YAY! FAILURE! Part Deux
Welcome to the second installment in our business blog series. I started the conversation a week ago with Part One. If you missed it you can read it here. When Carl and I started YAY! LiFE! we didn't put a lot of thought into the type of company we wanted to be. We didn't know exactly where we wanted it to go, only that we imagined it being big. We came up with a great idea, acted on it and it took off. Both of these quotes by the late Yogi Berra who just passed on September 22, 2015 sums it up perfectly. "If you don't know where you are going, you will wind up somewhere else." "You've got to be very careful if you don't know where you're going, because you might not get there." At one trade show, I asked our neighboring manufacturer if they did accommodation orders. One of the perks of being in the trade is the potential to buy products at wholesale pricing. He replied that it was the least he could do since we were part of the "SME". I asked what "SME" was and he replied, Shared Miserable Experience. We heard it echoed by manufacturer after manufacturer that it was the slowest show I've had in over thirty years. Here we were YAY! LiFE! part of a "SME". And in addition, sales managers, promising that you couldn't make it without working with their expertise, would circle like sharks. Something was very wrong with this picture. It just felt . . . icky. The gift industry has changed over the past thirty years. Marts all over the US are closing. Buyers are attending less shows. People at the shows seemed exhausted and wishing they were anywhere else but there, this included reps, buyers and manufacturer's reps. Today's consumers aren't collecting figurines and they shop on the INTERNET. Every show, we would psyche ourselves up, put on our game faces and go in hoping for something to be different in different showrooms, with different rep groups in different cities. And it really never was. Even in the best of times. We had our worst trade show sales ever in January of 2014 and the low sales continued for the next six months. It was May 2014 and once again it was time to pay for the trade show fees and we knew we couldn't afford to pay for them and come home without any significant sales. So we made the decision to break our ties with all of external independent sales reps we were working with. I cannot begin to describe how scary this felt. This is just simply HOW THINGS ARE DONE in the gift industry - create a product, get independent sales rep groups to pick up your line, attend trade shows, repeat with new products and with different sales reps in different regions. At the time we were working with a very reputable group in the industry. We had wanted to work with this group since the inception of YAY! We felt we must be crazy to break ties with them. They were the cream of the crop. But we were having the same struggles with an initial spike in sales, then a plateau and then, in this case a drastic decline. They were wonderful people. We really liked them, and . . . it wasn't working. Carl and I were miserable, broke and scared. I had always thought that as a company grew, so did expenses. So we didn't really bring a lot of mindfulness to our budget. During the business's rapid growth spurt, we borrowed money as working capital. We also launched a lot of new products that we don't even sell now. It was part of that whole saying yes to everything phase. Then when sales started tanking, we were left with debt in addition to our monthly overhead of paying for our warehouse and Easter Seals crew and other monthly expenses. We crafted a thoughtful letter to send to the rep group giving the required thirty days notice, which was going to leave us rep free as of June 15, 2014. I think pressing send on that e-mail was one of the scariest things I have ever done. What were we going to do? We didn't know. All we knew is that we couldn't keep doing what we were doing. We did have a system in place. Our strategy was to get all of our current wholesale customers to order online through the wholesale portion of our website which we had invested in building. Here's when the shit started to hit the fan. The DAY, I mean literally the DAY we sent the e-mail letting go of our rep groups, our website crashed. Like Hotel California, you could check in, but you couldn't leave. No orders would process. This means the only alternative way we had of creating any income besides working with rep groups WASN'T WORKING! We spoke a few times with our web developer who didn't sound that hopeful, but he promised to keep troubleshooting to get it to work. We were freaking out. A day passed, no word from him, another day, no word. We left voice messages, we e-mailed. EIGHT DAYS PASSED with our website not working and no response. WTF? When we did finally hear from him, we were not interested. We had to move on. We needed a working website. I put a shout out on Facebook asking if anyone was familiar with our web platform and got a referrals. I talked with a few guys and it didn't really click until I spoke with Vi. He said he wasn't totally familiar with our current platform, but he'd take a look and he's sure he could figure it out. He did and the site had not been updated in so long that there was no way to fix it. He might be able to do a few band aids, but who knew how long they would last and if we were going to pay for that, we might want to consider just moving the entire thing over to a Wordpress site. So that's what we did. The entire time Vi made us we feel totally taken care of and safe. He also busted this out in record time to get our site up and running by our deadline of no more reps as of June 15 and knowing our financial situation, let us make payments instead of paying it all up front. Seriously, thank you Vi! So we now had a new web developer who we loved and a new website. If you need anything, message me and I am happy to give you his info. He is awesome and we love him. In our prior developer's defense, he was well aware of our financial situation and I think in part he was trying to not have to bill us that much. He was a really nice guy. So he wasn't doing updates or fixes as often as was really necessary. I also think he had taken on more work than he could gracefully handle. Perhaps we could have handled parting better, but at the time it felt best to just avoid all the accusatory conversations and just move on. You may not believe it, but there's more. We were also working with a bookkeeper that was coming in once or twice a month to reconcile our accounts and do our commission reports for the multiple rep groups we were working with. It's standard to receive an open commission report every so often from a Sales Rep Group when they are closing a cycle. The report shows orders on their end that they have not received commission on. Sometimes the orders were cancelled, or didn't ship, or we hadn't yet received payment from, or sometimes orders just got missed in our reports and we'd still owe. Well, that's what happened here. To the tune of over $20,000 in sales missed on our commission reports, which was about a $3500 payout for us. It wasn't that we didn't owe the money. We did. It was just an unexpected expense when we were already struggling. Somehow these orders were all missed in the reports we turned in with our commission payments over the past year. I had not been doing the commissions or even checking on them when I should have been and when looked in the books, I could see all of the invoices in question. Why were they not on the report spreadsheets? When I questioned our bookkeeper, she said she thought the reports had looked weird a few times, but hadn't taken the time to look into it. She resigned saying that she realized she didn't have the time to give our account the attention it deserved and left our files beside the house when we she knew we weren't home. The situation with our bookkeeper and our web developer is very similar. They both knew of our current financial struggles so they were conscious of their billable hours with us. Both of them also had much bigger clients than us. As a result, we didn't get the best of them. I think both of them were trying to not charge us very much as a kindness, but it ended up ruining our working relationships. You know when you do something you don't really want to do because you think it's being nice and inside you feel resentment or overwhelmed because it really isn't worth your time and it all ends up falling apart anyway? To me, this is a perfect example of that. They needed a client that brought them more money. So that's what we all got in the long run. They freed up their time and somehow we managed to pay for a brand new website. And there's still more! At this point we were about three months behind in our rent to the fulfillment warehouse. We were also behind in our payments to Easter Seals. We kept hoping something would happen to suddenly turn things around, but it didn't and we knew we had to stop our monthly outflow because we were getting into a deeper and deeper hole as each month passed. FUN! We called a meeting with the owner of the warehouse and his manager. We told him that business was not picking up and we could not afford to keep accruing the monthly expenses. But here's the catch - if we were locked out and we weren't able to ship, we'd never be able to get out of our predicament. What he did was so kind it blew our minds. He said he would allow Carl and I to access our inventory and pull our own orders for two months rent-free. We wouldn't have the fulfillment costs since we were pulling our orders instead of his crew. The condition was he needed to be paid in full by the end of those 60 days. Typically if you can't pay your rent, you are locked away from your inventory until you pay up. This probably saved our business. I don't know what we would have done if we would have had to stop shipping. Since he was giving us our space rent free, it was not possible to keep our Easter Seals crew. If he wasn't getting paid, nobody else was getting paid. Especially a crew using a room he was providing free of charge at this point. We had to give Easter Seals an abrupt notice. We told them on a Friday that they couldn't come to work Monday. Ugh. It was awful. Have you ever walked through a neighborhood and noticed a store or a restaurant out of business and you think to yourself,I was just in here last week and it was business as usual? It's because everyone keeps hoping for some break to be able to keep their doors open and at some point you just have to cut your losses and stop digging the hole. That's what happened to us. Carl and I pulled and shipped our own orders from the warehouse for two months. We paid the warehouse owner in full and then single handedly moved the entire contents of the warehouse space we were renting back into our garage with a rented U-Haul. It was at least over a thousand boxes just of inventory items. Full circle. Here we were again back in the garage where it all started. To be continued. Stay tuned for Part Three of YAY! FAILURE!