...after 7 or 8 months of this experiment in small business:
1. hang on to your cash
Cash is the lifeblood of any business, and conserving cash - or at least deploying it very carefully - could be the most important responsibility of a business's management. My biggest mistake with Wavelength involved one of my first big decisions: whether to order large quantities of shirts in each design (which would mean a big cash investment but a low per-shirt cost) or to order small quantities of each design (which would mean a smaller up-front investment but a higher per-shirt cost).
I went with option A, which I partly justified by thinking "if the company takes off, I'll eventually sell all these shirts anyway." And I was also worried that I might be flooded with orders and not have the shirts to fulfill them. But some designs proved to be unpopular, and I soon realized that - even though other designs were selling relatively well - I would be stuck with large quantities of the unpopular shirts, and the cash I'd spent on them was gone forever. So be tight with that cash, and also rememember that...
2. focus groups are your friend
Along with tightening my pursestrings, I could have used a focus group or a poll of some sort to get a feel for which designs would be hot and which would be cold. In hindsight, this sounds like a no-brainer, but in the business's early days - before I even had an email list - I didn't really have an idea of how to go about getting a large sample of people to weigh in on my shirt ideas, and I decided to just go to market. Today, I realize I should have put more time into coming up with a polling strategy early on. In addition, I should have been more willing to...
3. adapt early - and shut down early if necessary
July 2005 was a big month for Wavelength Clothing. Shirts were printed and stored in my garage, the website was up and running, and I started using Google's AdWords program to drive traffic to my site. As I've described in earlier posts, AdWords brought me 300 visitors a day at a cost of $0.10 a visitor, so at the end of July, I'd spent about $1,000 and had 10,000 people check out the merchandise online.
Of these 10,000 visitors, only about 25 bought shirts - a number that was well below the 100 to 1,000 that I had hoped for. In the small picture, this meant that the AdWords program - which I had expected to rely on as a major source of sales - was a money-loser I would have to discontinue. In the big picture, it meant that Internet sales in general were going to be much harder to come by than I had thought, and that I would soon have to test different sales approaches like boothing it up at farmer's markets and college campuses.
The biggest message from the AdWords results was one that I didn't want to hear: my shirts might not be anywhere near as marketable as I thought they would be. In hindsight, I probably should have grown much more hesitant to invest any more money into the business. But with large quantities of shirts on hand (see lessons 1 and 2 above) and a stubbornly optimistic outlook in mind, I would hold off on cutting off the cash for several months.
