Josh Paulson acquired his grandfather’s pet accessories company in 2015 when it was losing $25,000 per month. Three months later it broke even. The company, Quality Cage, manufactures products for pet owners and veterinarians.
When Paulson arrived, the company had 2,000 SKUs across multiple pet verticals. Focusing on chinchillas provided the long-term turnaround. “We niched down into only chinchilla products,” he told me.
Paulson and I recently discussed his journey, addressing custom manufacturing, organic marketing, and more.
The entire audio of our conversation is embedded below. The transcript is edited for clarity and length.
Eric Bandholz: What do you do?
Josh Paulson: My company is Quality Cage. We manufacture small animal cages and accessories for the pet and veterinary markets. Our primary market is pet chinchilla owners. We build a lot of cages and products that cover all the needs of a chinchilla through its 20-year life. We manufacture on-demand. You place an order on our website, and we make it and ship it. We carry about 60 days’ worth of raw materials.
The company is 55 years old. My grandfather was the previous owner. I purchased the business in September 2015. We manufacture everything. We do powder coating, woodworking, welding, and machining. We even cut our own cardboard boxes when we can’t get the right sizes.
I had no idea what a chinchilla was when I started. I had to learn about the different animal markets. Chinchilla was the one that kept popping up because there were no big competitors. All the existing companies had crappy products just built to make a profit. Nobody was solving the problem that chinchilla owners had. After about nine months in, we niched down into only chinchilla products.
Previously I was in food and beverage manufacturing. I made beer, wine, and cheese for about two years, and was trying to start my own business. I had a culinary mushroom-growing business on the side selling to restaurants.
I was attempting to raise money from investors for my mushroom farm. One of them told me to get 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 had no experience managing employees or businesses. I went from zero to a 55-year-old company.
The business wasn’t doing well. It had collected 55 years of process waste and mess and was poorly run. I decided to try it. Quality Cage was losing about $25,000 a month when I got there. Within about three months, I got it to break even.
Bandholz: You broke even from chinchillas?
Paulson: It took me a while to discover chinchillas. The website was Zen Cart. I scrapped it and started building on Shopify. I listed about 40 products, but we had 2,000. I knew we needed to niche and specialize. Manufacturing 2,000 low-volume products is insane. It’s impossible. We would’ve had to quadruple our prices to make that work with that many SKUs. I niched down by necessity.
At first, I chose rabbits, and then some PETA folks — People for the Ethical Treatment of Animals — hit us online and left a boatload of bad Google reviews, one star. I didn’t know what to do. Many comments were from people who hadn’t even experienced our products. I considered renaming the company.
I went to the rabbit people for help, and they said, “Tough luck.” The bird folks responded the same. But when I went to the chinchilla community, they responded positively. 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 were good products.
Chinchilla folks liked our stuff and liked that I was having conversations and trying to learn from them. They posted in all their Facebook groups, “Hey, go report all these false, bad reviews.” All of them got removed. I knew right then, “Okay, we’re going chinchilla only.” These people are awesome and passionate, and they were not being 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 hire the right help. But the beauty of manufacturing is there’s no limit to how efficient you can be. That’s what the competitive advantage is, but it is so hard. You’ve got employees. You’ve got safety. We probably have 20,000 processes that all go into building our products.
But there’s still marketing. There’s still accounting. Manufacturing is not for the faint of heart. I grew up loving to make things. I live to produce products that make people happy. It’s a core value for me.
A lot goes into making each product, so efficiency is everything. There are probably 10 components per product at 150 products right now. The chinchilla exercise wheel is one of our most popular items. It is made in the sheet metal, welding, fabrication, and woodworking departments. Then it goes through a powder coating process and is assembled. There are upwards of 200 processes in that one product alone. We can make it in about 20 minutes.
There were so many inefficiencies initially. I just started ripping things apart and putting them back 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 every week are from return customers.
Word of mouth has been the best. I interact in Facebook groups and talk to folks. If I see somebody 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 worked well over the years. That would turn into them posting two or three more times, and I’d send them a gift each time. The retail value of the gift ranged from $50 to $70. That snowballed hard.
Bandholz: How do you research new products?
Paulson: I usually figure out what people have built on Etsy or what they posted in a forum 20 years ago. I analyze and use my empathy skills, looking at what the animal needs. How do we plan for that in the cage designing process? I go very deep into that. And that’s what I did with chinchillas.
The first step for most new owners is Googling, “What is a chinchilla?” And then it takes nine months on average for those folks to get one. And then you have 20 years of caring for it. How do we plan for all of those steps? I want to care for the animals and provide the products they need.
Bandholz: Where can people buy your products and reach out?