Several years ago, I co-owned a company that sold hospitality supplies, such as cutlery, dinnerware, linens, towels, etc. to hotels in the Caribbean. Basically, we sold what hotels need to operate day to day and business was booming.
Here’s my story about launching a new business and the lessons I learned by doing almost everything wrong …
Because we are having success owning an international hospitality supply company, my partners and I figure the best way to grow our business is to step outside of our comfort zone and start a whole new company servicing the college student population. We will provide all the essential kitchen products (a toaster, silverware, plates, glasses, blender, wine opener, etc.) for a 1 or 2 bedroom apartment, all professionally packed in a couple of medium sized boxes. They will then be delivered to the student’s parent’s house a week or so before school starts, or within a day of moving in to their new, shiny apartment.
After having attended a few business conferences where we learn about the importance of validating your concept, we set about surveying college students on various campuses around Florida. The feedback is stunning. “Sounds amazing” one student says. “So convenient, and so smart” another would say. Even moms we track down are eager to get more details. We are so pleased to hear all the support, feel extremely confident, and decide to go all in. What could possibly go wrong?
We procure a list of incoming sophomore’s home addresses (which I can’t believe is for sale through the public university system). We design some nice looking postcards and have them all prepared for a postal assault about two weeks prior to the start of school.
We hire a talented web programmer to design a website. We brainstorm a name and come up with MyBoxability.com because we are marketing geniuses, and this name makes sense on so many levels.
We get so excited that we order $50,000 worth of product from our vendors.
The entire inventory arrives at our fulfillment center. Once unpacked, it looks like a mini Bed Bath & Beyond out there. I actually have a conversation with my partner about whether we ordered enough product. Is $50K enough? It will be a disaster when we run out once our marketing blitz hits.
Launch day finally arrives and we go live with the website, and fire up the Adwords campaign. We look at our calendar and figure the direct mail is now infiltrating mailboxes. Mrs. Jones will be ordering any minute once she has a free moment to hop online, manually plug in the URL from the direct mail, see what an awesome deal it is for “ONLY $299 SHIPPED!”, and then hand over all her precious credit card info to a company of which she’s never heard.
Hours painfully tick by and launch day ends quietly. Total orders … zero.
It seems like all our direct mail is lost at the post office or something.
“Did you put the right postage on them?” People are clicking but there are no conversions. “Is the website broken?”
Desperately, we head out selling in person over the next few weeks but apparently people would rather just go to Target with their kids as part of the “sending Katie off to school” experience. Deflated, we think “Oh, you mean you’d rather actually spend time with your kid during her final days at home, even if it means going to Walmart together?”
It feels like we are floating in space unable to control our direction. It’s a success void. Are we “failing”? I’ve never failed before.
After a few weeks my partner departs quietly after I explain he will have to work for free. I am left with literally tons of useless items at a fulfillment center that is billing me weekly. I ultimately liquidate it all for ten cents on the dollar 180 days later. Total loss is $100,000 after all is said and done.
Snapping back to the present day, I can now look back on it as a tremendous learning experience. It’s almost like paying for an MBA in “What Not To Do”. I definitely feel I earned my stripes that year.
Here are just a few of the many lessons learned:
- Never trust an in-person survey. People will tell you what you want to hear. Rather than saying “That idea stinks” they will say, “That’s awesome. You’ll be rich in no time!” because it’s too uncomfortable telling a stranger the truth sometimes. Then they will go about their own lives and never think about you again.
- The Internet is an unforgiving place if you have no market or don’t know how to market. Stick to what you know or find a partner who knows.
- Test, test, test. I should have run an Adwords campaign to see if anyone was even interested in giving me their email address for pre-orders before designing a website and buying inventory. Build the business as demand builds.
I would do so much differently today but that’s easy to say now. I had not failed before. As humbling as it was to completely fail, it taught me so much. So go forth and go all in. Just be sure you understand what you are getting in to as best you can, and protect the downside as much as possible.