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EXECUTION Tightarse - From $70 to $35,000

Discussion in 'Progress/Execution Threads' started by AndyNZ, May 11, 2018.

  1. AndyNZ
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    Hi all,

    Thought i'd do a wee write up about this crazy journey of what was initially a side hustle stemming from me being a tight arse, to a business which makes more than my job as a BDM for a multi-million dollar engineering firm. It's been a crazy, frustrating, satisfying ride to this point thats for sure. I hope you enjoy the read and im sure ill enjoy recalling the last 12 months.

    As a side note, during this whole time i was studying with next to no income, had just bought my first house, and had literally just enough to cover the payment on one order of product...this is important for later and relates to the thread title.

    The tight arse moment

    So, it started because i was/am/probably will always be, a bit of a tight arse. I was in the market for a product, a want product, not something i or anyone ever needs, but one a lot of people in my target market do buy. I shopped around and was shocked at the cost i was up for, think around $2400NZD ($1600USD). I come from an engineering background, and looking at the product i knew the manufacturing cost, especially at scale, was peanuts compared to the $ value this product was selling for...and it was a really simple product. I thought, i bet i can buy this cheaper from Asia, i'll do some research.

    Research

    I began where i only knew to, Alibaba. I searched for the product i was after, or close too, and began to contact every "manufacturer" i could. I literally sent out a couple of hundred emails, with each reply i began to vet suppliers. I had a few criteria, range available, language boundaries, payment terms, price, and the big one, MOQ. I quickly learnt that if i wanted "my" product, i was going to have to buy 15x what "I" needed...not a problem though right, sell the other 14, mine becomes "free" and i make a few bucks. I did some numbers on 15 units, landed cost, shipping etc, and realized i stood to make a fair chunk of change. With some help from Walter on here (thanks Walter) i decided on a supplier who was a manufacturer, not just a re-seller (plenty pretending to be the prior i found) and pulled the trigger. There was significant risk here, 1) the product is made to order so i couldn't get a samples before placing an order, 2) There is engineering involved, and if i'd made one small specification mistake the whole order would be useless, and 3) my first order was into the 5 digit range.

    While this was going on i looked at the market i'd be selling into. I used a local site called TradeMe, similar to Ebay, and checked out how much interest there was in what i was going to be selling by checking the amount of "watchers" on the auctions that were applicable. I quickly learned there was a strong demand for the product even at the $2400 selling point. I decided on using TradeMe to sell the product and built these selling costs into my cost forecast.

    Product arrives

    After the order was placed there was a 45 days manufacture lead time, plus another 5 weeks before i would have product in my hands...it seemed like eternity. I did a quality check upon arrival and all seemed good, a few minor issues but with some elbow grease things were right as rain. Speaking of rain, the day i picked the product up (nearly 6cbm) i hired an open deck truck. It was pissing down with rain on my way to pick the goods up, but somehow a gap in the weather as i was loading them appeared and i swear i raced back to my storage facility with that rain nipping at my heels the whole way....it was stressful to say the least.

    Sell, Sell, Sell

    At least that was my plan. All my market research was telling me at my price point these things were going to fly.....well 4 weeks later, with E commerce listing costs eating a way i hadn't sold a single item. Worry was setting in and at this stage due to no work, study, and house costs, i had literally $70 to my name. I'd pushed my finances to the edge and i had no back up plan, i was all in. It was approaching a weekend where i had a friend flying in to catch up and go to a rugby test match and i barely had enough money for a few beers at the game. I did what i could only think to do, hit the pavement, go door knocking with product at potential re-sellers businesses, and hope like hell someone would buy some product off me. I'd been at it a few hours with no success and was on my way home feeling defeated when i stumbled across a business id never seen before but one that looked like a potential re-seller. I walked in and sold 3 on the spot, cash in hand....oh my what a feeling!!!! To say that weekend was a big one would be an understatement!!

    Pivot

    I eventually sold out, all 14 units, with demand presenting itself for more. But id learned from my mistakes and so set in motion a plan to bring in more, but with a different business model. There was a key value add to my product i was missing, and one that took capital intensive assets to bring to market, however, if i switched to a B2B model, and wholesaled to re-sellers, they could provide the value add, and the scale i wanted. I got things underway and began my marketing, social media and website development. I contacted all my previous customers B2B and B2C and asked for photos of my product in use, i was bombarded by happy customers and great photos which was an awesome feeling. I cold called some more re-sellers with my new marketing, website, and B-Cards in place and got a fair amount of interest. I set up warehousing and distribution, i was extremely lucky here, my family owns a freight company so i arranged storage and freight through them at rates so good it's disgusting, i operate on full 3PL. I was, and still am, running so lean no-one, not even the big players in the market, could match my price points. I started wining market share, but with growth comes growth pains, lack of capital for inventory and constant stocking out was a massive issue.

    Now

    Right now i have just accessed a pool of capital and have ordered not just a few CBM of stock, but literal container loads. I have 24 re-sellers nationwide and I stocked out again just this week (not so good). In the last two months I've turned over just over $35,000NZD ($24,000USD) with a 41% net margin. I'm finally reaching scale from my suppliers and am set to hit a major price break point which will increase the net margin further. The years looking really promising and with the contracts i'm working on right now i'm set to turn $250,000 in my first year of proper business....unreal. I'm still working my job as security for now but the plan is to move away from this next year and take this on full time.

    To do list

    Website needs an upgrade - I need to add better marketing photos and add inventory levels to the product on the site for B2B clients to access. At the moment customers call and ask what i have which isn't so efficient.
    Hard copy catalogs of product need design, print and to be distributed. I plan to send these nationwide to all the customers i haven't been going after due to consistency of supply issues at my end. You only get one shot with a customer and i don't plan on letting them down due to no stock on their first deal with my business.
    Expanding my range - I'm running a "best cost" strategy which consists of differentiated product, cost leadership vs competitors, and a reduced overhead spend. I need to differentiate my product and this is in the works now with 4 new products due soon that have not been seen in my market before. These products are close substitutes, not something entirely different or new.


    I guess this moral of the story is sometimes being a tightarse isn't so bad.

    I plan to keep this updated with happenings and its a good way for me to write down all the sh*t in my head, a constant whirlwind of whats next.

    If you read through this cheers, i hope it wasn't too dull. If you have any questions please fire away, i left out a lot of really in depth detail as it was already long enough.

    Cheers
    Andy
     
    Ahrius, sthubbar, Tina70k and 15 others like this.
  2. DAL
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    DAL New Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Great read, congratulations on your success so far! Keep the momentum! Thanks for sharing.

    DAL
     
  3. drgregw
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    drgregw Contributor Read Millionaire Fastlane

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    This is so inspirational! The hustle is real, going door-to-door takes guts. Keep up the awesome work and thanks for inspiring!


    Sent from my iPhone using Tapatalk
     
  4. kelvinfernandezm
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    kelvinfernandezm Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Beautiful good job on your execution.

    I know I shouldn't be asking but I'm just curious of what's your target market. You don't have to tell me what the product is just what market it is.
     
  5. Late Bloomer
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    Late Bloomer Gold Contributor Read Millionaire Fastlane Speedway Pass

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    WOW!!!! Absolutely awesome success story, and wonderful write-up, Andy. Thank you so much for sharing your story! Congratulations on what you've achieved! I sent a note to the mods asking them to put your post into the GOLD category.

    How old are you? Had you done anything entrepreneurial before?

    I don't know these terms: BDM, MOQ (Minimum Order Quality?), 3PL, CBM.

    Looking back, do you think there could have a realistic way to assess interest without the risk of having to get the 15 units and hope you could sell them?

    Is there any way to announce that you will have a batch upcoming, preorders close on a particular date otherwise the customer might miss out?
     
  6. AndyNZ
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    Hi Kelvin, sure.

    Target market is typically male, between the ages of 25-50, however this age range is moving lower into the earlier 20's. Most buyers are Tradespeople or business people with a strong work/lifestyle balance. I know my target customer very well as i am one :)
     
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  7. AndyNZ
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    Hi,

    Thanks for the kind words and the push for gold, it's much appreciated!!

    I'm turning 30 in a few months time. Kind of, nothing like this though. I've always hustled whatever i could to make an extra buck or two, i bought, repaired and sold dozens of vehicles over the years, ranging from dirt bikes to excavators. This taught me a few things, good images of "product" are key to selling, you've got to stand out somehow!! and be excited about what you're selling, if your stoked on what you are bringing to its easier to make your customer feel the same way.

    Terms are : BDM = Business development manager. MOQ is minimum order quantity. 3PL = third party logistics meaning all my logistics are taken care of, i don't manage that side of things, it's very hands off. CBM = Cubic metres (freight volume).

    Typically i do something similar yes. I normally announce to my customers a few weeks out that i have stock arriving and offer a "pre-market" special, this has a few benefits. 1) Gives me chance to sharpen my marketing skills and create additional customer contact, the more customers see you active in the market the more comfortable they are dealing with you. 2) Pre-sales lower my cost of capital, less borrowing = less interest payments = lower overall COGS and higher net margin, and 3) Stock liquidity. I'd rather move stock and turn it over fast for less margin than go for higher margin and have slow moving stock, just my preference but it's working well for me.
     
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  8. Late Bloomer
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    Ah, thanks for the explanations.

    Looks like you will be well set for your 30th birthday.

    I'm really glad to get to learn from your experiences!
     
  9. ArtRyumin
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    ArtRyumin Contributor FASTLANE INSIDER

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    Great to hear of your success! also awesome to see someone from NZ on here also doing a fastlane business. I'm also developing something for the civil industry in NZ and abroad, if you're in this market, i feel for somereason you're in civil? Good luck with the next steps.!
     
  10. AndyNZ
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    AndyNZ Contributor

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    Hi Art,

    Nice one!! Where about's in NZ are you? My market isn't the civil market but that's certainly an exciting one to be. Good luck with your product!!
     
  11. ArtRyumin
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    ArtRyumin Contributor FASTLANE INSIDER

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    I'm in Christchurch but also operate in and around the Auckland region.

    Thanks! Did you sign up for alibaba's privilaged request service? I'm sometimes waiting for weeks/months to hear back from a manufacturer/reseller, the other day i got a message thinking it was for my most recent request but it was one from two years ago! i can't seem to figure out alibaba and how to get infrom of them thining of taking up this free offer for the privileged requests. Any suggestions or tips?
     
  12. AndyNZ
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    Hi Art,

    I'm originally form Christchurch myself and am there every few weeks, i'm based in Dunedin right now though.

    No i didn't. It can be a tough one to get replies, but one thing i would say is if you find it hard to create contact with suppliers through Alibaba initially this could follow on to further business dealings with that supplier. Any supplier which did not reply to me within 48 hours i cut from my vetting process. A good tip is to look for suppliers with the blue circle red tick next to their name, otherwise known as an "assessed supplier". I have found these types of suppliers to be the most active and easiest to deal with. This certification means they have been audited by a third party inspection company and the reports on this are available through Alibaba. Furthermore, when placing RFQ's (request for quotation) be as polite as possible and give as much information as possible. Also ask many questions once you receive contact, i have found that exactly what you want is normally available or do-able, but you want find it unless you ask the right questions.

    A lot of contact i have with my suppliers now is using WhatsApp or WeChat, seems to be a common way of business communication in China, as well as direct emails once i have these through Alibaba.
     
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  13. ArtRyumin
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    Thanks Andy that's very helpful. Appreciate the tips. Let me know if you're ever looking for someone to have some beers with when you're here, would be great to meet someone into FL mentality over here.

    All the best for now.
     
  14. AndyNZ
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    Sounds good Art, will do :thumbsup:
     
  15. Richard Gao
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    May I ask, did you design the product yourself to make cheaper and bring it to a manufacturer? Or did you find a manufacturer that made cheaper products and sold their products?

    Awesome journey bro.
     
  16. AndyNZ
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    Hi Richard,

    Thanks man, long ways to go just yet. I found a manufacturer who made the product i wanted, then requested small changes specific to my market so i could differentiate my product enough. The cost to make these changes was nil, and as far as bringing the cost of the product down, there are two drivers here, 1) Benefits of international business ie, labor arbitrage and lower raw material cost in China, and 2) scale, larger orders bring my landed cost down significantly.

    Once here, my cost advantage is maintained through a lean operation and efficiency.

    I hope that answers your question.
     
  17. Richard Gao
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    Wow, that's amazing, I thought your competitors would have thought of doing that already, it's surprising how big businesses sometimes don't pay attention to small details. Is your only selling point on these the price?
     
  18. AndyNZ
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    I think in a lot of industries businesses get used to the norm, if its always been that way then why change it right? We all know that people and organisations are resistant to change, uncertainty is scary, it's our job as entrepreneurs to make these changes but create comfort and certainty in the changes we make. I've had push back from re-sellers on some further changes i've tried to make in regard to supply chain payment terms but you can only do so much sometimes.

    No, my overall strategy is "best-cost" so this encompasses a few points. 1) Lower overall cost for a substitute product meaning my wholesale price is better, but due to my supply chain changes i make more margin than competitors and so do my re-sellers by selling my product, its win-win for all involved, 2) a differentiated product meaning the product has changes, that in my case, improve the product for my target market, and 3) maintaining a lower overhead spend. This third point is what allows me to do the first. It's a big circle, if any one of the 3 "legs" falls away the overall strategy falls over.

    Another point i will add in all of this is that when marketing a "best-cost" product it's key to prop up the quality of the product with marketing. Use high quality images, branding that looks premium (i use some gold ,black, and white in my logo), only show your product in use where the surroundings fit your brand etc. You're coming in with a cheap price and you don't want customers to equate that with "low quality".
     
  19. Richard Gao
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    I see, pretty amazing how big companies leave out small details, but it means more pieces of the pie for us!

    May I ask, did you do advertising with your ecommerce site when you first tried to sell your product, or did you just leave it on there? And did you go door to door selling to houses or door to door to retailers?

    I'm thinking my product (and most products) would fare poorly online at first, where you can't hold the product physically, and there would be little trust when there are no reviews at first.

    So I'm thinking I'll have to grind door to door for retailers too when I have my product manufactured, but I don't know any others than Walmart, Superstore, Costco, (insert any other big retailer here)
     

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