Josh Paulson took over his grandfather’s pet accessories company in 2015 when it was losing $25,000 a month. After three months, it broke. The company, Quality Cage, makes products for pet owners and veterinarians.
When Paulson arrived, the company had 2,000 SKUs across multiple pet verticals. Focusing on chinchillas provided a lasting turnaround. “We niched down to just chinchilla products,” he told me.
Paulson and I recently discussed his journey, addressing custom manufacturing, organic marketing, and more.
The full audio of our conversation is embedded below. The transcript has been edited for clarity and length.
Eric Bandholz: What are you doing
Josh Paulson: My company is Quality Cage. We manufacture small animal cages and accessories for the pet and veterinary markets. Our main market is pet chinchilla owners. We build many cages and products that cover all the needs of a chinchilla over its 20 year life. We work on-demand. You place an order on our website, and we make it and ship it. We carry around 60 days worth of raw materials.
The company is 55 years old. My grandfather was the previous owner. I bought the business in September 2015. We do everything. We do powder coating, woodworking, welding, and machining. We even cut our own cardboard boxes when we couldn’t get the right size.
I had no idea what a chinchilla was when I started. I had to learn about different animal markets. Chinchilla continues to thrive because there are no big competitors. All existing companies have crappy products made just to make money. Nothing solves the problem of chinchilla owners. After about nine months, we ended up with chinchilla products.
I used to be in the food and beverage industry. I’ve made beer, wine, and cheese for about two years, and I’m trying to start my own business. I have a culinary mushroom-growing business on the side that sells to restaurants.
I am trying to raise money from investors for my mushroom farm. One of them told me to take six months of managing a business, and he would invest. Three days after that meeting, I moved to Portland, Oregon, and took over my grandfather’s company. I have no experience managing employees or businesses. I went from zero to a 55 year old company.
Business is not going well. It has collected 55 years of process waste and mess and is poorly run. I decided to try it. Quality Cage was losing about $25,000 a month when I got there. In about three months, I got it to break even.
Bandholz: Did you spoil even the chinchillas?
Paulson: It took me a while to discover chinchillas. The website is Zen Cart. I scrapped it and started building on Shopify. I listed about 40 products, but we have 2,000. I know we need to niche and specialize. Making 2,000 low volume products is insane. It’s impossible. We had to quadruple our prices to do that with so many SKUs. I am niched down by necessity.
At first, I chose rabbits, and then some PEA people — People for the Ethical Treatment of Animals — hit us up online and left a boatload of bad reviews on Google, a star. I do not know what to do. Many comments are from people who have never experienced our products. I thought about changing the company name.
I went to the rabbit people for help, and they said, “Tough luck.” The birds responded the same way. But when I went to the chinchilla community, their response was positive. There are Facebook groups of 20,000 chinchilla lovers. We made some chinchilla products, but it wasn’t a big market for us then. However, they are great products.
The Chinchillas loved our stuff and I loved that I was talking and trying to learn from them. They posted in all their Facebook groups, “Hey, go report all these false, bad reviews.” They were all deleted. I knew then, “Okay, we’re only going to chinchilla.” These people are wonderful and passionate, and they are not taken care of.
Bandholz: Manufacturing seems like a tough business.
Paulson: For sure. You have to be crazy to get into manufacturing. If you have money, you can get the right help. But the beauty of manufacturing is that there is no limit to how efficient you can be. That’s the competitive advantage, but it’s very difficult. You have employees. You have salvation. We probably have 20,000 processes that all go into building our products.
But there is still marketing. There is still accounting. Labor is not for the faint of heart. I grew up loving making things. I live to make products that make people happy. This is a core value for me.
A lot goes into making each product, so efficiency is everything. There are probably 10 parts per product out of 150 products now. The chinchilla exercise wheel is one of our most popular items. This is done in the sheet metal, welding, fabrication, and woodworking departments. Then it goes through the powder coating process and is assembled. There are more than 200 processes in just one product. We can do it in about 20 minutes.
There were a lot of inefficiencies at first. I just started tearing things apart and putting them together.
Bandholz: Talk about your marketing.
Paulson: Most of our marketing is organic, not paid. Despite our growth, we still have a 40% returning customer rate. Forty percent of our orders each week are from returning customers.
Word of mouth has been the best. I interact with Facebook groups and talk to people. If I see someone post about getting a Quality Cage, I look at what they ordered and what product they didn’t buy, and then I send it to them as a gift. That got better over the years. That will make them post two or three more times, and I’ll send them a gift each time. The retail value of the gift ranges from $50 to $70. That snowballed a lot.
Bandholz: How do you research new products?
Paulson: I usually know what people built on Etsy or what they posted on a forum 20 years ago. I analyze and use my empathic skills, seeing what the animal needs. How do we plan for that in the cage design process? I went too deep into that. And that’s what I did with the chinchillas.
The first step for most new owners is Googling, “What is a chinchilla?” And then it takes nine months on average for those people to get one. And then you have 20 years of nurturing for it. How do we plan all those steps? I want to take care of the animals and give them the products they need.
Bandholz: Where can people buy your products and interact?
Paulson: QualityCage.com. I’m on Twitter, @amagijosh.