and engage with clients, not so much for selling,” Aarstol stated.

Expense Control

Aarstol was frugal with lease, paying only $700 a month until 2012 because of his little warehouse and office, two blocks from the beach.

He advises business owners avoid renting main street offices should they want to control expenses.

“You will find bargains in beach towns. After we were doing $1.7 million in earnings, we transferred into a 1,500 square foot area for $1,900 per month which was one block from the beach, rather than $3,000 per month downtown,” Aarstol stated.

Stephan Aarstol appeared on Shark Tank in 2011.

Biggest Mistakes

Aarstol was inexperienced at recruiting and managing employees before he began Tower Paddle Boards.

“Selecting the right people and managing them is a skill that is completely different from being an entrepreneur. I have made a few mistakes in this respect,” Aarstol stated.

The business’s quick growth necessary support for sales, answering phones, advertising, and shipping. Aarstol hired a woman to do all this.

He soon discovered that a”jack of all trades worker” suits a particular amount of business development, and then personnel with specific, higher-level abilities becomes necessary.

“Getting people motivated and producing the ideal dynamic within the business was difficult for me to learn and get accustomed to quickly,” Aarstol stated.

Biggest Successes

In July 2014, Tower Paddle Boards was named San Diego’s fastest-growing private business by San Diego Business Journal.

“We’ve also been known as one of Mark Cuban’s most successful Shark Tank investments by Individuals and Entrepreneur magazines,” Aarstol stated.

Aarstol continues to profit from Cuban’s participation.

“He provides advice and counsel on larger picture strategy. Mark spent in Tower Paddle Boards since we sold online, direct from producers, and did not have the overhead of a retail store,” Aarstol stated.

“It was Mark’s suggestion that we begin making custom boards and we are just beginning to ramp up that,” Aarstol stated.

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