You can still make mistakes

I’ve been running companies for 10 years, whilst they haven’t all gone smoothly, they all have performed well.  This was until my latest venture. During one of my periods of looking to the future, I decided that after running companies where I had to be the product, I needed something where I could ship a physical product. This business failed spectacularly, to the tune of costing me personally £30k and causing major headaches. What went wrong here and what have a I learnt?

Strangely enough, I know what went wrong and I learned that I should follow the principles on TBPO. Not following guidance on the steps to take when setting up a company was a fundamental flaw in my process.  This process, when followed, will lead to successful companies to fund a good lifestyle.

Here’s where I went wrong:

1)      No market research

Here’s the scenario, you brainstorm a great idea – dropshipping products related to an area of interest, like Wiccan. After looking for gifts for friends and family, you see that they’re top performing companies are ones from out of the country. It’s an easy model to replicate, you set up a nice website and then you market it. Orders are placed directly with the stockist, and they ship to your customer.  A great passive income idea, so great that if any market research had been done, there would be a clear indication that this model is being used by hundreds of other companies. The niche isn’t there, what would be the differentiator between you and these competitors?

I rushed in, built the website and arranged agreements and then thought that was it. Had I done some small batch testing, spending around £500 - £1000, I would have seen that this market is already saturated with many discounters. The wholesalers and distributors are already at rock bottom profit margins. It’s not worth the hassle, don’t spend money to make a profit margin of 1 or 2%, it just doesn't cut it. When Amazon are selling the product for £10 lower than your cost price, you know it’s the wrong place to be.

2)      Outsourcing the running of the company

After running around the company for a month, I decided to bring in someone to run the company on my behalf. This employee was interested in the products but had zero experience in running a company. That was OK, I was going to mentor them and guide them through the process. This was going great for the first couple of months. Then a problem occurred – I took time off. Taking time off and completely disconnecting was the reason I wanted to have this new business. I wanted to travel and learn new things and I had someone running my company, so all was good? Yes? The answer was a resounding no! What I hadn’t realized, due to my clouded judgement and lack of analysis of the data, was that I effectively was still running the company but paying someone to talk to me about it. I was still too hands on, and the person employed to run the company wasn’t doing anything to improve the company. What do I when I realise this? I decide that I would get an employee in to one of my other companies to free my time up to focus more on this new venture.

I was doubling down and chasing my losses, the new employee turned out to be not a good fit for my other company, so here I was with two employees not performing and my still working 16-hour days. The failings were being covered as one of my older companies was covering the bills for everyone. So here is the mistake I made – I didn’t learn to delegate work and manage employees before taking them on. I should have got a virtual assistant to allow me to hone the skills I required to manage my staff effectively. Practising with a VA ensures that you can delegate, chastise, and motivate people to perform as you require.

3)      Changing your model without cost analysis

The final, and probably longest-term mistake I made was to change my model. The company was established to be a passive income company. It was my first foray into physical products, rather than services, and was originally established to hold no stock. After lead times for delivery became too great, thanks Brexit, it was decided to hold some stocks of the products we sell. I tasked my employee to find which products to stock and place the orders. There wasn’t any oversight of what was being ordered, just a bill on my credit card. If you see point 2, I just didn’t handle them correctly. With hindsight, a great tool, I see this point as the biggest failing. It really is a case of 1 + 2 = 3. I compounded my earlier errors by asking someone who wasn’t performing to spend money to hold stock, they did zero market research and so we ended up with products that looked “cute” rather than would sell.

All the points I have raised here as to why my business failed as all ones which could have easily been avoided by using one of the planners from The Business Parents Organization. The last 18 months are a case study on the costly mistakes you can make when you don’t follow the guidance on establishing a company and getting the product to market.

So, after learning all the lessons the hard way, I have a person working on commission to shift the products I have left. This is going well, and 10% has been sold in 3 months to recoup some of the money tied up. The cashflow of the business is slowing being rebuilt, but I still am out of pocket to the tune of £30k after all the stock is sold off.