- In 2018, I started one of Australia's fastest
growing eCommerce businesses. - This is a calming blanket.
- It reduces anxiety. - We made millions of dollars in sales and helped a lot of people, and then I almost blew it. This is an absolute, crazy story and you're gonna wanna
watch it to the end. It was late 2017, and I was still living with my parents at that
stage, failed university, I'd failed a ton of businesses. I was really settling in thinking, am I ever going to be successful? It was something that I
always wanted during school. I wanted to be a billionaire. I wanted to be rich. I was sitting there one day and I was just thinking
about completely giving up. I remember thinking is
my intelligence enough to achieve what I want. Maybe there's something that I'm missing. Maybe the people that have
succeeded are successful for something that I don't have at the time I was researching
on PubMe, which is, basically, where you get
research papers and whatnot, and I remember coming across this article about kids with autism spectrum disorder really favoring weighted blankets. A lot of the scientific
evidence was anecdotal at that stage, but there was definitely something there they'd
been used for generations, and I thought, "Hey, this
could be a good business," and then I was like, "Look, I'm
gonna give it one more shot. "If it doesn't work, I'll just default "to being a videographer, "completely forget about my dreams." I was this close to giving up. So, I did the standard
eCommerce process thing that everyone does that I went onto the site Alibaba and
basically looked for the product, and I couldn't really find any suppliers that were supplying the product. It turns out that's a really good sign because you're really early onto the trend which we're gonna talk
about in a little bit. I managed to get some samples sent across. Samples cost, you know, $100, $150, because they were so heavy to ship. They were nine kilogram
blankets coming from China and it was basically all the
money I had at that stage. I ended up getting my girlfriend, and my mom just around the
house, to model the blankets. I got my camera, set up
a basic Shopify store. In our first month, we ended
up doing $1,000 of sales. I think it was at that point where I was like, "Okay,
this is actually gonna work." I remember I didn't even have
the product at that stage. I just had the website and
people were buying on pre-order. So, these customers were willing to wait, two, three months for the
product to even come in, making me really understand
that this could be a big thing. Then the second month, we
did about $2,000 in sales and I'd saved enough to
actually place an order. It was basically 200 units and they were going to ship it over, and it started to take
off like a rocket ship. We built a really strong
marketing framework, acquiring customers really
cheaply on Facebook, nurturing them through emails
and amazing customer service. It was like we could not miss, every single initiative that we launched, every single marketing
program was profitable. We were able to hire an amazing team. We also managed to get the number one spot for "weighted blanket" on Google, and we were the fastest
selling weighted blanket in Australia, overtaking our competitors. In our first year of business, we're doing $1.5 million in profit. The second year of business, we were able to do $2.5 million in profit. If I could sell the business
around that trajectory, I could have been looking
at $10 million cash in the bank, and my life
could have been set up, but then I screwed it up. Over the next 12 months, we went from doing $500,000 profit months to losing over a million
dollars in the year. If you wanna know where it all went wrong, you can break it down to four main issues. The first issue was we just didn't have our
basic business strategy. We were grabbing weighted blankets, adding new materials to them, such as silver iron blankets,
hand-woven blankets, bamboo blankets, these new materials. We thought we could reinvigorate
our customer audience and keep growing our business. This was inherently flawed in the end and it was very hard to see
that until it was too late. It wasn't enough to
differentiate ourselves from the large retail chains like Kmart, Spotlight, and BIG W. They used their huge size and the fact that they don't really have to ship their customer the product, so they can actually charge way less. They often focus on the bottom
end of the market as well. So, launching a lower quality product to give a very, very cheap price. While we were focusing heavily on quality, when they launched the product, finally, it went viral. It was on things like TikTok, saying, "This is a calming
blanket, but way, way cheaper," and that caused us lots of issues. They took a lot of our market share, meaning that our brand just wasn't strong enough to
hold onto those customers. The second thing that we failed to do was proper planning on multiple fronts. The main one was actually inventory. Paired with our product strategy of launching lots of different skews and lots of different materials. It becomes a very hard to juggle inventory
and forecast correctly. Even in peak COVID time
where demand was really high, we were still doing unprofitable months, simply because we couldn't
get our top sellers in. When you're trying to
advertise your non-top sellers, your advertising efficiency goes down, your sales go down, and it
can cause huge problems. Pair this with the supply chain crisis, where freight was taking incredibly long, the suppliers were taking incredibly long due to this increased demand, and we just couldn't get the inventory we needed
to become profitable. The third thing that changed is the Apple privacy law changes. Apple, in a bid to destroy Facebook and a lot of small businesses with it, changed their privacy laws, so people needed to actually opt-in to receive targeted ads on any app. This decimated a lot of our businesses, but especially calming blankets, because it's a hyper targeted product that's helping people with
certain sensory disorders or even helping people improve sleep. The fourth main issue, which
is probably the largest, was poor financial decision making, greed, and just poor
decision making by myself. I was trying to make the
group as big as possible. We had a group of brands that were doing over $1.5
million profit a month. To move the needle with this, I was hiring really aggressively. We got to about 100 people and I was trying to share the
resources among the group. It turns out that this is
very, very difficult to do. eCommerce businesses are so
amazing, like calming blankets, because they can stay incredibly lean. You only need a few main people and a couple of agencies, and you can really
scale up and scale down. There's not that many fixed
costs as we call them. As things grow in any organization, things become less efficient. Communication becomes harder and tracking output and motivating people also becomes harder. It's just natural in growing a business. As Davids Sacks says, "The benefits of synergies
are hypothetical, "but the benefits of focus are immediate." We ended up needing to restructure
the entire organization. Each business needed to become, kind of, their own entity,
with their own people focusing on the business. Now each responsible for
their own profit centers, and everything was very, very measurable. In hindsight, this is definitely how it should have been
set up from the beginning. So, after all that journey,
what have we learned from it? Firstly, don't pursue growth at all costs. Don't take on too much risk, grow your business at a pace that you can actually
feel comfortable with. Secondly, ensure that you
have really strong processes in your department before you try to scale up too quickly. Also, make sure that you're
constantly looking at your business or product strategy. While our initial product strategy might have been working over time, it just wasn't defensible, and we should have
created patented products that were really helpful
to our customer base. So, that BIG W and these people would've
stopped us eventually. Focus on things like
product diversification, channel diversification, like not just being too
reliant on Facebook, and also market diversification. So, getting other regions scaling as well. Also, make sure that you have really clear financial reporting and planning for your future. If you're struggling with that or don't think you have it right, hire someone senior or get a consultant to really come in and
look at your business, and, finally, don't wait too
long to change something, if you do not think it's working. You also really need to
understand the Pareto principle, the 80/20 rule. This says the 80% of your results will come from 20% of your actions. In our case, it was just
launching amazing products through Facebook marketing. I decided divest lots of profits
into lots of other things. That's called Shiny Object Syndrome, and it's an entrepreneur's curse, but you really need to
understand what that 20 is to invest in it heavily
and just keep going. So you might be wondering,
where is calming blankets now? We have amazing customers, and amazing reviews, and
our product is great, and we just did over
$500,000 in sales last month. It's gonna take a lot of work to take the brand where
it should have been, but we're excited to
take on the challenge. I just wanted to leave you with my closing thoughts about failure. Thomas Edison said, "I have not failed. "I've just found 10,000
ways that do not work." Whether he said that or not, it's always stuck with me. My motto is, the only failure
that is actually a failure is one that makes you give up. If you like today's video, I really want to start
sharing more failures to show that nobody is perfect and business really is
challenging for everyone. Don't forget to like and subscribe. Peace. (upbeat music)
