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After 3 years of activity, I made the decision to shut down my company. Here goes my story, I hope you can learn from my mistakes.
THE IDEA:
On December 2018 I had my second and definitive FTE event (long story short, I was fired when the company where I was working decided to eliminate my role, which apparently was created as an experiment, and I never saw it coming). So I started to look for ideas.
I thought about a friend (my business partner in this venture), who has been designing tailor-made clothes for kids in this niche (where she had clients who said they couldn´t find these types of clothes at an affordable price) and she was always struggling to keep up with demand. We concluded that her issue was scalability, and decided to create a small brand to sell her products in a streamlined and scalable way. We took the leap.
Mistake one: Go all in in an unknown industry without making enough research.
THE BEGINNINGS:
It was December 2018 and we decided that the best plan was to prepare a new collection to launch on fall. We spent months looking for suppliers, making the designs and suitable small batch manufacturers.
Finally, in October 2019, we launched the first collection.
Mistake two: we didn´t test the market. If I could go back in time, I would have made a smoke test with some samples, and even launch a smaller collection in summer just to test the waters.
We got our first clients from friends and people who started following us on Instagram. We also did some paid ads. All in all we managed to sell almost all our inventory in the next months. Then the pandemic hit and we had a lot of delays with the materials we needed to produce the next collection and we were almost with no stock for months (but we kept receiving messages form clients asking for products, especially for the baby collection). We launched the next collection eventually and it was also a total hit, especially the baby collection, our main problem was stock rupture and productive capacity to keep up with demand.
THE RISE:
The fall 2020 collection was when things started to go exponential (In November and December we made 70% of the yearly revenue) and during 2021 the trend continued. Keeping up with demand was still our main struggle.
Mistake three: Instagram was practically our only source for new clients, we were doing so well in Insta that we got comfortable and became extremely dependent on it.
Mistake four: We got a lot of queries from multibrand stores to sell our clothes, but we were so focused on B2C, and going B2B would requiere some changes, that we decided to put all of our eggs in the B2C basket (which at the same time was in the Insta basket….).
Pursuing the B2B route as well would have meant sacrificing a little bit of momentum in the B2C business due to production constrains, but it would have mean a new recurring source of revenue, diversifying our Insta dependency, but at that time, I was so obsessed with the B2C strategy (I was planning to open physical stores of our own, too) that I didn´t see it.
THE FALL:
For the next collection we decided to increase initial production considerably to solve our issue of having enough stock to meet demand, and I put more money in to fuel that growth via inventory (at this point the company was profitable).
We announced our launch via email marketing and it had a great welcoming. However, when we launcvhed on Insta itb wa s atotal fiasco.
Our Insta reach dropped by around 70% and with it the sales. Not only our growth slowed but we start to have negative YOY sales.
We started considering that maybe they didn´t like the new collection that the slight increase in price maybe was excessive, and many other things, but the email marketing was doing great and recurring customers were buying, especially the more expensive products. (I later realized our clients were extremely price sensitive for some products but insensitive for others but not at that time).
We talked to other brands and they told us they were experiencing the same on Insta, I researched about it online and it seemed to be a general trend… The algortithm changed and we were f***ed. We breached the commandment of control and we were suffering the consequences.
THE STRUGGLE:
We seriously considered shutting down at that moment, but we didn´t want to quit without trying enough. We thought we could make it work if we solved that control issue with Insta, also, fall/winter was historically our best sales.
We invested heavily in video content we increased our reach in Insta, but we were still far form our “glorious days”.
We also tried alternative channels and we managed some success with Google, but not enough. We started selling thorugh a physical store in exchange for a comission (which provided some extra revenue but nothing crazy and it is very time consuming).
We also tried the B2B route but we didn´t manage to get to any agreement and we were having production delays.
At the same time, our CAC and production costs were skyrocketing, and our margins suffered to the point any profitability vanished.
Then it hit me, the main problem was not only the commandment of control, it was worse, it was the commandment of NEED. We were selling 10$ bills at 5$ without even realizing it.
Mistake five: We were doomed from the start seduced by a business model and niche that seemed profitable, but it was only due to arbitrage (free Insta organic reach), and like all arbitrages, they fade over time and with them the opportunnity.
So, we decided to shut down the business after we sell all the remaining stock. Then, I will move on to my next venture idea, that I am currently actively searching!
I hope you managed to learn something from my experience and prevent you from making the same mistakes!
THE IDEA:
On December 2018 I had my second and definitive FTE event (long story short, I was fired when the company where I was working decided to eliminate my role, which apparently was created as an experiment, and I never saw it coming). So I started to look for ideas.
I thought about a friend (my business partner in this venture), who has been designing tailor-made clothes for kids in this niche (where she had clients who said they couldn´t find these types of clothes at an affordable price) and she was always struggling to keep up with demand. We concluded that her issue was scalability, and decided to create a small brand to sell her products in a streamlined and scalable way. We took the leap.
Mistake one: Go all in in an unknown industry without making enough research.
THE BEGINNINGS:
It was December 2018 and we decided that the best plan was to prepare a new collection to launch on fall. We spent months looking for suppliers, making the designs and suitable small batch manufacturers.
Finally, in October 2019, we launched the first collection.
Mistake two: we didn´t test the market. If I could go back in time, I would have made a smoke test with some samples, and even launch a smaller collection in summer just to test the waters.
We got our first clients from friends and people who started following us on Instagram. We also did some paid ads. All in all we managed to sell almost all our inventory in the next months. Then the pandemic hit and we had a lot of delays with the materials we needed to produce the next collection and we were almost with no stock for months (but we kept receiving messages form clients asking for products, especially for the baby collection). We launched the next collection eventually and it was also a total hit, especially the baby collection, our main problem was stock rupture and productive capacity to keep up with demand.
THE RISE:
The fall 2020 collection was when things started to go exponential (In November and December we made 70% of the yearly revenue) and during 2021 the trend continued. Keeping up with demand was still our main struggle.
Mistake three: Instagram was practically our only source for new clients, we were doing so well in Insta that we got comfortable and became extremely dependent on it.
Mistake four: We got a lot of queries from multibrand stores to sell our clothes, but we were so focused on B2C, and going B2B would requiere some changes, that we decided to put all of our eggs in the B2C basket (which at the same time was in the Insta basket….).
Pursuing the B2B route as well would have meant sacrificing a little bit of momentum in the B2C business due to production constrains, but it would have mean a new recurring source of revenue, diversifying our Insta dependency, but at that time, I was so obsessed with the B2C strategy (I was planning to open physical stores of our own, too) that I didn´t see it.
THE FALL:
For the next collection we decided to increase initial production considerably to solve our issue of having enough stock to meet demand, and I put more money in to fuel that growth via inventory (at this point the company was profitable).
We announced our launch via email marketing and it had a great welcoming. However, when we launcvhed on Insta itb wa s atotal fiasco.
Our Insta reach dropped by around 70% and with it the sales. Not only our growth slowed but we start to have negative YOY sales.
We started considering that maybe they didn´t like the new collection that the slight increase in price maybe was excessive, and many other things, but the email marketing was doing great and recurring customers were buying, especially the more expensive products. (I later realized our clients were extremely price sensitive for some products but insensitive for others but not at that time).
We talked to other brands and they told us they were experiencing the same on Insta, I researched about it online and it seemed to be a general trend… The algortithm changed and we were f***ed. We breached the commandment of control and we were suffering the consequences.
THE STRUGGLE:
We seriously considered shutting down at that moment, but we didn´t want to quit without trying enough. We thought we could make it work if we solved that control issue with Insta, also, fall/winter was historically our best sales.
We invested heavily in video content we increased our reach in Insta, but we were still far form our “glorious days”.
We also tried alternative channels and we managed some success with Google, but not enough. We started selling thorugh a physical store in exchange for a comission (which provided some extra revenue but nothing crazy and it is very time consuming).
We also tried the B2B route but we didn´t manage to get to any agreement and we were having production delays.
At the same time, our CAC and production costs were skyrocketing, and our margins suffered to the point any profitability vanished.
Then it hit me, the main problem was not only the commandment of control, it was worse, it was the commandment of NEED. We were selling 10$ bills at 5$ without even realizing it.
Mistake five: We were doomed from the start seduced by a business model and niche that seemed profitable, but it was only due to arbitrage (free Insta organic reach), and like all arbitrages, they fade over time and with them the opportunnity.
So, we decided to shut down the business after we sell all the remaining stock. Then, I will move on to my next venture idea, that I am currently actively searching!
I hope you managed to learn something from my experience and prevent you from making the same mistakes!
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