When Start-up Costs are High

I realise now why so few people go into manufacturing products – the start-up costs are huge! Service-based and information-based businesses can largely be started with little capital. Even my previous tea company only needed about $5k to get started before I had a batch of products to sell.

My ambitions to do something with recycled plastic this time is far more expensive than any business I’ve ever tried. Sure, I can buy something from China and private label it for minimum costs, but I wouldn’t be fulfilling the purpose of the social enterprise (to reduce plastics going to landfills and waterways by making great products out of Australian recycled plastic).

How much am I talking about? Well, the design and mould costs alone for my simplest product is estimated to cost $30k. This is before I even have one product to sell.

While 3-D printing has definitely revolutionised the cost of prototypes, the process itself is not ideal for mass production or even performance testing of products that must have some level of strength or rigour.

Therefore, in order to make more robust and mass produced items, moulds still have to be made in a material that is significantly stronger and can withstand greater heat than the product material itself i.e. plastic.

Having these costs upfront is useful as I can more accurately assess risks and cashflow. At the same time, I can’t afford to fund all these moulds myself with only the savings I put aside after selling my investment property.

I always think that roadblocks are God’s way of telling me to pivot or shift directions.

I’m going to have to rethink my funding model to make it happen. Maybe, I go ahead and pay for the full design and product prototypes and see if I can somehow pre-sale or crowdsource cash to pay for the moulds. I may also be able to afford one mould if I can get a local government grant in August to start this project. Having the prototypes ready will be useful to convince people that the idea is worthy.

Any advice from my readers?

-Tammy

Found My Tribe

A few months ago, I spoke to a friend about my desire to do something in the circular economy. That is – turning waste like single-use plastic into something of value.

I’m passionate about keeping plastics from going to landfill and waterways, and I thought there was a business opportunity. However, most of my research at that point had been done via internet searches, books and conferences.

“How do I move forward?” I asked her looking for advice.

“We need to find your tribe,” she said.

She knew about an environmental idea hackathon where they needed mentors. She suggested that I volunteer. So, I did.

The hackathon itself wasn’t that useful for me though I do hope I provided some business value to the teams. They planned to announce the winners the following night at the organiser’s monthly networking event.

Even though my job was done the day before, I came along to the presentation. There, I ran into some of my old IT contacts and met other really interesting entrepreneurs that were excited about their work. I knew instantly that I wanted to spend more time with these people.

Last night, this memory came back to me as I attended the monthly networking event for this group again. We had just listened to a dozen or so entrepreneurs pitch their ideas and needs. These people were interesting. They were excited about their work and ideas. They were optimistic and moving forward. These were the people that wanted to change the world – just like me.

I’ve found my tribe!

Fast Eats Big for Breakfast

I was recently reading the Thankyou social enterprise story in a book called “Chapter 1.” One of the quotes that was repeated over and over again was the ability for a young, agile company to beat larger competitors with their speed i.e. “Fast Eats Big for Breakfast.”

Don’t get me wrong as my business isn’t even eating burnt toast yet. Still, when I look back to our start so far, I can see that we’re actually moving really fast now that I’m fully committed.

The first time I spoke to a potential investor about my idea was in a casual conversation was just two months ago – 3 April 2019 to be exact.

I applied for an ABN about three weeks later (23 April). Then, a fortnight after that I received some market research feedback that loudly confirmed the need for my products (6 May).

Late Monday, I received the CAD drawings from my designer (an uni student). And today, I just submitted them to one of the two Australian manufacturers that I am considering. I’m just waiting for the NDA to be signed before I send them to the second company.

I also confirmed today with Social Traders that my business model would qualify for certification under their process as a for-profit, social enterprise.

When I saw a friend tonight at a networking event, and I gave her an update she remarked about how much I have done since the last time I saw her. The reality is that I feel like this product development process is taking forever, and I’m always waiting for something to be done by someone else.

Looking back at my journal entries, I realise now that perhaps I’m being a little too hard on myself and others. Still, if fast beats big for breakfast… I don’t see a good reason to slow down now!

Personal Life vs Professional Life

I think one of the most obvious differences between most jobs and being an entrepreneur is the blending of personal and professional life.  It’s not always easy to tell where a work day starts or ends when you own your own business.

In this way, I suppose that it’s similar to the job requirements of the CEO role I had at my last job.  However, since I work primarily from home at the moment, the roles are greyer than ever for me.

From a useful perspective, I noticed almost immediately when my 17 year old cat started showing signs of a health problem yesterday afternoon. It prompted me to take her to the vet right away. The vet knew me from my previous job, and before I knew it we were talking about my new business as the first product line deals with animals – blending the lines again.

Thankfully my cat is feeling better now after the vet visit.  I lost a good part of the afternoon worrying about her, but was able to make up for the lost time by working into the late night.  To be truthful, that too isn’t much different than my last job.

Maybe a work/life balance really is a myth.  It’s just called life.

Learning, always learning

Most people know that starting a business is risky. You have to move fast because cash-flow is king. Therefore, everyday that I have to wait on something is another day that revenue isn’t coming in.

Right now, I still have a bottleneck with product designs.  Unfortunately, a large part of this delay has been to my own ignorance and lack of talents.

Back in my old career in IT, if you wanted new software or even a website developed, you provided the designers with a Word document that outlined the business requirements, functional requirements, and what technical specifications you knew.

For my product designs, I first sent a 4-page word document on 8 May to a Brisbane prototype design company I had been talking to earlier.   They got back to me a few days later, and we discussed it over the phone.

Much to my dismay, the owner of the company didn’t appear to understand it and said it would take upwards of $10k just to design it because of all of the research involved.  I understood at that moment that I must not have communicated very well because I had already done a huge amount of the research.  What to do?

I stood back and finally realised that product designers generally deal with pictures, not words.  So, the designer couldn’t understand the complex requirements I sent him because it was different than what he was used to in his business.  This is a bit of a problem when I can’t draw.

I realised then that I needed more help and begged friend to get involved who was way more mechanically oriented than I was.  After discussing my ideas, he talked about channel connectors and earth-grounded magnets which were more likely to be the terms that a product designer would understand. He even sketched out a few of the more technical components.

The next day, I was planning to somehow redraw these ideas into a more structured format for my Brisbane designer, and was procrastinating on what seemed like a mammoth task.  Fortunately for me, I randomly told another friend in passing about the challenges with designing a new product from scratch, and he recommended an university student that had done some work for him.

A week later, and we are almost done with converting my easiest product idea into CAD. It still took longer than I had anticipated to get this simpler design done, but at least we’re almost there.

Now, I can only hope that the Brisbane company is happy to work in this manner to develop the prototype as they normally make at least part of their income through the design process itself. Fingers crossed. Otherwise I have to find another company which will take more time.

Handshake Deals

I’m looking for a manufacturer right now to make my products with recycled plastic.  The company I thought would be a great partner just turned me down.  Why?  Because I wanted them to sign a non-disclosure agreement.

They said that they never needed one before, and didn’t see the need for one now.  Of course, they have little to lose for refusing to sign it except for my small business offering.  I’m the one that has more at risk – my patent pending designs.

I admire the idea of a “gentleman’s handshake.”  Unfortunately, I have been burned before by such verbal agreements.  When things get hard as they sometimes do with any long-term relationship, it’s amazing how many people forget what was agreed to at the beginning.

It’s even happened when I did have a written agreement in place. Several times, I’ve had to go back through old emails and the contract itself to remind the other party what we had decided months or years before.

I don’t think that it’s necessarily most people’s intention to break a handshake or verbal agreement.  I just think that it’s easy to miscommunicate and/or to forget what might have been agreed to long ago.

At the beginning of my career, I was a Contracting (procurement) Officer for the US Air Force.  I was taught then that contracts were written, but ideally put aside afterwards and never referred to again.  These pieces of paper were merely a safety net in case there were any issues later.

Today, I still think it’s just good business practice to have such agreements in writing even if you fully trust the other person.  If anything, the agreement gives both parties more reason to trust because their intentions are clear, and it equally places the risk on both of them.

As for my manufacturing partner – the right one for me is out there and they’ll understand the need for such agreements.

To be or not to be an entrepreneur (again)

I’m thinking about starting another business. After being unemployed for six months and travelling the world, my savings account is dwindling.  Still, I haven’t found the kind of work that I’m looking for next – something challenging, creative, purposeful and where I have a great deal of control.  It doesn’t seem to exist. Or if it does, recruiters don’t think I’m qualified.

At forty-six, I’m taking bigger risks if I do start another business now. My retirement savings isn’t that big after following my ex-husband’s career around the world for nearly fifteen years.  While I have saved a bit during my last few jobs, it’s funny how fast you can go through it when you’re not bringing in any income.

And what if I get injured or seriously ill during this business start-up phase?  I don’t have a safety net to bail me out.  Is it really worth taking this kind of risk now – at a time that everyone says is the prime of my career if I keep moving up the same path?

At least I don’t have kids to consider. Otherwise my risk appetite may be different.

Fear of starting another business has its place especially with my entrepreneurial track record – this will be business #4 if I go for it. Still, I keep telling myself that if I only put in the kind of consistent hard work into my own business that I have put into others in the past I should have a decent chance of success. 

While I could spend a lot of time thinking about the ramifications if I fail – loss of my entire savings, loss of my home, loss of my reputation. What if I never find a job again afterwards and become homeless? Ugh!

It’s scary and some days that is all I can’t think about.  But other days, I asked myself – what if I did succeed?  I could do a lot of good for the environment and community if I choose the right business.

Furthermore, wouldn’t it be amazing to have work where I am enjoying the process, not just an end goal? That is…

Work filled with growth, of purpose, of a diverse range of activities and opportunities for creativity.

Work where I see no need to make such dramatic career changes in the future because I never quit learning and enjoying the ride.

Work were I can set the purpose and values of the organisation and share that journey with others that align with them.

Because in five years’ time, I could be either doing the exact same work that recruiters expect of me.  Or I could finally be making a living with an entity that I literally took from an idea to a life of it’s own.

My decision point is coming very soon.  I admit that I’m scared.