Everybody likes to talk about business and entrepreneurship successes. That’s fun to talk about. Successes are a small part of my equation, as I’ve had more failures. I have learned more from ventures that didn’t work than ones that did.
If a business isn’t successful in 3 years …
One of the problems as an entrepreneur is not knowing when to give up. You think you can keep going if you try harder, make more money, or just get something right. It can drive you crazy. It can also drive you to be broke. Time can be wasted as well. Time is your most valuable asset besides your health, and we choose how to invest time every day.
Kevin O’Leary always says that if a business isn’t successful in 3 years, it is time to take that bleeding dog behind the barn and put it out of its misery. But it’s tough as an entrepreneur. I want to talk about one of the businesses I recently had to do that with. ENEMY was my custom sunglasses company that I recently shut down on December 31st, 2022.
What is successful versus what is failure is relative. ENEMY generated $2.2 million, but I shut it down because it wasn’t successful enough. Challenges occurred stemming from landing costs, the premium product components, the price point, margins, pricing, and competition. At the end of the day, nobody cared about ENEMY’s premium components.
There was no money!
Math ended up not working, either. By the time the sunglasses were sold with discounts and people got paid, I was only making 10 to $12 per pair of sunglasses. Then paid advertising had to happen. There was no money! So, after the first order, I had to get the margins down. I ended up ordering larger quantities after negotiating with the vendor. The bottom line was that:
- I built a product that was too premium for the price that I was charging.
- I didn’t want to be Alpha M pitching sunglasses.
- I hadn’t figured out a mechanism to sell a zillion glasses.
- I also realized that these sunglasses only moved if I pushed them and advertised them. I didn’t want to do that. I did not want to have the responsibility.
Shift in direction
I kept hearing Kevin Leary’s three years statement in the back of my mind when ENEMY hit the two-and-a-half-year mark. I thought about what I was going to do. I changed the glasses’ components to get them down to $18 and negotiated shipping rates (using ship instead of plane). I also didn’t want to be the brand, so I developed a new website and hired models.
I relaunched the company and gave it six months. If I couldn’t figure out the advertising mechanism in that amount of time, I planned on shutting down the company. I didn’t figure it out. I also realized that the market was highly saturated and competitive. So many companies were selling very similar products in quality and price. ENEMY was nothing special. The only thing that made it special initially was that I came out with it and had a loyal following.
Upon realizing that I had never figured out the equation to convert dollars in advertising money spent on digital to sales, I didn’t want to do it anymore. I didn’t want to spend time, energy, bandwidth, or any more money to figure it out. I could have figured it out because I have a lot of smart people around me, but I didn’t want to. I had other businesses, entities, and priorities making more money that were worth my investment time.
Selling off all the inventory in 3 months
I had over 4,000 pairs of sunglasses in my warehouse, and I didn’t want to promote them anymore, but I didn’t want to lose all the money. For easy math, that was around $80K worth of inventory. I decided to shut down the business and get it done by the end of the year so I didn’t have to think about it in 2023 or file another year of taxes. My goal was to sell all the sunglasses in 3 months.
I did it. I publish videos on my YouTube channel saying ‘thank you,’ but I’m done. I put all the glasses at 50% off, and it exploded. The website went crazy with traffic, and sales were coming in. The only reason they were selling was that people knew that it was the last chance to get ENEMYs, and 50% discounts move the needle.
Taking the L
The loss sucks, but what sucks worse was investing even more time, energy, and money in a business I didn’t feel right about. It wasn’t working, so even though ENEMY exceeded two million dollars in 3 years, it didn’t meet my needs or interest. I didn’t want to do it anymore.
The key takeaways are that you should not overbuild a product, you need to know your price, and you need to know how you’re going to market it. You also need to know the costs of selling it if you don’t have a big following. Market before having the inventory and know your competition. Ensure you’re not distracted because, like most people, you’ll go where the money is; if the money isn’t there, you’ll lose interest and focus. Once that happens, the business is done.