One of my readers commented about “that horrible catch-22 where my husband can’t cut his ‘real job’ hours until the business is making more, but the business can’t make more until he cuts his ‘real job’ hours”. This is a pretty common situation and it’s where I was when I decided to focus on my own business full time. Here are three things I think you must do to make the transition work.
1. Have cash reserves
There’s no way around this, you are going to have to assume some risk. If you don’t want to do that or can’t do that you are not going to be able to quit that day job. Don’t expect investors or strangers on Kickstarter to give you that money when you are taking no risk yourself and not putting up your own money. Things might get bumpy here and there once you go to work for yourself full time and you need to be sure you can pay your bills if that happens. Consider options like a home equity line of credit (interest rates are lower than a credit card and the interest is tax deductible in the US), retirement savings, or personal savings. I suggest having access to about 6 months worth of income at a minimum. It’s possible to get outside investors or a business loan but with no collateral or capital of your own on the line that can be pretty difficult.
Make a list of your monthly expenses. How much do you absolutely HAVE to make to survive? What could you cut back on if you had to? Be sure to account for costs like health insurance (if applicable) and taxes. Once you have this information figure out how you’ll fund 6 months of those expenses with zero income if you had to. If you can’t get access to that much cash now focus on a plan to save it up.
2. Have a specific plan to replace your old income
I can’t stress the word specific enough. How exactly are you going to earn the money and how are you going to somewhat accurately make those projections? Don’t say “sell stuff”. What exactly are the sales goals you need to make? When I decide to work 100% on Ex-Boyfriend we made a list of every upcoming pop up retail event we were definitely doing and what we expected sales to be (having done many of those events in previous years). We made a list of every wholesale lead and account we had and what we expected those to generate for us income-wise based on order history and current talks with those customers. We looked at our online sales from previous years and where the sales came from (ads, SEO, media placements, etc.) and made projections about where we expected online sales to be this year based on past performance. We had lots of specifics on costs and sales history that allowed us to forecast expected income.
We set goals that were reach, expected and bare minimum so we knew what we wanted to do, expected to do and absolutely had to do sales-wise to replace income that was being given up from another source. Every step along the way we were comparing our projections with the reality. Sometimes we made the reach goal, sometimes we made the bare minimum. Rarely (though it happened) we didn’t make the bare minimum of expected money from an income source. On average though we made our reach and expected numbers, which is what needed to happen.
If you find yourself struggling with the specifics of how exactly you’ll earn the requisite income, you aren’t ready to quit your day job.
3. Have a cut off number/date
Have a back up plan for what you will do if you aren’t meeting the expectations set up in step 2. How low can you allow the cash reserves to get before you have to get a new job? At what date must you be profitable by to continue with your plan?
If you aren’t making your sales goals you will have to find work again, you want to make sure you don’t allow your cash reserves to dwindle so far down that you’re desperate and destitute. It’s important to always compare your goals and projections with reality to make sure you’re staying on track.
Most business websites will talk at you endlessly about online marketing. How to do advertising, how to do SEO, how to optimize for mobile, etc. Let me preface what I’m about to say with this: These are all worthwhile things. You absolutely can see tremendous benefits from all of these tools and it’s good to know about these things and understand how to use them and why you might want to invest in them.
Now all of that said, in the last 6 months I’ve paid a lot less attention to online marketing. I haven’t spent a ton of time on our SEO, I haven’t been running a ton of ads, I haven’t been desperate for more Twitter followers. Despite this digital neglect our company has grown tremendously this year (even though we focused on those things more in previous years).
What the heck? How are you growing if you’re not blowing up the internets with your marketing?!
When 2012 started my partner and I talked about what we wanted for our business and none of the things we said had anything to do with the internet. We said “I want to be on TV/movies, I want to do events and I want to be in the fucking mall”. (We say “fuck” a lot around here.)
Just about all businesses have limits to their resources. The bigger you are the higher the limits are, but we pretty much all have them. We didn’t feel like we had the resources to do everything under the sun to grow the business so we settled on picking 3 things that we were going to hammer away at this year and really focus on them. That meant backing off some of the resources we’d sunk into online marketing in previous years.
Why did you pick those 3 things?
We really have one primary driver in our business, we want to be famous. We want everyone to know and love our brand. We want to be everywhere and have an army of loyal fans. So we had to pick priorities that served that goal. We didn’t just want sales, we wanted converts.
Wholesale was definitely our top priority this year. We picked it because we know when people see our products they fall in love. Our reasoning was the more stores carrying our line, the more people will see the products and fall in love and the more products we’ll sell. We felt like there was no substitute for being able to see our products up close and touch them and try them on.
Events were priority two, but the thinking was the same. If we just show up at festivals and comic cons and other pop up retail events and set up shop people are going to buy the heck out of our products.
Both pop up retail events and being in stores offers immediacy with the product that selling online doesn’t offer.
The media placements were our third priority, and we chose that as a priority because we wanted to create a sense of legitimacy around our brand that would appeal to wholesale buyers and consumers. We wanted to make people understand that we’re a real brand. We’re in the media, we’re on your favorite TV show, we’re in stores! We are not fly by night hobbyists working out of our mom’s basement.
What happened to your online sales and overall revenue?
While overall revenue increased quite a bit this year, online sales didn’t grow a ton. We definitely made more money via pop up events and wholesale. We still made money with online sales but it wasn’t our primary source of income like it had been in previous years.
Should I ditch online marketing too?
I wouldn’t say you should scrap online marketing altogether, we certainly didn’t. I will say you should pick three things for 2013 that are priorities for you and think carefully about what those things should be. Maybe online really is a goldmine for you and you should boost your efforts with online marketing. Certainly don’t choose to stop focusing on digital marketing simply because you don’t like it. What you focus on should be dictated by what drives revenue and growth for your business.
Pick your top goals for 2013 and let that dictate how you’ll spend your resources.
If you visit Smaller Box regularly you may have noticed the posts haven’t been as frequent and I haven’t sent out newsletters lately. Why is this?
1. I’ve been super busy with my own business
For the longest time I had been balancing my work on my clothing and accessory label with tech work. I did it because I was making tons of money doing tech work but it was also keeping me from making as much money as I knew I could be making with Ex-Boyfriend. I finally gave up tech work entirely and have been 100% focused on Ex-Boyfriend, working 60-80 hours per week along-side by business partner and husband Matt Snow.
We’ve had laser-like focus on the wholesale side of our business and started partnerships with some pretty major retailers. Our eat-sleep-breathe obsession is getting our products in just about every US mall in the in the next 12 months. This hasn’t left me much time to do anything else, which brings me to my next point…
2. I’m not sure how to write for Smaller Box these days
Most of my readers are in a different place with their entrepreneurial endeavors. A lot of my readers are running one woman shows and have no desire to be huge or build a multi-million dollar brand. I’m not disparaging that choice, but it’s not where we are with our business.
In the time since I started blogging here the questions and business situations I hear about haven’t changed and I can’t give the same answers I gave a few years ago knowing what I know now. I used to encourage everyone to make their situation work and I can’t keep doing that.
Creating a successful business requires a much steeper time and financial investment than most people are prepared to make, and that’s the real reason many businesses don’t grow or fail entirely. I can’t cheerlead the cause of starting a business with only a few hundred bucks in your spare time because it’s not something I believe in. I think it’s a road to heartache and frustration and I can’t encourage it. Yes, you do hear success stories about people who made those start up conditions work, but it’s not the norm, it’s not something you should count on.
I am hoping to still get posts in when I have the time, but at this point I really only feel like I can cover topics that are relevant to where I am with my business currently and it may be topics that aren’t relateable to hobbyists. Hopefully it will still be material that will interest some of you and maybe bring in new readers who are in the same stage with their careers that I’m in now.
If you’re a new to running a business the marketing and sales opportunities can be overwhelming. Which ones are good; which ones are a dead end? Here are 3 popular opportunities you will want to consider with caution:
1. Flash Sale Sites Why it sounds appealing:
Flash sale sites come in so many flavors these days: you’ve got sites like Fab, Gilt Group, Groupon, Living Social, etc. They’ll often come with compelling promises of promoting your brand to millions of consumers and selling a ton of product for you.
What might be wrong with the deal:
These sites are often looking for a below wholesale price from you on your products and they aren’t looking to agree to a minimum purchase. Meanwhile, they’ll want you to set aside inventory you could be selling at full price just for them, and at the end of the sale they will expect you to turn around and ship your goods out within a day or two and it could be anywhere between a few pieces or thousands — either result can be problematic.
What if they only sell a few units? Are you willing to set aside hundreds of units of product you could be selling at full price on the chance the flash sale will call for them? Are you willing to then part with only a few pieces for below wholesale if the sell-through isn’t great?
What if they sell thousands of units? Is it realistic for you to ship out that volume of inventory with a short turn around? What if they are paying on net 30 terms (which means they pay 30 days after you ship)? Can you afford to produce all that inventory you won’t see money on for over a month?
Why you might do it anyway:
Flash sale sites really vary with their models these days. Some do purchase inventory up front, like a regular wholesale customer. Some give you a longer turn around time to deliver goods. While there are plenty of flash sale sites with unfavorable terms, some flash sale site operators are getting wise to the fact that bad terms means it’s harder to get brands to participate and are offering more flexible terms to woo brands.
If you’re in a position to work with the flash sale site terms and can make it a break even or profitable proposition, the exposure can be a huge boon to a brand owner.
In a tough economy retailers are looking for ways to cut costs. One way they might do this is by accepting your products on consignment. This means they take your products and you only get paid if the products sell. If the products do not sell you can take them back or leave them on consignment until they are sold (depending on the store). If your products sell you will get, on average, about 50% of the retail price. So if your item sells for $20.00 you get $10 and the store owner gets $10.00.
Why it sounds appealing:
If you are having a hard time getting your foot in the door consignment can be a great way to prove yourself to a retailer. It gets your products in the retail space where customers can see them and allows you to beef up your list of stockists.
What might be wrong with the deal:
I’m not a big fan of consignment; here’s how I see it — I’m parting with a product I can sell myself at full price and trusting a retailer will drive foot traffic, merchandise my goods to sell and then actually follow through on paying me. If all goes well, I’m only getting half what I’d get retailing the product myself. All the risk is assumed by me and the reward isn’t substantial enough. Plus, it’s an administrative headache for me to keep track of which stores have which products, how long they’ve had them, whether they’ve sold or not, etc. For a product like mine, with a relatively low price point (my products all retail for less than $50.00) this nickel and dime game isn’t really worth the hassle.
Why you might do it anyway:
There are really only two good reasons to consign your products:
1. You have a product with a high price point and significant margin, for example an expensive bag or art or piece of jewelry AND you found a retail partner who wants consignment terms but also has a storefront with a significant amount of foot traffic and moves a lot of product. If you have that situation consignment might be worthwhile since your retail partner only has to sell a few pieces for you to make money at it.
2. You have a retail partner you want to work with who is on the fence about working with you. You feel your product would sell for them, but they aren’t convinced. You can offer to consign some inventory with them on a trial basis to demonstrate its sellability — but this is really only worth doing if you expect the retailer will convert to wholesale terms once you’ve proven your product will sell for them.
3. Product Reviews
These days you can’t throw a rock without hitting someone who has a blog, and product reviews are a popular way bloggers like to get “paid” for their work. They’ll ask you for a free sample of your product in exchange for writing a review about it.
Why it sounds appealing:
When you’re desperate for publicity any write up can sound attractive. You might also be wooed by the idea of link building if you’re trying to improve your SEO. Bloggers looking for products to review might try to dazzle you with stats on their blog traffic or the size of their mailing list to entice you, making it sound like a pretty sweet deal. Just send them a freebie and get this awesome plug on a blog.
What might be wrong with the deal:
Most successful/high traffic blogs aren’t spending their time soliciting freebies. They already get plenty of offers and are making their money from advertising, affiliate programs or selling their own products. If a blogger is asking you for free stuff, it’s not really “free” for you. You still have to pay for the product and shipping. If you keep sending out product every time you get a request those costs can add up.
You also have to consider whether the blogger actually has substantial traffic and whether the traffic is targeted enough. We constantly get requests for free product from mommy bloggers with only a few hundred readers who focus on blogging about topics like coupons and living on a shoestring. With our youth apparel at a $25 price point, we know we’re not selling a product that appeals to shoestring budgets. These offers aren’t a good match for us demographically speaking, and even if they were, the readership isn’t significant enough to make it worth handing out free products.
Why you might do it anyway:
If your product’s sample costs are low and the sample requests are coming from media outlets that cater to your target audience you might want to consider ponying up the goods. If you sell a product like food or skincare goods, you can probably package samples in a way that makes them cheap enough to produce and ship to reviewers.
While I wouldn’t recommend giving away freebies to everyone who asks, a review on a site with decent traffic that attracts your target market can be quite worthwhile.
I wanted to bring up a topic I hear a lot about on some design forums, but that gets little discussion from makers, and that’s spec work. Spec work means doing work on the speculation that you’ll get paid. I’m against you doing it and I’m against you asking other people to do it.
First of all, spec work comes in all sorts of forms. Sometimes it’s someone outright asking you for it. You’ll hear a story like “I’m starting a new business and if you do my website for free I’ll give you 1% of the first months sales” or “I want a new logo so I’m having a contest, best logo design wins a free prize”. Design contests are pretty much all spec work. You’re going to do design work and they’re only going to pay you if they decide they like the finished product.
Imagine if the entire economy worked this way. What if I decided I was only going to pay my dentist if I felt my teeth looked sufficiently white after a cleaning? Imagine if I told my divorce attorney “I’m only paying you if you get me 75% of the assets.” Other professionals don’t work under these conditions and designers/artists shouldn’t either.
Here are two of the most compelling reasons to avoid doing and asking for spec work:
1. It devalues design
If you’re one of those people who’s always pissed when someone criticizes your pricing or complains about how artists are underpaid, you should be the last one to do spec work or hire on spec. There’s a very good chance of the artist/designer doing work and getting paid nothing, which is about the worst deal you can get as an artist/designer. Even if you are looking at entering a design contest for a well known brand because you want the bragging rights or exposure, please know that neither of those things pays your bills.
Anyone seeking spec work is showing no respect for the artists’ work or time and thinks that you should work for free. Don’t encourage this mentality by actually doing it. It only perpetuates the belief that design/art is ubiquitous and no one need pay for it.
2. Good designers/artists don’t do spec work
While there are exceptions to this rule, generally speaking good designers and artists won’t do spec work. They usually value their own time enough to not get involved in that kind of work and they have enough paying customers to actually keep their schedule full of work that is paying them.
What this means for you is that if you are trying to get work done on spec (for example holding a logo design contest) you’re not going to get the most talented people submitting work. People willing to take on spec work might be too inexperienced to know better or not really be skilled/talented enough to get enough paying customers to occupy their time. Even if you have a good designer doing spec work, you’re not going to get their best work since you’re not really working with them. The best contracted design (whether it’s a logo or t-shirt design or new website) comes from a client working directly with an artist or designer and going through feedback and rounds of revisions.
If you need design work done check out portfolios on sites like Coroflot or Behance. Look for a portfolio that represents the kind of work you want done on your project and then contact that artist or designer about doing the work for you. If you can’t afford their rate wait until you can or keep looking for someone whose rate you can afford. Accept that this is a cost of doing business and be willing to pay for design work that you need done so you can get a product that serves your business the best.
I’m willing to bet this has happened to you:
You walk into a store and pick up a [bag/necklace/shirt] and think to yourself “Oh my goodness, I can’t believe this [bag/necklace/shirt] is in this store! My [bags/necklaces/shirts] are a zillion times better! Why are they such a big deal? Why won’t this store carry my [bag/necklace/shirt]?”
You may be totally right, your product might be way better than a competitor’s version and they might be selling their crap right and left while your struggling to sell anything. The problem has nothing to do with your products vs theirs. Here are some of the more likely reasons they’re outselling you:
I talked about distribution channels yesterday but can’t emphasize their importance enough. It’s the same idea as a crappy top 40 song getting huge. If every radio station is playing a song all day every day it will get popular, whether it’s good or not. If a product is in everyone’s face enough people are going to buy it. Take a hard look at how your branding and product are being distributed now and what more you can do to get your brand and product in front of more people.
Packaging and presentation are sometimes way more important than the product. I wrote a post several months ago about companies selling incredibly unremarkable products with great packaging. If your competitor’s presentation is nicer than yours they’ll sell more product, even if the item itself isn’t special.
Relationships matter in every industry. Knowing the right people can make or break your brand so forging connections is an important part of growing your business. A famous blogger is more likely to write about her friend’s company than a stranger’s company. A buyer at Saks is more likely to buy product from a friend who started a handbag line instead of you. A magazine editor at Lucky is more likely to feature a friend’s line instead of a stranger’s. You may not have friends in high places yet but making friends in the right places can have a huge impact on your bottom line. Look into trade shows and networking events where you have the opportunity to meet people and see if friends of friends have connections that can be of value.
4. Sales Skills
Whether you’re doing direct retail at pop up events like craft shows and festivals or business to business sales with store owners and buyers, sales skills are important. I’ve been to so many live events where people working in the booth are surly, unfriendly or snobby. I can’t imagine those people trying to charm a store owner, since they can’t even talk to a consumer. If you aren’t a naturally outgoing, confident, charismatic person hire someone who is to deal with the sales side of your business.
While I won’t go so far as to say having a great product is meaningless, it won’t make or break your company. A good product helps, but without the other ingredients you’ll have a difficult time realizing any success.
I’ve been so busy with running my company that I’ve hardly had time to share great links, so today’s update is a bit long. Before I get to it, I wanted to tell you that one of my favorite biz coaches, Sarah Shaw, is doing a free conference call on July 10th about how to get your business to $1 million. You can sign up for it here.
I obsess about pretty much one thing 24/7 — getting my brand and products in front of as many eyeballs and into as many consumer hands as fast as possible. This might sound like a no-brainer for a product-based business, but I’m always surprised when I talk to other budding entrepreneurs who limit their distribution channels.
When I talk about distribution channels, I mean all the ways you are getting your brand and products in front of consumers. While I won’t say it’s impossible to make it with a single distribution channel, it is much more difficult. If you rely only on Etsy or only on craft shows to distribute your product you’re missing out on a lot of other ways to build brand awareness, boost sales and ultimately make more money.
When you think about distribution channels, think about the options that are a best fit for your product and brand and think about all the different options within a type of distribution channel. Here are some examples of distribution channels you may currently be overlooking.
While most of my readers do some form of selling online, there are tons of sub-channels within online sales such as:
Your own wesbite
Marketplace websites (Ebay, Etsy, Amazon)
Deal-a-Day Sites (fab.com, Living Social, Zulily)
The more online venues you use to sell your product the more consumers you can reach. If you currently sell online, look into more places you can sell online, instead of relying on a single venue.
A lot of creative entrepreneurs are wary of getting into wholesale. You have to learn some lingo, talk with confidence to total strangers and try to sell to them, and get your product to a price point where you can sell it for 50% off and still make money. Admittedly, there’s a lot to know but it’s not an insurmountable challenge, you just have to educate yourself. (Side note, I LOVE this wholesale e-course. If you want to get into wholesale this is a top notch resource!)
Within wholesale, there are lots of ways to sell to stores, you can try:
Sales Reps – Reps will sell your product to stores for you, though they take a percentage of gross sales. Usually 10-15% depending on the industry. You’ll need a price point such that you can pay a rep, sell for half off and still be profitable to make this work.
Trade Shows – Trade shows are events where buyers and store owners gather to shop for products to carry. Be prepared to invest about $10,000 to do a trade show. (You’ll be paying for booth fees, booth decor, marketing/sales collateral and most likely hotel, air fare and rental car.) They’re not for the newest of newbies but if you have a little experience under your belt and the cash to invest, a trade show can be a great way to get seen by stores.
Cold Calling – This requires the least outlay of cash, though it will eat up a lot of time and you’ll need to be comfortable with calling up stores and asking them to carry your line. My company has had a ton of success with this method.
I love events, it’s not only a great way to sell a lot of product directly to consumers, it’s a great marketing tool. I always go to events with a sign up sheet for my newsletter and a huge supply of the most adorable swag you’ve ever seen. People love it. I always leave with thousands of dollars in sales, hundreds of new email subscribers and thousands of people taking my free comic strips and stickers with plans to adorn their laptop, car, fridge, office, etc. with my branding.
I recommend vetting events carefully, choose events that attract your target customer and have a large audience. These things are a numbers game so you are likely to make more money and get more marketing impact out of an event with 50,000 attendees than 5,000. Here are some kinds of events to consider:
Craft shows – I am not crazy about craft shows for my own business but lots of people love them. There are all kinds of craft shows from the alternative variety that attract the young and hip to traditional craft shows that attract suburban moms.
Conventions – I have had great success with comic cons, but there are conventions for nearly every niche interest such as scifi, tattoos, steam punk, etc. Check local media or convention centers for lists of upcoming conventions.
Festivals – think music festivals, food festivals, wine or beer festivals. Pick festivals that attract your audience. Check out your local chamber of commerce, newspaper or other local/regional publications for listings and ads for upcoming events.
Distribution channels feed each other
The more good distribution channels you have, the more the other channels benefit. I’ve found stores to carry my line doing events and I’ve had them contact me online because of my web presence. I’ve had retail sales online shoot up from having my products and brand seen at events and in stores. I’ve had my event sales grow because I go to the same kinds of events all the time and people recognize and like our brand, sometimes they recognize us from seeing us online or in stores.
They more you do all of these things the more they boost each other and the more overall revenue your company will see. Experiment with different channels and sub-channels to see what gets you the best results. You need not do every single channel, but you’ll likely see a big boost to your business from working on more than one.
You’ve probably heard this before but it bears repeating:
“If a customer has a good experience with a company they will tell one or two people, if they have a bad experience they’ll tell ten people.”
I can’t emphasize this point enough because I see the good and bad at work all day and if you own a business it’s important to think about this.
To begin with, at Ex-Boyfriendwe strive for 100% customer happiness and we’re probably pretty darn close to that. This doesn’t mean we’re perfect, but when something goes wrong for our customers whether we are to blame or not, we try to fix it. If the postal service loses a shipment, we replace it on our dime. If we mail out a wrong or defective item to a customer, we don’t have them bother to mail it back unless they want to. If they want it off their hands, we send a prepaid postage label. If they don’t feel like mailing it back, we still replace the item fast and free of charge.
Does this sometimes mean we lose money on an individual transaction? Yes. But the rate at which this happens is very low, far less than 1%, and what we get in return is extremely happy customers who love us and tell people to shop with us and buy from us again and again. We are okay with losing a battle here and there if it means we’re winning the war. What we want with our customers is a long term relationship and that means treating them as we we’d want to be treated if we were the customer.
This all might sound like no-brainer stuff but you’d be amazed at how often I run into the opposite attitude when I’m a customer. A few months ago I decided to never buy anything ever again from a supplier I’d been buying from for years. I’ve spent at least $100 with her on every transaction and probably ordered from her at least half a dozen times before. The orders were always great, the replies to email were always fast. So what went wrong? The postal service lost a shipment she sent me. When I told her it was never delivered (even though the USPS marked it as such) she told us since the delivery confirmation says it was delivered she wasn’t replacing it and if we wanted our stuff we could buy it again at full price.
Was it the supplier’s fault our idiot mail carrier likely left a box of product unattended on our doorstep in the middle of Baltimore city and it was probably stolen 2 seconds later? Nope. But it’s not my fault either and the bottom line is I spent about $150.00 on a shipment I never got and I was pissed. This supplier was willing to do nothing to help us or try to make the situation right. So that was the end of her consistent business from us and the end of me telling other businesses to buy from her. Was it worth not replacing our $150 shipment that probably would have cost her less than $50? I wouldn’t think so. But this is the kind of short-sighted thinking I see from other businesses all the time.
Most of my suppliers and vendors aren’t perfect. Most of them screw up sometimes. The reason they continue to get their share of our company’s six figure operating budget is because of how they handle their mistakes. The vendors we keep are the ones who fix problems at their expense instead of leaving us on the hook.
Whether your customers are other businesses or consumers, making them happy can have a huge impact on future business. You’ll never know how much referral or repeat business you lost from pissing someone off. It’s not something you can measure. What I can see from doing our best to please our customer is the emails we get every day raving about our amazing customer service and how much our fans love our products.
Got a customer service story to share? Post in the comments below!