Dealing with Entrepreneur’s Anxiety

I started blogging about my experience of building Po Campo three years ago but I only began regularly posting this past summer. I usually base the topic on something that I’m presently focused on, whether that be grandiose big picture things or nuts-and-bolts executional things. As far as I’m concerned, it’s all fair game and all part of the entrepreneur’s life.

Well, this weekend I drew a blank on what to write because I spent the last week doing little other than being overwrought about how much we would sell between Black Friday and Cyber Monday. I wish I could tell you how I managed to overpower the anxiety in the end, but I can’t, because I haven’t. However, I am going to hold true to the promise I made to myself to post every week, which means that while anxiety about Christmas sales is not the most interesting topic, I suppose I will just have to write about that, because it’s all I can seem to think about.

The core of my anxiety is that our December sales need to be good to end the year with a profit, a goal that has eluded me for the last five years. In addition to just making me feel like I am doing a good job at running my business, being profitable would increase my likelihood of getting a bank loan, or some other kind of financing, so I could start to improve my balance sheet. There’s nothing I’d like more than being able to pay back some of those early friend and family loans that make me feel guilty and some of that high interest credit card debt that just makes me feel like a loser.

I put together a solid holiday marketing strategy to hit our sales goals, but that has apparently done little to assuage my anxiety. When I’m in a state like this, I feel paralyzed by my inability to control the outcome of a situation, and so I sit around watching movies until an idea strikes me (Change up the card abandonment email! Reactivate the Google remarketing ads! Think of another clever facebook post – and boost it!), in which case I jump up and do that post haste. I don’t feel like there is time to do the things that normally help me feel balanced, like yoga or cooking or socializing, because I feel too busy, when in reality I’m just waiting…for something.

December 13 Update

Holiday sales are going splendidly, thank you very much. Our last shipping day is Dec 19, which means by this time next week, I’ll be ready to sit back, relax, and enjoy the rest of the holiday season!

Why I don’t manufacture in the USA

There is a lot of talk nowadays about manufacturing in the USA and “reshoring“. Part of me applauds these efforts and part of me, remembering my own difficult time with domestic manufacturing, thinks that not only is it not possible, but not something anyone in her right mind would wish to do.

Then I wondered if my experience with domestic manufacturing in the cut-and-sew space was typical. To fin out, I’m sharing my experience with manufacturing in the USA, which we did from 2009 through 2011, and why I’m not overly eager to try it again.

When I first hatched the idea for Po Campo in 2008, I was very keen on the idea of producing our product domestically, if not locally. This was before there were resources like Maker’s Row around to help you figure out how to do it, and it was much more difficult than I had ever imagined it would be.

Unlike overseas manufacturing, where the factory does all the sourcing of raw materials for you, in the U.S. you typically have to do all the sourcing yourself. So, there are two parts of the manufacturing process: the sourcing of the raw materials and then finding a factory to construct your product.

Sourcing Raw Materials
Once we had good samples of our first products, we were able to make a thorough Bill of Materials (BOM) and start the hunt for suppliers. Our bags had about 25 different components each, so there was a lot of hunting to do. We turned to Google and Thomas Register to start contacting companies.

Our first lesson was that the MOQs (Minimum Order Quantities) for raw materials was much higher than we needed. Dying/printing custom fabric was upwards of 5,000 yards when we needed 100 yards. Buying bulk webbing (straps) in custom colors had an MOQ of 1,000 yards when we needed 400 yards. Trying to get hardware at an affordable price required a purchase of at least 1,000 pieces when we needed about 200 pieces.

We tried to tweak our designs to require fewer materials, but we were still nowhere close to hitting the minimums. Therefore, we had to purchase most materials “off the shelf” and pay 50% to 100% more for them, forcing us to both raise our price and reduce our profit. In some cases, we ended up purchasing materials directly from Asia, either because we could not find a vendor in the U.S. or because it turned out to be less expensive, even with exorbitant shipping costs.

While we were eventually able to source all of the different materials, they all came from different suppliers with different terms and different minimums, resulting in a very complex supply chain. Also, the raw material vendors could be difficult to work with. They were often rude to me on the phone, treating me like a small-scale nuisance and/or a stupidly naive girl rather than a true customer. They were also technologically unsophisticated: ordering by phone or fax was much more common than ordering by email or online, which made ordering a lot of material hard to do when you had a full-time job elsewhere. In short, buying materials was a pain in the butt.

Producing the Product
Now, onto the labor side of the equation. The greatest benefit of working with a local factory was their proximity. Sample making was a collaborative process, where they would make a bag according to our drawings and then we would visit and discuss improvements together. Our factory was about a 20 minute drive from my office (I still had my day job), making it close enough to swing by over lunch if I had to.

A common complaint about overseas factories is that they are always late but we experienced the same thing with our local factory, which makes me think it is just inherent in the cut-and-sew world. You may think that you can go down to the factory and stomp your foot enough times to make them finish your order, but that just wasn’t the case. If they had an order from a more valuable customer (read: larger) to finish first, they would.

Another problem we experienced was running out of materials. Despite building the BOM together with the factory, we would inevitably get a call midway through production that they had run out of something and could not continue. We would rush to track down more of it, often paying a small order surcharge or purchasing way more than we needed to to keep production on track. I don’t think the factory purposefully wasted materials, but since their profit was in how quickly they could sew things, it was in their best interests to cut corners on efficient material usage in exchange for construction expediency, and we paid for it.

Pricing Problems
Because of the higher costs of both the raw materials and the labor, our margins were so-so, around 34% (industry standard is 44%) or less, sometimes much less, depending on how much the raw materials cost that go-around. That meant we would have to sell more bags to make enough profit to grow the business as we wanted.

Yet, it was hard to sell bags. We got a lot of encouragement and oohs-and-ahhs, but we were told over and over that our prices were just too high. Our efforts to streamline the design to simplify production resulted in a simpler bag that we were still charging too much for.

The high price of the bags affected other aspects of the business too. We learned that since our product was so new and different that we needed to invest more in marketing. We originally planned on giving influential bloggers and journalists a bag for them to review, but our bags cost us too much to do this at a large enough scale to make an impact.

I started feeling that the only thing I liked about manufacturing in the US was being able to say “Made in USA”. But if the process made me miserable and we weren’t able to sell enough to stay in business, why were we doing it?

Deciding to Make a Change
After another disappointing sales season in Spring 2011, I decided to test the notion that our sales were slow because our bags were too expensive. I dropped the price as low as we could to see what would happen. Our online sales went up over 400% the first month and stores started reordering for the first time.

The experiment confirmed that our price was a big hurdle to purchase, and reducing our cost by 35% or more was not going to be feasible with the way we were doing things. Even if we went to a different city in the U.S. with cheaper labor prices, our raw materials costs, which made up about half of the total cost, would stay the same. Expecting to save 35% on labor alone, regardless of where it was made, was unrealistic, or unconscionable, as workers would likely be working in sweat shop conditions, which are sadly not unheard of in the USA.

Since moving our production to Asia, we have had our fair share of problems. Shipments have been late, sometimes devastatingly so, and we have had quality issues here and there. However, it is much easier to produce the bags that I want to make (and that our customers ask for) because not only is there a wider array of materials available, but I also have access to the latest in cut-and-sew technology. Our profits are much healthier, and, as a self-funded business, this makes all the difference in the world. Some of the things I’m most proud of with Po Campo, like hiring a good team and our partnership with World Bicycle Relief, would not be possible without those profits.

Would I ever consider producing bags in the USA again? You bet. I think about it all the time. But I don’t want to go back to the way things were in the early years of Po Campo, where it felt like we were slowly marching towards an inevitable death.

Is Cut-and-Sew in the USA Realistic?
Learning from other brands that successfully produce in the USA, if Po Campo were to “reshore”, we would need to change our distribution strategy (i.e. only sell B2C) and own more of our supply chain. We’d likely need to raise our prices and sell to different customers too. Essentially, we would need to develop a new business all together. Oh, and I would definitely need to procure enough capital to give me a multi-year runway, and access to capital has not been easy for me.

Now that I’ve shared my sordid tale with you about my experience of making in the USA, I’d love to hear about your experiences. Did you encounter similar road blocks that I did? If so, how did you overcome them?

How I Plan to Maximize Holiday Sales

One of my favorite things about being in business for a few years is that you have a sales history that you can refer to when you are doing your planning. It sounds horribly geeky but having to guess about when, where and how you’re going to get sales is the absolute worst. Case in point: how much money can I hope to make this holiday season?

Like most consumer good companies, I hope Po Campo will cash in on all the holiday shopping activity. Below are our sales trends over the last two years. After a spring/early summer spike, you can see that the holidays are our second highest sales season. Our retail (i.e. B2C) sales have roughly doubled this year over last, and I’m banking on that trend continuing through December. Rather than just hoping for the best, I checked our data from last year to see what worked the best so that we can focus our efforts on activities with a high ROI.

Po Campo's sales history over the last two years
Po Campo’s sales history over the last two years

First I look at our Quickbooks file to see where last year’s holiday sales came from and discovered that 78% came from retail sales, with the remainder being wholesale drop ship accounts.

Step One: How to Maximize Retail Sales

Focusing on the retail sales, about 30% of those came from doing holiday shopping events. We are doing several more shopping events this year, so I feel pretty confident that we’ll be able to roughly double that amount.

The rest of our sales came from our online store. To learn more about those sales, I looked at our Google Analytics acquisitions report for last year’s holiday shopping season to see where the highest converting traffic came from.

Po Campo's converting traffic from last holiday season (Nov 15 - Dec 31)
Po Campo’s converting traffic from last holiday season (Nov 15 – Dec 31)

70% of our conversions came from people looking specifically for Po Campo, either typing into the URL bar or searching for Po Campo, or a variation of our name, in Google. My first thought is that these are people come to us already knowing what they want, so can I expect this number of visitors to double this holiday season?

To make an educated guess, I run a report comparing this year to last year. Our traffic is up by 56%, but our conversion rate is down by 19%. Therefore, if those trends continue through the holidays, I expect our organic and direct traffic to increase somewhat, but probably not double.

Next, 19% of our conversions came from referral traffic, mostly blogs that had included a Po Campo bag in some sort of gift guide. I know we are going to be included in some of the same gift guides this year, and it’s a little too late to make any more pitches. However, we have started some strategic partnerships with various groups, affiliate networks and analogous brands that should increase the amount of referral traffic we get.

Lastly, 7% of our sales came from social, almost entirely from facebook and Pinterest. Both of these platforms have greatly improved their targeting and reporting tools over the last year, so while I’m not able to glean much information about was successful last year, I think there is an opportunity to run some promoted posts to increase conversions this year.

Most of these tactics for are underway, with the exception of the facebook and Pinterest optimization. Researching that is now on my to-do list for next week.

Step Two: Drop Ship Accounts

Secondly, I ponder the drop ship accounts. Generally we just let them run on auto-pilot and focus most of our attention on our own online store. However, these drop ships have grown into a decent size business for us this year and I’d like to support them as they push for holiday sales as well. I brainstormed some promotion ideas with my team, including:

  • Developing content that they can just plug into their networks. Our expertise is in inventive and inspired products for modern city living, in particular integrating the bicycle into your life, and this is something we’d be happy to share with them.
  • Using our reflector pins as a gift with purchase (commonly called GWP) during certain periods.
  • Offering longer return periods
  • Offering special promotions

Knowing that time was of the essence, we sent these ideas to our contacts to get their input. As I feared, we were too late to be able to do much, especially with the larger sites. Not to let this lesson go to waste, I added a reminder to our 2015 calendar to look into this with our drop ship accounts in late September/early October instead.

Maximizing Holiday Sales Strategy

Here is what we still have time to do this year:

  • Promote the heck out of the holiday events we have planned this year
  • Activate our Google Adwords that target the common misspellings of our name (like Pro Campo or pocampo) and turn on our remarketing ads to make sure we stay top of mind to people who visit our site.
  • Increase traffic from facebook and Pinterest
  • Promote the gift guide exposure
  • Identify partner marketing opportunities with our simpatico brands
  • Continue to talk with drop ships about highlighting Po Campo

I look forward to sharing how successful we were in January! What are you planning for your last minute marketing push?

Running “Quickbooks Reports”
Po Campo uses the Wholesale and Manufacturing version of Quickbooks Premier. We set up our different revenue sources as Customer Types and these include: Retail, Drop Ship, Wholesale, Distributor and Discount. Running the “Sales by Customer Type” report (Reports > Wholesale & Manufacturing Reports > Sales by Customer Type) displays how your different revenues streams perform against each other over a period of time.

I didn’t discover this report until this year and now it is one of the ones I look at most often!


Is “Taking the Plunge” Worth It?

A couple weeks ago, a friend asked me to lunch, saying she was weighing an important decision and wanted my input. The important decision turned out to be whether she should quit her high paying job that was fine enough but not fulfilling for a very low paying job working for a nonprofit that she really believed in. She knew I had quit a high paying job to work on Po Campo, which pays me very little, and did I think it was worth it?

Of course I gave her the enthusiastic “yes!” that I give to everyone who asks me this question. I offered up the usual reasons of why quitting a good paying job or leaving a career is actually not as scary as it may seem: you can always go back to the old career later, you have savings to help you transition to a lower pay, you don’t actually need that much money anyway, and what’s the worst thing that could happen anyway? It’s not like it will kill you.

She ended up turning down the new job and staying put, saying that it just “made more sense”. I don’t blame her for that. It did make more sense. Yet, I had to admit to myself that I was disappointed to hear her decision. Why?

At first I thought it was because misery loves company. We romanticize the thrill of “taking the plunge” but in all actuality, it sucks most of the time. Well, starting a bootstrapped business does, anyway. It’s stressful. It’s tiring. It’s thankless. It apparently never gets easier. I treasure my relationships with my fellow bootstrapped entrepreneurs because they are the only ones who can sympathize with my struggles and whose encouragement to keep going matters most.

But why would I want my friend to share my misery? And am I really miserable?

No, of course I’m not miserable. I would even describe myself as happy.

When I started Po Campo, I made a pitch to a colleague to join me in my venture. The first slide had the Gandhi quote “Be the change you wish to see in the world”. Despite all the hardships I’ve faced since quitting my good job and taking the plunge, overcoming the challenges with starting and growing a business have definitely made me stronger and more confident. I know the future will be similarly tough, but I feel ready for it. I feel more in control of my destiny and I believe in my ability to change the world, at least my little corner of it. Before Po Campo, I had hoped that I could be a positive influence on the world someday. Now I know that I can. And therein lies my happiness.

So, maybe I was disappointed with my friend’s decision because I thought she was going to miss out on experiencing this source of happiness. But honestly I don’t think so. I think I was disappointed simply because I thought it would be another thing we could share, just like our love of recycling and our love of foreign travel. I’m glad she chose what was right for her.

I’ll close this post with a quote from Henry David Thoreau from Walden:

“I learned this, at least, by my experiment: that if one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with a success unexpected in common hours.”

The inspiration for this post came from a lovely interview with designer/artist Elle Luna on The Great Discontent. I recommend reading it.

Why I don’t use a Fulfillment Center

After 2.5 years, Po Campo is getting ready to move into a new home! And we’re taking our warehouse with us. There are many places that will warehouse and ship your products for you, so why are we doing it ourselves? You need more space, you have to stock a lot of shipping supplies, and it takes a lot of effort.

Short answer: Because we always have. And I kind of like it. And it’s cheaper.

When we started Po Campo, we were making just 200 or so bags at a time. My co-founder and I didn’t have space in our apartments to store them, but my parents lived in a nearby suburb and, as empty-nesters, that had plenty of space and liked the thought of helping me with my business any way they could. We trained my parents on how to ship orders and they would dutifully take care of that for us. We did this for the first 3 years of Po Campo’s existence.

Once we started importing the bags in 2012, we were getting 8,000 bags at once, rather than at most 500. Clearly that was too much to keep in my parents’ basement, so I started looking for a warehouse space. My friend Annie of Mohop shoes was setting up shop in a raw commercial space and had extra room so we moved in there.

Our first raw commercial space
Our first raw commercial space
First Warehouse 2
Our first warehouse

Looking back, this would’ve been a good time to outsource the warehousing but honestly it didn’t cross my mind. I don’t know if it is because I didn’t know fulfillment centers existed or because I wasn’t ready to let go of it yet. Our operation still seemed pretty small scale.

As it turned out, our first production run from China had a lot of issues. We had to hand inspect every bag before shipping it out, which we wouldn’t have been possible if we had had outsourced it.

As the business grew, shipping and fulfillment became more complex. We established processes for shipping items from our online store, how to handle drop-ship accounts, how to export, how to work with different stores’ vendor routing guides (basically very specific instructions on how you ship products to them). We negotiated better UPS rates and got discounts for shipping supplies. We installed software to better manage our inventory and sync with our online store and Quickbooks. I always thought it took my parents so long to ship bags because they were older and slower to learn new things, but it turns out that shipping actually takes time and effort!

However, our office/warehouse space had some downsides. It didn’t have a loading dock and we were in the basement, which made moving pallets in and out with the freight elevator a pain in the neck. Also, it was horribly cold in winter and just kind of crappy overall, with flickering fluorescent lights, cracked cement floor and lots of spiderwebs. We were ready for an upgrade.

I was picturing moving into a cool lofted studio space that we could use for an office and maybe a showroom and then outsourcing the warehousing and fulfillment. I shopped around and found some suitable fulfillment companies, but after getting estimates on the cost, it turned out to cost about a third more than we were paying to do it ourselves. (See how most fulfillment companies charge below). Was it worth it?

I decided it was wiser to just move the warehouse into a better space. After looking at other warehouse spaces, I realized our warehouse was actually pretty small, and could be even smaller if we found a place with taller ceilings. I’m happy to say that I found the kind of lofted studio space I was originally dreaming of, and it’s large enough for a small office and warehouse. I think this space will hold us just fine through the next period of growth, and which time we will reassess.

Packing up our current warehouse, getting ready for the move.

Things to think about when deciding if you want to self-fulfill:

– You can make sure it is done right (mis-ships from fulfillment centers are not uncommon)
– You can access your inventory easily, should you need to do pop-ups, retail events, or sales calls
– You can customize your shipping process on the fly, e.g. if you want to add gift tags for the holidays
– It’s nice to have your product around you because it’s tangible proof that you’re making things
– It’s often cheaper, assuming you’re not paying for a high rent space. Rawer, commercial flex-space is about half the cost of office space.
– If there are any problems with your product, you can catch it before sending it out to your customer.

– It’s very time-consuming and you’ll probably want to hire someone to do it. A college student will suffice.
– It’s more complicated than you’d think. You’ll have to learn about how shippers work, how to get the best rates and how to do the appropriate documentation.
– Depending on your product, it can take up a lot of space. Plus, you’ll need to stock shipping supplies. This isn’t feasible if you live in a high-rent area. Fortunately, Chicago has many affordable spaces in good locations.
– You have to be there to do it. I always dreamed of a virtual office, but storing physical inventory means that someone has to be there everyday to ship it out.

Example of Fulfillment Center Fees
– Rent, for how space you take up in their warehouse
– Picking fee, for every time someone has to pick an item off the shelf or out of a box
– Receiving fee, for every time you send new inventory to them
– Packaging and shipping materials, like boxes, tape, etc.
– Pallet loading fees, if you are shipping out product by the pallet
– Order processing fees, if they have to log-on to any accounts to download orders
– Labeling fees, if your customers require specific labels or bar codes
– Paperwork fees, if your shipment requires special paperwork, such as for exports
– Returns fee, if your customers send back unwanted product directly to the warehouse
– Shipping account usage fee, if you ship using their UPS/FedEx account

This is more specific than how I account for fulfillment costs in our system. I just have two line items in our books for fulfillment: Shipping costs (i.e. UPS) and fulfillment costs (i.e. shipping supplies and the hourly wage of the person who’s doing the shipping). When I was comparing the cost of doing fulfillment ourselves versus outsourcing it, I went through the painstaking process of determining how much we would’ve spent had we priced everything like an outside fulfillment center does, which is how I found out it would’ve cost roughly $500/month more to have someone else do it.