In just a few decades, starting a business has become so decentralized and “easy.”
It is available to anyone who is willing to put forth an honest effort, work hard, and has internet at home – or even a public library.
But starting a company still requires a lot of hard, committed work. Starting a consumer product company is even harder. In the not too distant past, aspiring entrepreneurs had it even harder. No Google to research competitive products. No Alibaba to access thousands of manufacturers around the world.
No online marketing giving you access to hundreds of millions of eyeballs around the world. And Direct-to-Consumer meant mail-order catalogs.
In 2017, I started a consumer goods (pajama) business that quickly became a Top 1% Shopify business and within 12 months was in the 7-figure realm. In just one short year, I learned many valuable lessons about starting an online-centric, consumer goods brand. As I do at the beginning of each new year, I thought a lot about what I’ve learned over the past year, what I want to take away from my experiences, and even what I wish I had already known. Below are six key insights I wish I had known.
1. Forecasting inventory is hard!
Anticipating the demand for your product is hard. You can run as many so-called ‘sophisticated projections’ as you want, but what you’ll find is those are frequently wrong. After all, in the beginning, your projections are typically wishful thinking (hopefully based on some level of research).
Project too little inventory and you will run into back-order purgatory. This leads to money left on the table, upset customers, and stymied growth. A few years ago drop-shipping was the new big thing. It was a marvelous way for entrepreneurs to start a business, never pay for inventory – or even touch or see the product, and even have someone else do the fulfillment. That obviously has some severe limitations though, namely the inability to build your own brand. More recently, a better way to start a business began to grow. Print on Demand (PoD) is the safest, easiest, most affordable option to start a consumer-based brand now. Many vendors exist, and with “Print on Demand” products, I was able to expand beyond my core product offering and sell additional products at literally no upfront cost to me. Most surprisingly, having the ‘secondary’ Print on Demand products increased the sales volume of my core products (more on that in point #4).
2. Investing in inventory is expensive
Thankfully there are a few ways in which an entrepreneur can start her business nowadays. With the advent of crowdfunding, getting started can be a lot easier and more successful. That being said, it’s not like a Kickstarter campaign is any walk in the park. Even if you do successfully pre-sell your product, you’ll be surprised by how quickly it goes and how much will be tied-up in inventory. To stay ahead of demand, if you follow the traditional route, your biggest expense will undoubtedly be inventory.
3. I wouldn’t pay myself for the first year
With product-based companies, nearly 100% of your money will go to inventory. Seeing the number of digits in total revenue might make you feel good, but the truth is that if you get too greedy and start putting some of that money in your pocket too soon, you may quickly find yourself tight on cash flow, forced to get in business with dangerous loans, or worst of all – out of business and looking to get another job. Unless you’re independently wealthy, consider how you want to start your business and what kind of business you want to start. It can be a long, lonely, poor road for a while.
4. Offer Multiple and complementary products
When you’re in e-commerce and dependent on online digital ads, you will likely monitor and obsess over your Return On Ad Spend (ROAS) like it’s Facebook circa 2005 or Instagram in 2011. Of course, you can and will learn to optimize your ad performance. However, one of the best practices that is too often ignored is to provide opportunities for cross-selling and up-selling. If a customer that comes to your site for a primary product is introduced to a compatible and cool ad-on product, you just increased your order value and thus your ROA. If someone comes to buy a cool hat on your site, at check-out show them a t-shirt that will go with it to improve your margins and revenues.
5. Hustle. Hustle. Hustle
Entrepreneurship can be an unforgiving, difficult road to travel (especially alone). There will be peaks, valleys, more peaks, and valleys you didn’t even know existed. You’ll likely wake up feeling like you are ready to conquer the world, hit 8am and feel defeated, win something big by 2pm, then stop working at 8pm feeling defeating yet again. Relax, exercise, spend quality time with the people you care about, and recommit to putting in that same effort the next day. Take comfort in knowing that millions of others have gone through what you’re going through before. You can do this!
6. Give time and attention to your efforts
There are two ways you can go: Forward or Backward. If you do not actively work toward progressing and growing your business, the chances are very high that it will go backwards (i.e. fail). That doesn’t mean you need to focus on it all day every day – hello Side Hustles! – but if you want it to grow and succeed, you need to commit and give it attention. Like almost anything good in life, it requires grinding, attention, and definitely some patient waiting.
Thatcher Spring is a Columnist at Grit Daily. He is the CEO and a cofounder of GearLaunch.