Category: Money

How I Increased our Holiday Sales by 87%

Posted on by Maria in How-To, Marketing, Money, Sales

My post “How I Plan to Maximize Holiday Sales” from 11/18/14 outlined my strategy for cashing in on the holiday shopping season. Are you curious about how my plans worked out? Now that the dust has settled, I checked to see how well we did.

I pulled these reports with Quickbooks and Google Analytics. Details on how to do so are in each metric.

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Google Analytics Acquisition>All Traffic>Channel report, comparing 2014 (Blue) against 2013 (Orange). This report shows Sessions (aka Traffic) and E-Commerce Conversion Rate.

Overall Goal: Double sales over 2013
Result: Overall sales increased by 87.2%. So not quite double, but pretty close.
Analysis: Of course it always burns a bit to not quite hit your goal, but overall I am happy with how the season turned out.
How I know this: In Quickbooks, I ran a Profit & Loss Statement (P&L) for the holiday time period and compared 2014 against 2013.

Goal: Double retail event sales by doing many more events
Result: Event sales increase by 98.7%. Hurray! Again, not quite the goal, but pretty darn close.
Analysis: We did a whopping 8 events (as opposed to just one in 2013), and that strategy obviously worked. That said, we were all pretty exhausted by the end of the month. Next year we’ll skip some of the slower shows and enlist more volunteers so we aren’t working seven days a week.
How I know this: In the same P&L statement from above, I filtered it for our “Retail Events” customer. We didn’t set-up a Retail Events customer until midway through 2014, but since we use Square for credit card transactions at events, I was able to figure out the 2013 sales with a Square sales report.

Goal: Maintain the momentum of increased traffic to our website by 56% over 2013
Result: Traffic increased by 62.3%.
Analysis: I attribute the extra bump in traffic to just more people being online and shopping.
How I know this: In the Google Analytics Acquisition Overview report, I compared 2014 against 2013. I refer to “Sessions” to represent inbound traffic.

Goal: Increase referral traffic by roughly 50% by being in more gift guides
Result: Referral traffic increased by 41.2%.
Analysis: Despite not hitting our goal, I am very pleased with how this strategy played out. Our e-commerce conversion rate from referral increased to an impressive 9.73% (compared to 0.41% in 2013), and of course that is a better metric than just traffic. We will push harder for gift guides next year, and get started on them earlier.
How I know this: In the same Google Analytics Overview report, then just clicking on the “Referral” line to dive into that report.

Goal: Invest in social media advertising to increase conversions.
Result: Our traffic from social increased an impressive 435.7% and our e-commerce conversion rate increased 214%. The vast majority of both traffic and conversions came from Pinterest.
Analysis: Obviously the Pinterest increase is a huge win, and interesting because we didn’t put any marketing dollars there. We did advertise on both Facebook and Google, and hardly saw a bump from those advertising efforts. Next year we will double down on Pinterest and try advertising there instead.
How I know this: In the same Google Analytics Overview report, then just clicking on the “Social” line to dive into that report.

Goal: Keep drop ship account momentum going, which had increased 74.1% over 2013.
Result: During the holidays, our drop ship orders increased by 132.1%!
Analysis: We offered our drop ship accounts limited-time discounts on certain SKUs so that they would have styles to promote during the big shopping days like Black Friday and Cyber Monday. We also changed to shipping every day (rather than just Monday, Wednesday and Friday) so that they can offer more shipping days.
How I know this: In Quickbooks, I ran a report under “Manufacturing & Wholesale Reports” called “Sales by Customer Type” and filtered it for the “Drop Ship” type. Note: You have to be using the Quickbooks Premier: Manufacturing & Wholesale Edition to have access to this report. Another method would be to just compare sales from these accounts from one year to the other.

Overall I am very pleased with how the holiday sales turned out. It’s great to end the year on a high note and to sell through a lot of inventory. For 2016, I want to reduce the craziness by getting a headstart on some of these initiatives, especially pitching the gift guides and our social media campaigns earlier on.

If you had particular success with any of your holiday marketing strategies, please share in the comments below.

Ways to Finance your Small Business

Posted on by Maria in Money

How do you finance your small business? It’s a good question.

Unless you are independently wealthy, you are going to need money. An early mentor told me that I would need twice as much money and time to grown my business than I thought. I vividly recall thinking, “Not me!”, but she was right. In fact, I would say that it has taken four times as much money and time as I had thought. So learn from my mistake and plan for it.

A recent feature in Crain’s Chicago Business discusses the current state of small business financing, and it’s worth a read. Here’s my take on the different sources for cash.

1) Your own money. Plan to use pretty much all your savings over time (guess who covers the cash flow crunches???), but try not to touch your retirement account, as that would be irresponsible.

2) Friends & Family. Nobody really wants to do this, but you’ll probably have to, as you’ll run out of your own money at some point. I only asked people for money who met three criteria: 1) Had money that they didn’t really need to survive; 2) Knew me and trusted me; 3) Liked the idea of supporting an entrepreneurial venture. A handful of former colleagues and close family members met this criteria, and they all gave. I asked for a loan rather than an investment; it seemed simpler and better fit the spirit of the request, as people wanted to help me more than get rich off my company.

3) Microloans. Non-profits like ACCION lend to small businesses that would be refused by traditional banks for various reasons. The loan amounts tend to be smaller (under $50,000) and interest rates are higher, but they are accustomed to working with non-bankable businesses, and therefore are much more understanding and creative in their approach. I have had two loans with ACCION and found the process to be painless and almost enjoyable, as I really feel like they are rooting for me.

4) SBA Loans. Banks don’t want to lend to small business: too risky. The government’s Small Business Administration (SBA) will guarantee a bank’s loan to minimize its risk. These are almost easier to get as a start-up than as a young business, because if you’re the latter, you’ll need to show positive cash flow (i.e. profit), have collateral and have good business credit, most of which you probably won’t have. I’ve been turned down by seven banks, despite having year-over-year growth, so I haven’t really found this to be a doable option. Plus, each application takes hours and hours of paperwork so it can feel like a major waste of time if it doesn’t work out. Not to mention that the bankers will treat you like a big loser, which sucks.

5) Crowdfunding. Kickstarter, Indiegogo, and the like, is probably where new product companies go for the first round of capital nowadays. It make sense, because you can pay for your first production run AND get your first customers. Some people keep going back to the crowdfunding well for more money, but it seems like you’d eventually hit a point of diminishing returns. Po Campo did a Kickstarter campaign for our Bike Share Bag in May of 2013. It was successful, but was so much work that I can’t imagine it would pay off as a longterm strategy.

6) Alternative sources. These run the gamut and some can be kind of loan shark-y, so be careful. A common method of funding is to pay back a loan with a portion of sales, plus interest. You typically can get the money quickly, but if you can’t pay it back quickly, then it can turn out to be incredibly expensive. I think it’s best for companies that sell a lot daily, like a restaurant. Online sales take a long time to build up so this isn’t a good option if you’re just getting going. Paypal Working Capital offers this for existing customers, which I haven’t tried yet but might in the future. Bolstr is a Chicago company with a similar approach, using investors’ money without giving up equity. We did a program with them last year. I thought it was a lot of paperwork for just $10K, but could be an option for you.

7) Angel Investors. Typically this is the next step in major funding (think $100K+) after the friends and family stage. A characteristic of angels is that will buy into your vision and will offer guidance and mentorship to get to the next level. This isn’t a philanthropic donation however. They will take a share of your company and will expect to see a return on their investment, usually when you sell your company down the road, or during a future fundraising round. Po Campo has no investors, but I’m looking. You can’t just look angels up in the phone book, so it’s lots of networking to find someone that’s a good match.

8) Venture Capitalists. VCs focus on high growth companies, which pretty much isn’t you if you are making a tangible consumer product. There are exceptions of course, but high growth companies are in the tech field, as this interview with venture capitalist George Deeb succinctly explains. VCs get all the attention in the media, but this is probably your least likely source of capital.

As you can tell, I’ve tried most things. None of it is very pleasant but seems to be just a fact of life of a small business. I’d love to hear your take on the different methods in the comments.

Understanding your financial statements: Overview

Posted on by Maria in How-To, Money

I frequently meet with budding consumer products entrepreneurs who ask me questions about finding suppliers or talking to stores or getting press. Rarely does anyone ask me to help them understand their financial statements. And by rarely, I mean never.

As industrial designers, learning how to use financial statements to guide business decisions is just not a competency of ours. Financial statements are emotionless, brutally so. They lack nuance. They reduce the richness of our work to heartless black-and-white numbers. Moreover, we fear that the numbers will tell us to stop doing something when we know in our heart of hearts is the right thing to do, even if it isn’t making much money (yet).

Envisioning the future comes easily to me and is enjoyable, while addressing reality can be tiresome. As a business owner, you must be able to do both, and the objectivity of financial statements makes them useful for evaluating the “reality” piece of the equation.

The three main financial statements are:

  • Profit & Loss Statement (also called Income Statement)
  • Balance Sheet
  • Cash Flow Projections

I’ll devote individual blog posts to these different statement types, but here’s a quick overview of why you should care about each one, with a relatable example to illustrate how they work together.

Profit & Loss Statement (P&L)
I think this is the easiest one to mentally grasp. Basically, it takes your sales and subtracts your Cost of Goods and overhead expenses, leaving you with your net profit.
Why a P&L is useful: If your net profit is a negative number, you’re losing money, which is unsustainable.

Let’s say you graduated college and got a decent job that pays $4,000/month.Your monthly expenses are $3,000/mo., giving you an extra $1,000/mo of “net profit”. If you were spending more than you were making each month, you’d have to borrow money from mom & dad or use credit cards to keep going, neither of which is desirable for very long.

Balance Sheet
I think of the Balance Sheet as describing the overall “health” of your company. It summarizes your assets (things you own, like cold cash or inventory) and liabilities (things you owe, like loans).
Why a Balance Sheet is useful: The Balance Sheet shows you if you are healthy through and through or if you are actually sickly but clean up nice. If you are carrying a lot of liabilities, such as loans, you are being weighed down by debt, even if you are showing a profit on the P&L.

In our scenario from above, I forgot to mention that you have a $50,000 school loan debt and $10,000 in credit card debt. So, despite making a $12,000 “profit” each year, you are still in the red overall since you owe $60,000 to other people. The debts don’t show up on the P&L, so you need the Balance Sheet to get the full picture.

Cash Flow Statement
As a small company, your vendors are going to want you to pay upfront and your customers are going to want to pay you late. That means that even if you show a profit when all is said and done, there will still be times when you don’t have the money you need to pay the bills just because of timing.

Why the Cash Flow Statement is useful: If you look at your statement and see that things are going to be tight in, say, March, you can plan for it by asking for better payment terms from certain vendors or delaying purchases.

In our real-world example, this would be like deciding to use $4,000 of your annual $12,000 “profit” to book an awesome vacation for you and a significant other in February. At the end of the year, you will still have $8,000 profit leftover, but February will be tough since you still have to pay your normal living expenses.

 

This took me a couple of years to wrap my head around, but I think it would have been useful to internalize them earlier. Please leave questions in the comments below and I will answer to the best of my ability!

Finally, Something Good Happened!

Posted on by Maria in Money

The first 6-7 months of 2012 were pretty good, as far as sales were concerned anyway. I went into August with a full calendar of trade shows and a new sales team, pretty certain that I’d end the year just as strong as I started it.

But, I was wrong. Sales in August, September and October were about half as much as I was planning on, which was pretty devastating. Then my sales manager left (along with much of my sales team) when it became clear she wasn’t equipped to handle the problem. Then several stores returned their bags because they weren’t selling. Then I found out that one of our most popular styles was defective and that some customers were dealing with returns of up to 30%. Then I got turned down for a loan (after I was approved no less!) and I had to stop paying myself.

Finally, today, three good things happened.

1) The University of Chicago Business School is including Po Campo as a project case in their Marketing Research class! That means I am going to have 5 MBA students working on Po Campo for an entire quarter! This is too good to be true. Knock on wood.

2) I stood up to my manufacturer. I’ve been told I’m waaaay too nice and understanding and need to toughen up and be more forceful with my manufacturing partner, otherwise I’m just going to continue to be docked around. I really gave her a piece of my mind today, and it felt darn good. My intern said I sounded “assertive”, which is definitely a step up.

3) After seeing our bottom line go farther and farther into the red the last few months, I rolled up my sleeves to dig deeper into the Quickbooks file to see if something was wrong. I mean, I know things are bad, but really this bad? Good news, I found some oddity in the file that was having the cost of goods on some items be double what they actually were. In other words, it was only showing half as much profit as there actually should’ve been. After figuring out how to correct it, I improved our bottom line by $20,000! Hallelujah! (And why didn’t my accountant catch this?)

I hope this means that I’ve turned a corner. I’ve noticed my optimism increase as well as my general jolliness. Times sure can get bleak around a small company, but finding the patience and strength to wait it out and/or pull yourself back up can be certainly rewarding.