Learn to Make a Product

Expert Consulting for Product Entrepreneurs

What I Learned After Losing $20K In A Day

This article originally appeared on our Forbes blog

When you’re learning as you go, as many first-time entrepreneurs are, each lesson comes with a price tag. Whether it’s a lost client, a quality problem, or an unforeseen delay, it almost always involves a cost you didn’t intend to pay. While in the short-term this can be painful, the key is to mine these losses so that future experiences aren’t quite so “expensive”!

In 2010 my company–a two-year old reusable bag brand–was starting to gain traction, producing orders for some of the world’s top retailers. We had just partnered with a large non-profit to create bags for a new fundraising campaign, and because of the tight deadline, brought on a new factory to produce the goods.

Everything was moving along as planned until the client reviewed a sample created by the new factory. Though happy with the bag’s quality, they requested a color change to one of the printed graphics because it didn’t match their existing swag and collateral. Naturally, we communicated the adjustment to our production manager, assuming the simple switch would be made without a hitch! However, our request was met with the following reply: “Sorry, that isn’t possible. The full order has already been made and is ready to ship. Please advise.”

From there, things quickly went south. Even though the color change was minor, the client was unwilling to accept the product as is. And because we couldn’t produce a new batch of bags before their deadline, the only option was to cancel the order completely. To make matters worse, the factory wouldn’t accept any responsibility for the snafu, claiming that they had started production in order to meet our ship date, and that the sample sent was strictly “for reference,” and not a form of approval. While their practices were questionable–since approval by way of a pre-production sample is standard–we had other time-sensitive orders in-process that would have been jeopardized by a refusal to pay, and had to go along with their demands. So, in addition to refunding the client and losing a significant sale, we still had to foot the entire bill.

Here’s what I learned from losing a big chunk of money in a short amount of time.

Have A Process For Everything

A fiasco like this could easily have been avoided. How? By creating and following a simple process to officially greenlight production. I advise all brands I work with to communicate to their supplier–in writing and prior to submitting a purchase order–that all samples will have to be approved using a specific form, and that manufacturing will not begin until the form has been received by the factory. We then identify the key personnel involved in the review process and ensure that everyone understands their role.

A system like this is not difficult or expensive to implement, yet it’s normal for new entrepreneurs to feel that formality is an overkill if an organization is still small. In fact, the opposite is true for small, budding businesses. Such systems are not only helpful for staying organized in the present, but also function as the building blocks of what your entity can become. Establishing clear guidelines and procedures is a must-have if you want to scale and experience healthy growth.

Just like the human body ingests and digests nutrients in precise ways in order to grow, a business must have consistent systems in order to retain and leverage its resources (i.e. customers and money). On the other hand, disorder and disorganization cause resources to leak out, as I so painfully learned.

Know When To Say No

His loss could also have been avoided had we simply declined/refused the order. Tight timelines are never ideal, but for new entrepreneurs they can be especially detrimental. That’s because the learning curve is steeper, and inexperience makes it harder to anticipate exactly what could go wrong. Throw in a wild card like a new supply partner or a product you’re producing for the first time and it’s definitely risky business!

Further, if you try to beat the clock and end up failing (i.e missing a deadline or delivering a poor quality product), it’s likely you’ll lose the customer involved for good. But if you politely decline and continue to nurture the relationship, you still have the opportunity to secure repeat business down the road.

It’s always painful to turn down work, but discernment and patience are key to long-term success. Trust that there will be other opportunities!

Always Build In A Buffer

When you do say yes, be realistic. Building in a buffer might mean not “wowing” the client with a super-fast turnaround, but it performs the dual role of managing customer expectations and giving you a window of opportunity to correct course if things go awry.

In this particular scenario, a built-in buffer would have allowed us to re-make the bags and deliver the order as planned. Discarding a batch of inventory is still a waste of time, money, and resources; however, the result is certainly less painful, as the customer’s total payment is likely to cover the cost of a second run. In our case we would have broken even, a much preferred outcome!

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Four Tips For Checking Supplier References

This article originally appeared on our Forbes blog

Checking references is an important (and free!) part of the supplier vetting process. I’m surprised by how many makers either don’t request them or don’t follow through once they secure names. Further, it’s not enough to ask easy questions such as, “Do you recommend Company X?” as the goal of each conversation is to go beyond surface level information. When done properly, speaking with references should paint a fuller picture of what it would actually be like to work with a given supplier.

Here are four tips to optimize your reference checks and make more informed decisions as you source new partners.

1) Ask For More Than One Reference

Reputable suppliers should have multiple happy customers willing to endorse them. When requesting references, be clear that you’d like a few options, and let the supplier know that both past and present clients are okay. This may give them more range, as some clients in their roster will be off limits due to privacy clauses.

If a supplier refuses to provide references or will only send a single point of contact, this is usually a sign to proceed with caution.

2) Stick To Your Product Category

Speaking with references who have made products similar to yours is key. For example, if you on the hunt for a factory that specializes in structured outerwear, but the references you receive can only vouch for the supplier’s ability to produce casual knits, the intel is only so helpful. Seek confirmation that a partner is good at what you are making.

3) Create A Vetting Checklist

It always pays to be organized and methodical when vetting, especially when you’re in contact with multiple potential partners and need to collect and evaluate lots of data. Before setting up discussions with references, make a list of the questions you want each one to answer. You’ll also need somewhere to compile all of the information you receive, such as in a spreadsheet dedicated to your vetting efforts.

Here are some suggested points of inquiry:

  • Is the supplier responsive? How long do they typically take to reply to messages?
  • How long has the reference worked with the supplier?
  • Has pricing increased over time? If so, why?
  • Are deadlines usually met? If not, why?
  • If there has even been a quality issue with the factory, how was it remedied?
  • You’ll receive an extra layer of feedback if you ask questions by questions by phone since it’s possible to pick up on more nuanced forms of communication such as tone, hesitation, sarcasm, etc.

    4) Remember That No Supplier Is Perfect

    A factory doesn’t need to score 100% on price, quality, speed, responsiveness and everything else you’re looking for in order to be a worthy choice. As with any relationship, partnering with supplier requires compromises. The important thing is that you are clear-eyed about the potential trade-offs of working with one vendor over another.

    For example, if you hear repeatedly that a factory has great quality but needs to be nudged a bit to finish orders on time, you can enter the partnership knowing you’ll need to build in delivery buffers. Preparation can help eliminate unwanted surprises and offset a vendor’s weak spots. This is not to say you should ignore negative feedback, but rather a reminder that no business is perfect.

    References are likely to say positive things about a supplier, or else they wouldn’t have been chosen in the first place. By starting each conversation with the reminder that you aren’t seeking perfection but rather a solid, reliable partner, you’re more likely to receive authentic feedback.

Paying An Overseas Supplier? Read This First

This article originally appeared on our Forbes blog

Paying an overseas supplier for the first time (or second, or third!) can be a nerve-wracking endeavor. Are they trustworthy? Will they deliver what they’ve promised? Are they even a real company?! Unfortunately – and I wish this weren’t true – some of the nervousness is warranted. After helping countless entrepreneurs untangle manufacturing problems with factories, I’ve seen my share of bad apples.

The good news however is that when things go wrong, it’s almost always the result of an easily avoidable mistake. A review of an overseas transactions that has gone awry usually uncovers one of the following errors.

Mistake #1: Not Requesting a Sample

Requiring that a supplier send you a sample of whatever you’re buying before paying them may seem like common sense, but it’s a step many people skip. They do so for one of two common reasons. The first is that suppliers may make a compelling argument for why samples are not needed. For example, “Don’t worry, we produce for many big companies!” or “Sending a sample will just be extra time and money. Our quality is great so there’s no need.” While this logic is flawed (big companies still require samples and the cost of securing them is nominal compared to risks of not doing so), new entrepreneurs who lack experience are more likely to be swayed.

The second reason is that people believe photos are a sufficient form of approval. A factory might email a picture of a material sample or finished product that looks great, but when the actual order arrives the specifications deviate in a way that was not apparent on a screen. Even worse is when the “sample” in the photo is completely different than the item ultimately shipped.

Mistake #2: Paying 100% upfront

It’s always best to structure supplier agreements using a deposit/balance schedule. As with many other industries, you pay a deposit to start a production order (typically between 30-60% of the total purchase order value) and then issue the balance payment prior to their release of the finished goods. There are a few instances where it is industry standard to require full payment up front, such as when a supplier is creating custom molds for a metal or plastic component of your product. While paying in advance for certain fees is unavoidable, deposits are the norm in most production scenarios.

When you pay a supplier in full at the start of a project, you lose your most compelling negotiating tool – a refusal to send more money until the company corrects unsatisfactory work. You also increase your financial exposure should they fail to deliver entirely. While it’s terrible to completely lose a 30% deposit payment if a supplier disappears, it’s even worse to lose it all!

Mistake #3: Sending Money to a Fake Account

While most supplier disputes are the result of a miscommunication or mismatched expectations, a small number are due to outright deceit. An increasingly common type of fraud occurs when rogue individuals imitate legitimate factories, convincing foreign buyers to send deposit payments for various goods and services that they have no intention of rendering.

To avoid this type of transaction, check that the ‘Pay To’ account information on the invoice is the same as the company name who you are supposedly doing business with. For example, if you are buying buttons from XYZ Button Co. but the payment instructions on the invoice ask you to send a wire transfer to QRZ Inc., consider it a red flag. The same is true if you are asked to pay large sums of money via paypal or issue a bank transfer to an individual’s personal account. In short, make sure the names on all invoices, bank accounts, and shipping documents match the name of the actual factory.

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Setting up trustworthy supplier partnerships involve more than just payment practices, but being aware of these classic mistakes is an important part of protecting your investment!

Maker’s Beware: 3 Product Entrepreneurs Share Their Biggest Rookie Mistakes

This article originally appeared on our Forbes blog

Launching a business with physical products comes with its own set of unique challenges. Here we chat with three product-entrepreneurs who share their most memorable rookie mistakes, along with how they corrected course and consequently, implemented permanent improvements in their businesses. Their anecdotes represent some of the most common missteps made by new makers. After working with designers and inventors for nearly a decade, I can confirm that nearly every newcomer who loses time, money, or momentum has done so because of one of these preventable errors!

Mistake #1: Assuming Everyone Understands What You Want

Learn to Make a Product | Maker's Beware: 3 Product Entrepreneurs Share Their Biggest Rookie Mistakes
Briana Borten
Briana Borten, Founder, The Dragontree

When Briana Borten was launching her holistic body care line, she, like most people bringing a product to life, was hyper-focused on the details. In her case, packaging was a central focus; she had beautiful labels designed for each product, and tweaked and retweaked the colors and copywriting and layout until they were just perfect. The first production run went off without a hitch, and she was was thrilled with the results.

Product sold quickly, and when it came time to re-up on inventory, she handed off the specs to a production manager who would oversee reordering. This is where the “a-word” reared its ugly head. Borten assumed that because she was providing a finished design to her team as well as her supply partners–one that she had outlined clearly and painstakingly–there would be zero confusion about her expectations for the finished product. She didn’t see the need to establish a system of checks and balances to ensure the specifications were met, because it just seemed obvious that they would be.

Production mistakes happen for a variety of reasons. Changes in personnel, calibration issues with machines, accidentally using the design files. Human error is present, if not prevalent, in manufacturing. All these variables make “assuming” a risky business.

In Borten’s case, her manager failed to request a new set of samples prior to production. Also a victim of assumption, she assumed the supplier would deliver exactly what had been sent on previous orders. She didn’t want to delay delivery by double-checking. As a result, a very large order arrived at her warehouse with incorrect labels.

The experience led Borten to implement systems to preserve quality instead of relying on the judgment of any one individual. She outlined a sampling procedure in writing that required two people to sign off on proofs, as well as a quality check that would catch any incorrect orders on site at their production facility.

Mistake #2: Having Design Tunnel Vision

Learn to Make a Product | Maker's Beware: 3 Product Entrepreneurs Share Their Biggest Rookie Mistakes
Ryann Scrafford, Founder, Charlie Rowan Designs

Ryann Scrafford did what many designers do when searching for manufacturing solutions: she looked for someone who could recreate her baby blanket designs exactly as she envisioned them, with no deviation from her original design. While it sounds logical to look for supply partners who can reproduce or make your product just the way you want it, the search for perfection can be a momentum-killer.

This is mainly because it can be hard to replicate precise specifications from supplier to supplier, particularly when it comes to materials such as fabric. Not only is there natural variation between “the same” material produced by different vendors, but there are also countless types of fabric out there, with varying weights, finishes, printing techniques and so forth. The sheer volume of choices makes searching for an exact match akin to finding the needle in the haystack. This phenomenon is true for many material components.

New design entrepreneurs are better served by looking for the best materials they can find, rather than embarking on an endless search for a perfect match. This is even more true for people producing at small quantities; since they don’t have the budget to customize orders like big brands do, they are limited to “stock options” (materials that are regularly stocked by suppliers). For example, a multinational sportswear brand may produce thousands of yards of custom performance fabric at a time, made exactly to their specifications; however, a small maker looking for this same material will not be able to find it because it’s not something that textile suppliers stock.

In order to speed up the sourcing process, be open to feedback from suppliers about what material option might work best for a design rather than making narrow requests. When Scrafford’s search for a specific fabric stalled out after a year of futile sourcing, she realized she needed to be open to new solutions. The result was a revised product line that was a bit different than her initial offering, but just as high-quality!

Mistake #3: Launching Without A Clear Pricing Strategy

Learn to Make a Product | Maker's Beware: 3 Product Entrepreneurs Share Their Biggest Rookie Mistakes
Markisha Velazquez, Founder of Junior Baby Hatter

Pricing a product correctly is central to a brand’s viability. Price too low and a venture becomes unable to sustain itself; price too high and customers won’t buy. Both options, sadly, can lead to business failure.

Markisha Velazquez launched a line of children’s hats with the best of intentions. She wanted to give parents stylish headwear options for their kids at an affordable price. She set her initial price point at $20; however, her manufacturing costs were nearly just as high. Without earning a profit, she was left with very little to market the brand, let alone keep the lights on.

She then tried applying a standard retail markup in which the cost of making a good is multiplied by 2.2 to set the wholesale price (the price that stores and other resellers pay), and then multiplied by 2.2 again to set the retail price (the price the end consumer pays). These hikes resulted in a massive slowdown of sales because they didn’t account for the most important aspect of pricing: what the market will bear.

After receiving guidance from a business coach,Velazquez dug deeper into her customers’ buying habits and examined what they were paying for other high-quality children’s accessories. First she identified brands with a similar target customer and “Made in the USA” focus, and tracked their pricing across a variety of channels, including boutiques, pop ups, and ecommerce stores.

Then she signed up for in-person craft markets, which, compared to trade shows and pop ups, provided her with an inexpensive way to get face time with actual customers. This proved to be the best source of intel, as she could see people’s reactions to pricing firsthand, as well as what styles were most likely to bring in traffic. As a bonus, she also received feedback on the fit of the hats, which helped her improve her design.

Armed with this data, she set a market-based price and then resourced the labor and materials required to make the hats to fit within the desired profit margin. Ultimately, she had to find a different fabric vendor and remove some non-essential components like design trims, but the end result was a product line that did not compromise on style or quality.Velazquez’s new pricing strategy now yields enough cash flow to run the business and to invest and grow.

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