As the 3 year anniversary of my start-up, Oneiric, quickly approaches, I thought it was time to finally round off the trilogy of “lessons learned” in this third (and probably not the last) part. Full disclosure, it’s been a VERY long 3 years and it’s been one rocky trajectory. In my last post, 2 years in Business: 9 Major Lessons Learned Building and Running a Start-Up, I discussed how this journey has been one crazy ride; but honestly, nothing’s really changed in this capacity.
I’d like to think of this as my most candid post I’ve written so far about what entrepreneurial life is really like. My hopes are to provide some comfort for founders that are struggling and feeling discouraged, but also for others that are seriously considering if they are really ready to adopt the entrepreneurial lifestyle. As a disclaimer, I would be remiss if I didn’t note that because Oneiric is a product-based business, some of the key learnings here may only be relevant to similar companies.
It’s easy to assume that everything is going well all the time, but the truth is, rarely do things work out the way we plan. As much as I wish I could say that my pragmatism trumps my emotions, it doesn’t. However, I’ve learned to cope with the series of disappointments and daily setbacks that the entrepreneurial life entails. Choosing this path for myself has been a very humbling experience.
Now let’s get into it. The lessons I’m about to share are both recycled and revised from the last post and some brand new.
Cash Flow, Cash Flow, and More Cash Flow
I put cash flow management at the top of the list because I’ve now come to the obvious realization that cash flow is the most important and vital thing to the survival of our business. I’m not going to lie, the past few years I haven’t been the most diligent in managing cash flow. I would look at it on a bi-weekly or even monthly basis (eek – guilty), but as we grow, I’ve now formed the habit to look at it daily. Every business model is difficult in its own capacity, but with ours, it’s particularly difficult to manage due to the combination of seasonality, ordering product overseas, lead times, and working with wholesale (I have a bitch fest coming about this, so stay tuned).
As of right now, we have two major seasons in our business; the wholesale season where we ship to retailers in June/July and the direct to consumer (AKA the actual hockey season), which spikes for the super short duration from mid-August – January/early Feb. In addition to the seasonally-induced-challenges of our business, we manufacture our product in China and lead times are very long. I’m talking 5 months long from purchase order (PO) issued to the factory to product arriving on our doorstep. We need to place a PO with a 30% deposit to our factory in January in order to have goods arrive in time for wholesale season; long story short, focusing on cash flow during slow periods is crucial. I’ve come to learn that there will always be delays with overseas manufacturing, and now account for a buffer of time to realistically forecast when the goods will arrive.
It is a balancing act trying to manage cash flow during the slow periods, which includes forecasting how much inventory to order, how much we’re going to sell online (which up until last season was completely precarious), and when we’re realistically going to get paid by wholesalers (which can range anywhere from 30 days to 120 days from shipment).
I am always pessimistic when it comes to cash flow, which has helped prevent us from running out of cash. I overinflate expenses, add in a miscellaneous category and record incoming wholesale revenue a month after payment is due. In other words, being pragmatic is my jam. Cash flow is different than our sales forecasts in the sense that we adopt a slightly optimistic outlook when preparing our forecasting to give us challenging, but solid goals to help grow our business.
Managing cash flow has not only been an invaluable tool and skill for the business, but for my personal life too. I keep a robust cash flow of my personal income and expenditures which helps me anticipate and plan for unexpected expenses. Honestly, this is a life skill that everyone should master.
Learn to Embrace Uncertainty
I think this has been the hardest part of running Oneiric. The uncertainty of so many different variables….will this cheque come in on time? How much are we going to sell this month? Will the business work out? What do I do if it doesn’t work out? What if this new product that we took a HUGE risk on this year doesn’t sell?
The list goes on, and on, and on. Every entrepreneur needs to take risks. Starting a business is, itself, a HUGE risk, but I found that if I don’t manage these running thoughts of constant uncertainty, then I would drive myself mad. Not to mention the fact that these questions love to pop-up at the most unideal times; like a Girl Guide Scout showing up on your doorstep with those god damn thin mints while you’re on a diet. These questions love to sruface when I’m alone with my thoughts (usually during bed time) where I’m engaged in a self-destructive circle of negative thoughts both about the business and myself.
Embracing the unknown is easier said than done. Most individuals strive for some sense of stability in their lives, but because life happens, it’s easy to feel like control is slipping out of your hand. The future is never certain, but what I’ve learned is that if you show up every day, chip away at goals slowly and try hard to just be present in the moment, those fears and anxieties begin to take a back seat.
Remind yourself why you undertook this entrepreneurial journal in the first place, it will help lay the foundation for the long road you have ahead. Building a brand and a business takes a long time and a lot of patience – accept that delayed gratification will become your mantra.
Find Fellow Founder Friends
It’s great to be able to talk to my partner, friends, or family about my entrepreneurial struggles; however, there’s always a sliver of disparity surrounding these conversations. It’s hard to understand unless you’ve dove head-first into this kind of career. Fortunately, I’ve met an amazing group of founder friends over the years that I talk to regularly. Whether we meet up for a bourbon (which has literally become as regular as a lunch break), dinner, or just talk briefly on the phone, it’s always cathartic talking to this group.
The best part is that we’re honest with each other – no bullshit, fluff, just hard truths. I’ve met other founders that put on a façade and explain to me straight faced that everything is going smoothly and they are growing so rapidly that they can’t even keep up with demand. I don’t mean to discount anyone’s career journey, but if you’re telling me it’s been a smooth trajectory, then you’re either lying or are a pseudo-entrepreneur *definitely not mentioning and specific pyramid schemes here…COUGH*. Although every entrepreneurial journey is different, we all struggle in some capacity.
I think there’s this perception that if you’re not raising a huge round of venture capital or getting acquired for millions, then you are branded as an unsuccessful founder. Popularized by some of the large tech publications, this can be deflating as a founder who’s been grinding for years to growing a business organically. Comparing your start-up to these very rare occurrences is just the recipe for a downward spiral of self-sabotage. Trust me, I’ve experienced it and sometimes still do.
By building relationships with other founders that are authentic, genuine and honest, you’re able to form a trusting bond and allow yourself to be vulnerable. Yes, it’s okay to admit that your business isn’t always doing exceptional, that there’s been some huge setbacks and that you’ve made a handful of mistakes over the last year. If you’re not honest, then they won’t be either.
I really hope our retail partners aren’t reading this, but I need to be completely honest (but I’ll refrain from being brutal) because this is probably the most frustrating part of our business. I don’t personally know any company that actually enjoys working with wholesale/distributors on a high level. With that being said, we do have some amazing retail partners we’ve been working with for years that genuinely care about our business and believe in our products. They are amazing human beings that are so great to work with, but don’t get me wrong, that doesn’t mean we haven’t encountered our fair share of SHADY little retailers.
*A disclaimer before I dive into our frustrations; I do know some businesses that have been very successful with the wholesale model, but for us, it hasn’t really worked out the way we had hoped. My advice would be to test it out and start small, see if it works/prove the model and go from there.
For you readers that are not familiar with the wholesale business, it is essentially a business that believes they are taking all the risk by carrying your product. They blame their business risks on high overhead including rent, staff, and inventory commitments (ie. Minimum order requirements by big brands). Due to these high risks they try to put as much risk on those smaller manufacturers as possible.
We, as the manufacture, are the last to get paid, have to dish out ridiculous margins, and have to deal with utter shitstorms like consignment deals, return requests for inventory that doesn’t sell, and not getting paid at all for upwards of 6 months. Although some are reasonable, most retailers won’t even look at carrying our product unless they get a minimum of 40% margin. The larger retailers? Even worse. Let me break it out to you this way – 50% margin + 12% back page = a very sad and pathetic 2% margin for us.
Then there’s the whole other giant of managing expectations and issues around sell-through. In 2017, we invested pretty heavily in some beautifully designed in-store point-of-purchase (POP) displays; a half mannequin uniquely displaying our product with an amazing backdrop. We shipped POP’s as value-adds based on minimum order quantities. In conjunction with the POP, we developed SPIFF programs (incentives for staff to sell our product), in-store training guides for managers and staff, etc. The perfect recipe (or so we thought) for a successful entry into the retail landscape. Our experience was a horrible mix of disappointment. Our meticulously designed, developed and ordered backdrop was nowhere to be found in the store; replaced by the manager’s low-rent cardboard signs that closely resembled a C+ level high school project. We also had the pleasure of seeing our product in the company of numerous other brands of base layer apparel…shoved in the back corner…with hardly any visibility. Cool cool – thanks, guys.
The product we designed is very unique and original. It’s a different concept that the hockey crowd is slowly starting to understand and adapt to. In retail, however, we need it to be in the line of sight for customers. Because our product’s features and benefits aren’t outright displayed, we need the staff to show their best customers the product and to explain what makes our product a standout. People are skeptical of the unknown; if our base layer is shafted in the back corner of the store, it further displaces our product from new customers. Our key retail partners that we’ve been successful with have done just that. They understand the need to close the knowledge gap between a new product and potential customers.
The combination of in-store displays, exhaustive training, terrible payment terms, and ridiculous margins helped us come to the realization that we couldn’t continue to run a business that predominately sold through wholesale; taking 100% of the risk all the time and reaping none of the rewards. Retail still has a place for sure, but we are slowly shifting that ratio as we continue to build out a more direct-to-consumer model.
Be weary, my friends, when you first enter into retail – you too might find yourself in a venting session a la blog.
Focus on Building a Sales Funnel
As we work on shifting our business model and inch closer to becoming 100% e-commerce based, it’s essential that we build out a robust online sales and marketing funnel. For online, that funnel is broken out by driving the right traffic to the website, converting that traffic, then implementing retention marketing tactics to keep customers coming back for more.
There is no easy solution for perfecting this formula; it’s a matter of testing, revising, testing, revising, and testing some more. In fact, as I write this, we’re still testing and trying new marketing tactics to win over new customers.
Our hopes are to build a machine where our marketing activities are so well optimized that the business grows organically itself.
Three years. Three long, discouraging, heart breaking, amazing, fulfilling years. There is no better way to describe starting and running a business. Pouring your heart into something that you know will improve the lives of other people.
The entrepreneurial path isn’t for everyone. Those that crave stability, shudder at the thought of rejection, and struggle to manage adversity might want to consider another career path.
Although we’ve had some pretty shitty luck, and to be honest, and at times I’m not quite sure how we pulled though, there have also been some incredible surprises and amazing self-discoveries that have sprouted along the way.
Until next time 🙂
*Edited by Alex Rudow