Online Course Reflections

Just a few follow-up thoughts on the online class second session...

Frequency not volume... if you grew up in USA, there is only one way to do business as taught in business schools, assumed on all trade magazines and newspapers etc, and that is you compete on price by means of volume. So far in this class we've learned there is another basis, and that is competing on design.

If you are competing on design, what you have is new. Your product is the answer to the #1 question of every customer in the specialty markets "what is new?" the # 2 question is "What is your minimum?" because the stores have no idea how the "new" will sell, so they manage away the risk by buying an absolute minimum.

And so do you. Your supplier may have a 500 piece/ $5000 minimum production run requirement, and you may be selling 10 units per store, thus you need 50 stores to place orders with you, in a workable amount of time, for you to get enough orders to cover the supplier's minimum.

And so you do. Now this first shipment, once delivered, may not sell well. (if it does, great, just keep taking orders). If it does not ell well, the stores will tell you why: wrong shape speed flavor size material color or whatever. Even if it does not sell for the retailer, they still pay you, plus they tell you what is wrong. At this point, you fix those problems, and try again. And you keep this up and watch your product get ever-better.

As your first shipment sells out, and you order a second shipment against new orders from new samples, and in this way you are able to remain flexible and responsive to the market. So your next shipment is an absolute minimum as well. You never order more than an absolute minimum from the supplier, in spite of the fact that you are shipping in less than container loads of goods, and gaining no economies of scale you mmight get from volume shipments.

In volume, you may get a 100,000 order from walmart, and then work to get that to 500,000 in 6 months, then 1 million 6 months after that, always trying for more and more volume.

In frequency we may get our first $5000 order covered in 6 months from now, then we shoot for another $5000 in 3 months, another $5000 in a month and a half, another $5000 in 3 weeks, another $5000 in a week, and so on. We never push for the economy of scales of mass merchandise.

No one knows us starting out, they will let us offer something marginal and new, and if we do well, continue to do business with us, even offer new designs for us to work on, ever growing our business.

Any problems we run into we sort out as we go, and there is really nothing we have teo worry about, because since we love what we do, we enjoy solving the problems.

Anne and Mileandru gave us good arguments to work with Wednesday, and I'll address these as devil's advocate.

Secrecy leading up to a launch denies us the good of the feedback of so many customers. Secrecy also implies the item will have a huge market, something many will want to steal. I doubt this, but let's address it on a practical level.

With a big, secret launch you have the problem of all your eggs in one basket. It takes money for a big launch, and then you have the problem of finding the, and at what cost? What if something goes wrong with the product, and a recall is required. If you scare everyone, getting anyone back will be a challenge.

The same item launched noisily on the margin to upscale stores keeps the exposure minimum, so that if anything goes wrong nobody knows and nobody cares. To recall $5000 worth not anything is not the end of the world. Financing the launch of a small business only takes the money for the first minimum production run, say $5000, and you can earn that on your own working part-time at Starbucks if need be, in other words, there is no stopping you.

There is money to be made while working through the upscale stores, money that can never be gotten later. plus, there is lifestyle to be lived while developing the business from small to bigger which you miss out on if you try to go straight to big. it would be a drag to devote 4 years and all assets to a project that leaves you far worse off than you started.

It might help to forget about starting a business, and just think in the much narrower terms of milestone # 3... that is getting enough orders from customers to cover the suppliers minimum in a workable amount of time, profitably. Get that done and then decide what to do. Think of it like a small project you do in the next couple of months, like cleaning out the the garage or something that is a challenge but not amazing. Don't sweat it like "I am trying to start a business."

then when you get to milestone #3, execute and repeat as necessary.

I was in Las Vegas at the Ski Industry Association show Tuesday and met Klaus Obermeyer , who founded Obermeyer Sport (clothing) over 60 years ago. Never heard of him? Most people haven't, but the down parka, the turtleneck sweater and stretch ski pants all came out of his company. He is another example of someone who experienced a problem, solved it for himself and then sold it to everyone else.

He would tell you what I am telling you... I know because I learned if from people like him and do it myself. (Actually his daughter took my class some 20 years ago when she was starting a snowboard company herself... which I thought was strange since her father has forgotten more than I'll ever know... but there you are... I didn't mention to him I tutored his daughter.) He must be over 90 years old, was laughing and acted as delighted to greet me and my wife as though we were his first customers ever. He just loves what he does, the money just comes with the work. We want to work it the way he did.

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