Monthly Archives: August 2014

3 Lessons From When a Big Break Went Bad

Po Campo exhibited at Outdoor Retailer for the first time in August 2011 and it felt like we were the stars of the show. Despite being in the back of a tent in a parking lot across the street, there was a flurry of traffic the whole time, with buyers from nationwide chain stores calling their colleagues on their cell phones, saying “You gotta get over here and see this bag line!”.

I thought this was my big break. Finally, we were getting interest (and orders!) from large retailers, dramatically increasing our sales to the point where I could not only start paying myself but maybe get a little office and a little staff, the whole bit. The buyers said they needed the new product within five months for a spring launch and I said, “Sure, no problem!” even though I knew this was actually a big problem, since I wasn’t sure how I was going to make the bags. We had recently decided to split ways with our existing manufacturer and hadn’t lined up a new one yet. 

The next few months were the most stressful of my life. From having to come up with $50,000 in two weeks for the factory’s downpayment to taking a call on Christmas Day to learn that the bags would be months late, to paying out the nose to get bags made locally to meet our January order commitments, to finally receiving the bags from China – in April – only to learn that there weren’t all perfect. All those big customers I was so thrilled to line up dropped my product line and rather than propelling Po Campo forward, the whole episode set us way way back. I hope I will never have to go through that again

And I hope you won’t either! Here are a few lessons that I learned so that you won’t repeat my mistakes.

1) Rushing manufacturing leads to problems. You may be able to pull all-nighters with your local team to hit a deadline, but this just doesn’t seem to work with manufacturers, especially ones on the other side of the world that you have a short history with. There are just way too many things that can go wrong and your business will bear the brunt of it. I think it’s better to communicate delays with your customers (or not take the orders in the first place) than to force manufacturers to go beyond their comfort zone and try to do the impossible. We now agree on a development and production schedule with our manufacturer that we are both comfortable with and don’t rush it.

2) You do dumb things when you’re desperate. I was feeling so rushed to get manufacturing started that I shelled out for a big downpayment before seeing any good samples from the factory. I know, very scary – and stupid! But I was feeling desperate. The factory said they needed the money to know that I was serious before getting started, which is fair enough, but I needed good samples to know they were serious about making my product. I put their needs ahead of my own, which irreversibly put Po Campo in an inferior position that I paid for later. My desperation mindset is similar to the scarcity mindset, where you make bad decisions because you feel like you have so few options. Whenever I hear myself think, “But I have no choice!”, I try to think of as many choices as possible.

3) Look before you leap. Do I regret taking those orders? A little bit. Part of the thrill of the entrepreneurial journey is that you are in unchartered territory most of the time. You do a lot of leaping off of cliffs and hoping for the best. I just wished I looked before I leapt, because I probably would have realized that in this case, the risk outsized the reward. The risk, the very real possibility of not being able to fulfill the order on time and losing customers was much greater than the reward of launching in new stores in January. A safer route would’ve been to tell the stores we weren’t ready to launch in spring, but how about summer? We would’ve missed a few months of selling in their store, but the likelihood that we would’ve been able to coast into the finish line would’ve been much greater.

I recount this story, and some of my other lessons of the “big break” in a podcast with Jane Hamill on Fashion Brain Academy. Have a listen!

I’d love to hear some of your stories about when you bit off more than you could chew, and how you recovered from it (hopefully). Please share in the comments.

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5 Financial Ratios for small manufacturing companies

It’s not as obvious as you may think to tell if your business is doing well. For examples, sales can be rapidly increasing, which feels like things are going great, until you find out that expenses have been outpacing the sales, in which case you’re back to where you started from. I’ve been there and it stinks!

Having strong financials is not the only characteristic of successful companies, but they certainly make running and growing a business easier. With my background in industrial design, I always thought as “financials” as someone else’s job, so it took me several years to get a good handle on what my financial statements were telling me and how I could make business decisions based on them. Once I became familiar with the Profit & Loss Statement (also called Income Statement) and Balance Sheet, I started using standard financial ratios to help me understand how my company was performing compared to other companies in my industry. Learning how Po Campo stacked up against other small companies (here defined as manufacturers with sales under $5 million) helped me understand how to move the needle towards a stronger financial profile.

My five favorite ratios are:

1. Current Ratio = Current Assets ÷ Current Liabilities
Definition: We all need money in the bank to make sure we can pay all our bills when they come due. The current ratio measures the “safety margin” that you are maintaining to cope with the ebbs and flows of cash.

What’s normal*: 6.4
If your current ratio is less than this, that means a surprise expense could impair your ability to pay your bills, which is risky. If your current ratio is greater than this, that means your socking away an above-average amount of money, which is more comfortable. My number is much smaller than this, which explains why I’m so stressed when I think about money!

Where you find these numbers: Both the current assets and current liabilities are on your balance sheet.

2. Quick Ratio = (Cash + Accounts Receivable) ÷ Current Liabilities
Definition: The quick ratio measures the extent to which you are able to pay your current obligations (read: bills). 

What’s normal*: 2.5
Similar to the “current ratio”, if your number is less than this, you are operating a little too lean and if your number is greater than this, you are operating at a more comfortable level.

Where you find these numbers: Cash (and Undeposited Funds), Accounts Receivable and current liabilities are all on your balance sheet.

3. Accounts Payable to Inventory = Accounts Payable ÷ Inventory x 100
Definition: This ratio tells me to what extent my inventory is being financed by my suppliers rather than being financed by cash flow or traditional debt.

What’s normal*: 16.8
If your ratio is higher than this, it means that your supplier is financing most of your inventory. This could be okay if you have a good relationship with your supplier. It does give them more leverage over you, as they are essentially your bank, so just make sure you’re comfortable with that.

Where you find these numbers: Both Accounts Payable and Inventory are listed on the balance sheet

4. Debt to Equity = Total Liabilities ÷ Net Worth
Definition: This ratio tells me the balance between debt and my equity.

What’s normal*: 0.1
If your number is lower than this, that means that a greater proportion of your business if financed by the owners, which generally means you have fewer financial obligations but also means that your growth may be restricted by how much the owners are willing to finance.

Where you find these numbers: Once again, this is on the balance sheet.

5. Times Interest Earned = (Profit Before Taxes + Interest) ÷ Interest
Definition: TIE measures the number of times profit (before interest and taxes) will cover your interest payments. It helps you know to what level your income can decline without hurting your ability to make your interest payments. 

What’s normal*: 0.5
The higher the number on this ratio, the better! But as long as you’re above zero, you will be making your interest payments.

Where you find these numbers: On you P&L (Profit & Loss), take your Net Income and deduct taxes and interest, and then divide that number by the interest.

Good luck with calculating your ratios! Remember, building a business is a #practice, so just try to improve month by month and quarter by quarter. Rome wasn’t built in a day.

*How do I know what’s normal? As a member of the Outdoor Industry Association (OIA), I received a copy of their 2013 Manufacturer Benchmarking Report that “presents a detailed but straightforward analysis of the financial and operating characteristics and compensation practices of outdoor manufacturers”. And boy does it ever! Read a topline of this report here.

Designers as Entrepreneurs

Last Friday, August 15th, I had the honor to present at the IDSA International Conference in Austin about one of my favorite topics: Designers as Entrepreneurs. Here is a recap of my presentation.

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Now is a great time to start a business. There is better access to capital, it’s getting easier to make and sell products, and there is a growing support network.

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I launched my company Po Campo in 2009. We make bags for modern urban living: bike bags, yoga bags and travel bags. We sell our bags mostly through other retailers nationwide and internationally in Canada, Mexico, Europe and Australia, as well as through our online store.

There are lots of qualities that industrial designers typically possess that come in handy as an entrepreneur, particularly creativity, optimism and tenacity, because people are always going to be telling you that your idea isn’t going to work.

Yet there are other ways that I feel like my industrial design background has led me astray as I transitioned into the role of entrepreneur, which I’ll share through some anecdotes.

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I had two jobs before Po Campo. I graduated from the University of Illinois at Chicago in 2001 and wanted more than anything to become a design researcher. That was right after the first tech bubble burst though and jobs were hard to come by. I was thrilled to get a position at Arctic Zone, a Chicago-based manufacturer of soft coolers and lunch bags. That is where I learned cut-and-sew manufacturing and how to work with China.

Next I took a job at Webb deVlam, then called Webb Scarlett, as a structural packaging designer. In this role I learned about the power of branding, as well as the importance of standing apart from your competitors at shelf. Eventually I transitioned to heading Webb’s design research and design strategy department, focusing on helping our CPG customers identify white space in the market and learn what design language would communicate the desired benefits to the intended consumer.

Then I started to get the itch to do my own thing. As a consultant, I was working on projects for months that I cared deeply about, just to have them vanish with the final deliverable. I really craved holding onto the reigns longer. But doing what?

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I always loved biking to work yet I wished there was a better way to carry my belongings. Backpacks and messenger bags didn’t do it for me and the bags that were designed to go onto bikes were very utilitarian. I felt like I was being made to choose between biking and having normal looks bags, which just seemed illogical.

IDSAPresentation.005I realized that with my background in soft goods design and branding, starting a bike bag company would be a perfect fit for my talents. Plus, when I started doing my market research, I learned that cities around the world were investing a lot of money to build up more bicycle infrastructure to encourage people to bike for transportation. I knew there would be a lot more people like me, looking for crossover products to help them integrate biking into their daily lives. I could claim this emerging market space as my own. Easier said than done!
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I teamed up with a industrial designer friend and these were the first two products we developed, a “Going to Work Bag” and a “Going Out Bag”.

In the beginning, I was so excited about building a company led by two female industrial designers. I really believed in the power of design and thought that it would give us a tremendous competitive advantage. I was convinced that, compared to most companies run by old businessmen, we would do everything differently and everything better.

It wasn’t until I had to start doing all the other jobs in the business that I realized how wrong I was about the importance of the design. Everything from shipping logistics to accounting to customer service had a spirit of creativity and craft to it, especially in the start-up phase where you are building the company brick-by-brick and figuring out how it all fits together as you go.

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This is Po Campo organization chart. Learning the other jobs within a company really leveled the playing field for me, which is why you see Design at the bottom with everything else, instead of at the top where I first thought it would go.

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We launched in 2009, before Kickstarter and Shopify, so we went straight to selling in stores. I went door-to-door cold calling on shops. We got our bags into over 15 stores in Chicago that first summer and got great press right out of the gate. REI asked to bring in the line during our first month, and we soon had orders from Japanese and German distributors for our next season’s production run. Woo-hoo!

We started daydreaming about quitting our day jobs, about all the other great products we would develop, about what a cool studio space we would get. But that didn’t last long.

When I started calling our shops to get re-orders, I didn’t get any because they hadn’t sold any bags. After two and three months, they still hadn’t sold any, and would we mind taking them back? We panicked.

Looking back, I know what the two main problems were. First, our bags were about twice the price as the competition. Sure our bags were a lot cuter, as is evident in the photo above, but not THAT much cuter. Second, we were selling to an emerging market, which meant that our consumer not only did not know that products like ours were available, she didn’t even know that she needed a product like ours yet! We needed to do a lot more marketing that we hadn’t planned for.

Hindsight is always 20/20. At the time, we just felt like we needed to stop the leak and started asking our customers about what we could do to improve sell-through.

IDSAPresentation.010Most of the suggestions seemed like pretty simple fixes, such as streamlining the design to reduce cost, adding different sizes of bags, adding different colors, creating non-bike bags for people who like the look but don’t bike, etc. And here is where you have to be careful as a designer leading a company: Since design was the easiest thing for me to do, I just designed a lot more stuff. Our line ballooned from 6 SKUs to 68 SKUs just a few years later. Sure, we were growing, but it was haphazard growth that was hard to manage and almost certainly impossible to sustain.

So I went back to my design background and thought about what I would’ve said to a client who would’ve approached me with a similar situation back when I was a design strategy consultant. I would’ve told her to reconnect with her consumer, so that’s what I did.
IDSAPresentation.011 We started spending time with our core consumer, identified which values we were aligning on, and refocused our line-up and marketing strategy around those values. We realized that we were not just making bags but building a community around the joy of modern urban living. We’ve started doing a lot more events, selected our retail partners a lot more carefully and started creating videos to show how people can incorporate biking into their daily lifestyles easier. Sales continue to grow – sustainably.

One of the biggest changes for me is learning to use numbers to understand what’s working in my business and what’s not, both for operations and design. Before Po Campo, I rarely used spreadsheets. Now data is my best bud.

I always liked design research because it enables you to make a sincere connection with the people you are designing for and helps you see how the products you are designing will make people’s lives better. But making people’s lives better isn’t enough to sustain a business; you also need revenue & profit. It took me awhile to really internalize that.

The design community doesn’t talk about sales much, as if talking about money that a product makes diminishes its value. I think this is a mistake, as it makes us think that good design is above trivial matters of money, when it’s not.

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Part of the reason our line grew so big was that I got attached to the products that I want to have in market. I started my own company to make the products that I want in the world, so it is hard to kill them off. For products that didn’t sell well, I would always want to give them a second chance, thinking if I had marketed them differently, they would’ve sold better.

However, a bootstrapped company doesn’t really have the luxury to give products second chances. I’ve had to alter my definition of good design to be not just products that are made responsibly and meet a consumer need or desire, but also makes us money (preferably quickly and easily!).

IDSAPresentation.014 IDSAPresentation.015Thank you!

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4 Tips for Surviving Trade Shows as an Introvert

I’ve found doing trade shows to be a necessary evil for growing Po Campo wholesale accounts. You get great exposure and there’s good potential for sales, yet they are expensive, time-consuming and exhausting – especially for introverts.

A key defining characteristic of introverts is that we refuel with alone time, whereas extroverts refuel by being around people. That means that the lucky extroverts get more and more energy as the day at a trade show wears on, while us unfortunate introverts are stumbling across the finish line by the time the show wraps.

Last week Po Campo was at its 10th trade show, the Outdoor Retailer trade show in Salt Lake City. With each show that we do, I hone my strategies for the best ways to survive them and get the most out of them. Here are my four tips for how to survive a trade show as an introvert:

1) Skip unnecessary social events (and don’t feel bad about it). People will tell you over and over that at the after show parties is where the real business gets done. Regardless, I know I am physically unable to work a 9 hour show and follow that up with mingling and drinking with strangers for another six hours, especially if I have to be back at the booth the following day at 9am at full strength. So I skip the parties. The difference this time around was that I didn’t feel bad about it. You have to know your limitations and respect them.
Side note: Often the industry parties right after the show have free food and drinks. If you’re like me and always looking to save a dime, go to the party just long enough to get a free dinner and then head out.

2) Plan your alone time to let yourself refuel. I used to think I could just muscle through a trade show, but inevitably I would run out of energy and ask a neighbor to watch my booth while I sat in a bathroom stall for 15 minutes to recharge. That’s no fun, so this time around, I planned ahead. I got up early to have a few hours of “Maria time” before showing up at the booth at 9am, enabling me to start the day fully charged and ready for action. I scheduled friends or sales reps to relieve me for 90 minutes every day at some point for a break. After the show, I would have dinner with a friend or go shopping for an hour or two before returning back home by 9pm to read or watch TV. Knowing when my escapes were helped me endure the longer stretches and be at my best for longer amounts of time.

3) Don’t talk to everyone. The common wisdom is that you should enthusiastically greet everyone that walks by and invite them into your booth to check out your wares. If you don’t act like this, people will tell you that you should. That’s simply not me, though, and nothing tires me out more than that kind of behavior. Instead, I smile at everyone I make eye contact with and if their eyes linger on my merchandise, I will jump into the pitch. If not, I don’t say anything. My reasoning is that I want to give the best version of myself to the people most likely to become customers and if I’m worn out from chatting with every person that walks by, that won’t happen.

4) Team up with an extrovert. Having an extrovert in the booth will relieve you of a ton of pressure to talk to people. Many extroverts actually like working at these types of events so finding a volunteer is pretty easy; I just post something on Facebook and offer a free bag in exchange for her time. However, be warned that if the show is slow, the extrovert will just talk to you instead, exposing you to the same small talk that you had hoped to escape. To play it safe, I usually only have my extrovert in the booth during the busy hours and then dismiss her when it quiets down, saying “I got it from here”. The busy times at trade shows seem to be between 10am – 3pm, although each show has its own rhythms.

If you’re an introvert, I would love to hear your strategies for surviving (and thriving) during trade shows. As Po Campo grows, I foresee more and more of them in the future, and there’s nothing I’d like more than looking forward to them rather than dreading them.

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Book Review: #GIRLBOSS

The list of prominent female entrepreneurs in product and design businesses is short. Martha Stewart? Sara Blakely of Spanx?  And yet there is no shortage of tales of successful male entrepreneurs in these fields. While I find many of their stories interesting and informative, they too often end the same way: some dude kicking back with his millions of dollars, luxury watches and a fleet of sportscars. Yawn. Just because I want something else as my endgame does that mean my aspirations are any less important or my business acumen any less acute? No, of course not, but if you listen solely to these dudes, you might think so. If women define success differently than men, what is the female equivalent to this vision of “making it”?

#GIRLBOSS by Sophia Amoruso

#GIRLBOSS by Sophia Amoruso

I was thumbing through a copy of Sophia Amoruso‘s #GIRLBOSS in the bookstore and read the phrase “I stopped feeling like I didn’t belong anywhere, and realized that I actually belonged anywhere I wanted to be.” That sentence really struck a nerve with me. Here I had this idea for these great Po Campo bags that I was so excited about and passionate about and then for five years had to listen daily that they didn’t quite fit into the current marketplace and that it probably wasn’t going to work. When so many people tell you “probably not” for so long, and people that you respect, it takes awhile to build up the courage and turn that dialogue around and say, “Well, actually, yes it will!!” That’s kind of where I am now, which was why I was eager to read about how Amoruso made that transition herself.

First, #GIRLBOSS is not really a business book, even though it was in the business section of the bookstore and about her business Nasty Gal. Regardless it was certainly fun to read, as the writing style is distinctly her own and about as different from a normal business book as possible. In the book, she candidly talks about the qualities that she possesses that helped get her to where she is despite not having a college degree or even a prior office job. I think I would have absolutely adored this book when I was 17 years old, wanting to believe I had greatness in my future but not being able to imagine how a 17 year old pimply dork with no boyfriend could ever become great.

While I suspect my 17 year old self would be happy with where I am now, my 37 year old self craves more. Despite feeling like the book left me a little empty-handed as far as business lessons go, there was one meme in #GIRLBOSS that I’m taking with me, and that is that you have to believe in yourself whole-heartedly before you can ask other people to believe in you. That’s certainly not a new idea, but coming from Amoruso, a most unlikely powerful CEO, it really rang true and was incredibly persuasive. All those years of people doubting me (and me doubting myself) have definitely left their marks on my psyche, but Po Campo needs a thoroughly confident leader to attain its goals, so that is what I will be.