How we flushed $70K down the toilet

written by GORILLA ROI under
 _category Amazon Journey

We nearly sunk our own ship.

Allow me back up to a pivotal point in our business when we knew nothing, that could have ended our business from the start.

In the beginning

that excited feeling from a new venture
that excited feeling from a new venture

We were so green and wet behind the ears that we made mistake after mistake.

In fact, I’d say we (as in my wife and I) made more mistakes than most people as we didn’t have any friends or connections with people who ran a business.

No one to ask for advice while we were starting up.

My family were puzzled, and questioned why I would leave a well paying 6 figure job at Samsung Electronics.

We had to learn everything through our failures and it hurt.

It still hurts with every new fail we encounter. There never seems to be a shortage of them.

Let’s go back to 2012.

As the title suggests, we were approved for an SBA (Small Business Administration) loan. Considering that banks were still tight on giving credit in 2012, it was a big feat for us to close on the SBA loan.

It literally took us 8 months to get the loan, but we got it.

One of the requirements was to submit a business plan. We made a killer deck, with wild cash flow projections that put us into positive territory after the first year. HAHA.

This was before we even knew about selling on Amazon.

It’ll be funny to upload the business plan for you to see. I now realize how useless business plans are for new businesses…

I see the same type of mistakes from people pitching on Shark Tank and other investment shows where they claim to have the best idea, and believe it will be profitable right away.

Just like me.

But with all those hopes and dreams filled in our pockets, we finally finished the SBA loan and got the money.

$70k fresh in the bank.

The dumb, horrible, inexcusable $70,000 mistake no business should make

With a big balance of $70k now in the bank, we had so much opportunity.

Right?

We did what any newbie entrepreneur would do. We stopped being resourceful.

When we were financing everything out of pocket and didn’t have much cash to work with, we kept an eagle’s eye on all expenses.

With this newfound wad of cash, common sense left the house.

We figured we needed to take our product packaging to the next level and fast before anyone found out.

After some searching, we found a superb design firm from San Francisco and hired them to design our

  • brand identity
  • logo
  • packaging
  • trade show materials like banners, brochures and other useless stuff like a presentation folder

The problem with marketing agencies is that there is a lot of “fluff work” to make the high cost worth it.

They performed the usual “market research” which takes at least a couple of weeks. Something we had already done by buying competitor products and comparing them.

Mood boards came next.

Then a lot of calls, proposals, and lots more back and forth over the next 3 months.

When it was all finished, we blew our entire $70k SBA loan on the design and marketing.

How dumb were we?

  • We did not set a budget
  • We didn’t know what we needed
  • We didn’t have a plan to sell the product

We were infatuated with the idea of having eye catching packaging.

Sales cures all… if you sell

Now that we had packaging deemed worthy and looking like it belonged on every retail shelf, we hit our first trade show.

Things started off “meh”.

We landed a few tiny accounts but still super excited to see it live on the shelf.

Fast forwarding a little, we visit the store, talk to the manager and buyer and get bad news.

The product wasn’t selling.

What a punch to the gut.

We realized we didn’t put any thought into how consumers think and chooses to buy a product. We approved this beautiful package design that wasn’t communicating any of the benefits to the buyer.

It only caused more confusion.

Back to basics and fundamentals

With all the cash gone, we couldn’t afford the fixes or redesigns the design agency would charge. Their hourly rate was $250-$300.

So I did what should have been done in the first place.

I went to the local supermarket and studied and analyzed the common themes of successful products.

And one by one, I started to make changes myself to the packaging. Having experience with photoshop helped.

The original designers certainly wouldn’t have approved my design changes. It messed up the aesthetics, the text alignment wasn’t perfect, I added images taken with my phone, the images didn’t flow 100% – but the conversions rocketed up.

Other improvements made to the product

Renamed the product to what it was.

If we were selling a yoga mat, we first called it some stupid name like “plush mat” thinking we were being different and creative. It was just stupidity. Should have just called it “yoga mat” from the beginning.

Added simpler descriptions.

We also had different versions of the product, and people would constantly ask us about the differences. Using the yoga mat example, we added terms like “hard”, “medium”, “soft”. Or small, medium, large to the packaging.

Added in use photos.

I took some random in-use shots with a cheap camera and my phone, created a collage using free online photo software and embedded it into the front of our packaging.  People can never have enough in-use photos.

This version is the same design we still use today -7 years later.

What I learned wasting $70,000

I’m being unfair by saying it was a screw up as the logo and design really is beautiful and it has created a wonderful brand and foundation over the years.

However, if I had another $70,000 loan, everything would be done differently.

The big takeaways:

Having no money forces you to be creative and go into fight or flight mode.

A sudden big balance causes “lotto syndrome” of spending on unnecessary things.

We no longer use agencies.

This a global economy and our main designer is in Eastern Europe. Her rate is $30-$50/hr and delivers mind blowing quality and speed. In a recent trade show, passersby would stop to just comment on how on-point and attractive the packaging was. Ever since, we have had great success finding designers ourselves from dribbble.com and upwork.com

Research your customers, not the product.

Had we bothered to put in the effort to do our own customer research and gathered feedback much earlier (or even during the design phase), we would have been in a much better position and with more money in the bank.

Sales is sexier than design.

The product could look the prettiest, but if it’s vague, doesn’t have a clear cut message and fails to convert, it’s dead to me. I’d rather have a website or product like craigslist.org that looks 20 years old but converts like crazy, than a flashy website that doesn’t convert. Same thing applies to product packaging.

What’s next?

Hindsight is 20/20 and it’s funny to look back on it. I’m shaking my head and laughing as I write this.

I’ll continue sharing more failures, successes, and lessons learned as I take you through our journey of getting to $5M in revenue and beyond.

What is Gorilla ROI?

Gorilla ROI automatically pulls Amazon data into Google sheets for you to make sense of the data without the inconvenience of manually downloading, sorting and updating spreadsheets.

Learn how you can centralize your data and use it to increase your ROI.

Leave a Reply

Your email address will not be published. Required fields are marked *