Confessions of a Former Business Owner

I’ve just recently launched a new business, but this is not my first time at the business ownership rodeo. I have felt the unadulterated joy of a first sale and the unmitigated devastation of closing a business. So I thought I might share some lessons learned, some of those hard-knock, shoulda-woulda-coulda ideas that might have made a difference the first time around.

Here’s hoping that if you are just starting a business, or maybe if you are in growth stage, these small confessions can help keep you from making some of the mistakes that I did.

Confession #1: I forgot to include packing materials into my pricing.

What can you get for a box of packing peanuts? Not much, which is surprising since they run about $10 a cubic foot. And what about boxes? You’d think you could find empty boxes on the cheap, but I found myself paying over a $1 a piece or more. Then there is packing tape, labels, and the gas it took to take the boxes to Fed Ex. On average, every order I sent out cost me at least $2 in packing materials.

That doesn’t sound too bad. Two bucks, no sweat, right? Maybe not, if you are selling high-end goods, but for me and my little gourmet food company, the average price of a box of cookies or gourmet baking kit ran about $7.50. That price was a 100% markup over cost. So forgetting to include the costs of those packing materials ate a huge chunk of my profit! Thankfully, most of the orders that were filled were not just one item. However, in hindsight, I should have been smart enough to factor those costs into my pricing.

Solutions: There are any number of solutions to this mistake, all of which include just being smart about how you do things. By the end I had figured a few out:

• Buy in shipping materials in bulk: If you ship items regularly, buy in bulk as often as possible. It might be a bit of an investment up front, but it will save you money in the long run.
•  Recycle if you can: Reuse boxes from other purposes and save all the packing material that comes in shipments you receive. For me this was tough because I didn’t want to send a box that had a logo from another company on it. But if I could cover that logo with a strategically placed shipping label, I absolutely used it.  
• Consider using the U.S. Postal Service: This is another one that may or may not work for your business. Depending on the type of item you are shipping and to where, this might not be your best or most cost effective shipping method. But consider that priority mail boxes and flat rate boxes are free. My post office even gave me free priority packing tape. And flat rate boxes might just be my favorite invention of the century.
• Add the cost into your price: Perhaps the most obvious solution of course is to tack a bit on the price to cover your costs. I am not suggesting you do a mark-up on the cost of your boxes and tape, but adding them into your pricing keeps it from minimizing your bottom line. By the time I closed, I was charging a fee for orders under $20 to cover my costs.

Confession #2: I printed everything myself.

When I started my business, I printed my own business cards on those perforated sheets you can get from any office supply store. I fired up my old inkjet printer and clicked print. They looked terrible, but they fit my purpose and I didn’t know any better. Then, I decided I needed catalogs and flyers. I printed a few myself, but even I had to admit at that point that I needed some better quality printing to make a good impression. I researched online and found a couple of companies who offered small quantity printing. Talk about sticker shock. Seventy cents a page for a full color, double-sided copy? Catalogs ran about $4 a piece! Forget that, I thought. I’ll just buy a really good printer and do it myself. So I financed a high-speed, full color, fancy-schmancy laser printer. I knew I could beat that pricing and save myself a whole ton of money printing on demand from the comfort of my home office. The printer would pay for itself and then some within the first year.

Sigh. It seemed great at first, but after you consider the cost of toner, upgraded paper, and the hours hovering over the machine, my cost really wasn’t all that much better. Add to that the cost of having half a container of toner cleaned out of your carpet after one tiny little fight with the printer and all of the pages wasted due to misprints or paper jams, I ended up with a very expensive printer that now just prints out my kids’ book reports on nice, shiny, glossy paper.

Solution: Trust me on this one. The solution is to outsource.

• Find a good out sourced printer or watch for sales at the copy shop: Paper jams and toner issues then become their issue to fix, and you won’t end up spending money on something you can’t use. There are even places you can get post cards and business cards for super cheap or even free, as long as you don’t mind their little logo on the bottom. If you are just starting out, this is a great solution.
• Evaluate the materials: As your business grows, evaluate and decide what printed materials you really need and what you can do electronically via email or on a website. And as with most things, your cost goes down the more you buy, so if you have to buy, make sure you get all you need at one time.

Confession #3: I gave stuff away for free.

When I think back to when I was just starting out, I had such a naive, trusting opinion of people. Don’t get me wrong—the world is full of amazing, kind, honest folks, but it is also filled with people who will take advantage of you if you give them half a chance. I wanted so badly for the world to know about and taste all the yummy gourmet goodies I sold. So much so, I was willing to give product away for free. Thinks like “buy one get one free!” popped up on my website. And because I had organized as a consultant-model company and wanted to build up my consultant base, I am ashamed now to admit that I offered full sample kits for free! Kits that cost me no less than $30 and had a sale value of almost $100. I estimate I gave away over $1,000 worth of product that first year. Money that would have been much better spent on other things like paying a good printing company, for example.

Solution: Consider very carefully what you can and cannot afford to give away for free.

• Free is a great gimmick, not a business practice: A big shiny free sign is a great way to get folks to your site or to check out your product, but it is not a guarantee that you will get their business.  There is value in the attraction of free, but there is also value in, well, a price tag. A price sets the perception of value and quality for your customers. If I can give it away for nothing, what does that say about the true value or quality of that item? I guess I learned that lesson the hard way.

What about you? Did any small or unexpected costs affect your bottom line? Go ahead, confess. Think of me as the Visa of hard knocks, all sorts of hard lessons accepted here.