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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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Why Products Designed By Women Are The Next Big Thing

This article originally appeared on our Forbes blog

An Interview with Danielle Kayembe
Danielle Kayembe is a futurist and the founder of GreyFire Advisory.

Have you heard the term coded patriarchy? According to Danielle Kayembe, founder of GreyFire Advisory and author of the white paper ‘The Silent Rise of the Female-Driven Economy’, it’s a phenomenon that impacts nearly every aspect of a woman’s waking life. Since the majority of our everyday products and systems are designed by and for men — to the exclusion of women’s unique needs, biology, and wants –our reality is in fact male-centric, says Kayembe.

Instances of patriarchal coding can be found in buildings, technology, and consumer products. For example, building doors are typically engineered for the tensile strength of men, making it difficult for some women to open them. None of the most popular health tracking apps (Apple, Fitbit, Nike)  included a way for women to track their monthly cycles at release, despite the fact that most users of these devices are women and periods are a fundamental component of women’s health. Other consequences are more sobering. When airbags were first introduced, hundreds of women and children were injured and killed because the companies who launched them had only thought to test them on the male body.

While such observations may seem negative, Kayembe posits there is a huge, untapped potential in the market for women-centered innovation (WCI): products and services that are not just marketed to women, but created by them too. Women designers and entrepreneurs have an innate ability to understand the pain points and aspirations of female consumers and thus drive new types of innovation, disruption, and brand loyalty. Or as Kayembe puts it, “Every woman, by virtue of her lived experience, is now a walking hub of multi-million dollar business ideas.”

Globally it’s estimated that women make 85% of consumer spending decisions, and when united as a market, represent the world’s second largest GDP. In the US they control roughly 50% of personal wealth ($14 trillion in assets!) and are the primary breadwinners in over 40% of households. Yet despite possessing substantial decision-making and buying power, only 2% of venture funding is given to women-led companies. According to Kayembe, this disconnect represents “the largest arbitrage opportunity in the market today.”

The tendency of today’s investors to overlook and underfund female entrepreneurs may well be changing. Kayembe predicts that as the most successful female-founded companies reach liquidity (IPO’s or acquisitions), “a new ecosystem will form.” Namely, female investors will launch their own funds, invest in companies that sell products and services they are familiar with, and actively seek out women-led companies to support. Instead of having to depend entirely on the current venture capital network, they will create their own, comprised of WCI-friendly investors and companies.

If this shift does in fact play out, other factors are likely to ignite the success of WCI. One is that women are known for sharing products they love with other women, a behavior enhanced greatly by the use of social media (which women engage in 62% more than men). The second is that millenials are buying more from smaller companies and choosing value-based brands over traditional heritage brands. The Boston Consulting Group estimates that large companies have lost $18 billion in sales to small businesses in the 5-year period ending in 2014. Both of these social trends lend themselves to the rise of female-driven products and services.

It’s easy to see the world as static, and to view people as too entrenched in their ways to create seismic change. Especially since coded patriarchy is potentially thousands of years in the making! But Kayembe sums it up best: “The darlings of the business world shifted from middle-aged men in Brooks Brothers suits, to college dropouts in hoodies — it’s about to shift again.”

Why I’m Grateful For The Hard Parts Of Entrepreneurship

This article originally appeared on our Forbes blog

Entrepreneurship has a bad rap for being risky, stressful, and isolating. And rightly so! I work intimately with founders and small businesspeople, and I’m constantly reminded that behind every creative and innovative venture are humans grappling with frustration, fear of failure, unrealistic expectations, and self-criticism. While bypassing these difficult feelings is unlikely, it is possible to draw wisdom and strength from the challenges of entrepreneurship. After all, from great struggle comes even greater growth.

Here are three reasons I’m grateful for the hard parts of being an entrepreneur.

If It Was Easy, Everyone Would Do It

This is a reminder I find helpful when going through a tough time, or when I need the motivation to push through a labor-intensive project. Why? Because creating and delivering a product or service is challenging enough on its own; if it were easy there would be more competitors vying for your potential customers!

I recently had to create 100 pages of written content for a visual guidebook about manufacturing. (It was as fun as it sounds.) Every time the “finished” product was ready for review, our team would find an important addition or revision, usually requiring the entire design layout be adjusted. This went on for months! But the process made me acutely aware of the creative and financial investment required to develop a truly useful resource, and thus clearer on our competitive advantage and value proposition.

If what you offer takes little risk or effort to imitate, you’ll quickly be surrounded by other players in your space. It requires significant effort and stamina to build something brick by brick, but the upside is that there’s less of a crowd!

Losing Money Is A Great Teacher

You can ace b-school, read lots of business books, and hire the best consultants, but as with most things, there’s no better teacher than real life. Until money is on the line, everything you’ve learned remains theoretical. The sting of actual, tangible loss is what produces your most profound lessons, and if you’re willing to examine these failures, you can gain lasting wisdom.

During my early years as an entrepreneur, I developed a habit of keeping a “money mistakes” journal. Every time our company made an expensive misstep–such as a production run filled with defects, or a marketing investment with no ROI–I recorded three things: a description of the event, how much money we lost, and what, in hindsight, could have been done to prevent it.

Evaluating each mistake helped me uncover unhealthy patterns (such as dismissing my gut instinct about a person or project) and ultimately make wiser, more savvy investments as time went along. While tallying up losses doesn’t exactly feel amazing, the lessons learned are here to stay.

Being Discouraged Can Build You Up

In my bleakest, most vulnerable moments, I’ve had to confront how I choose to view myself when I’m not measuring up to outside metrics of success. Making the decision to believe in your own worth after a failure or disappointment is challenging; however, the result is true, unshakeable confidence that remains with you through all of life’s challenges.

You might lose money or customers or a sense of status during your adventures, but the sense of self you develop is yours to keep. This is the real entrepreneurial gold! And for me it’s what makes the journey worth taking, even when things are hard.

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!

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