What Went Wrong?
Updated: Oct 30
Many start-up founders seem to have a rather unrealistic view of business. Business is messy and full of surprises needing tough decisions and giving sleepless nights, far from the glamour of the business magazines. I built my business over 20 years and successfully exited. Here are a few experiences of ‘What went wrong’ and some of the lessons learned.
I founded the business importing and distributing multimedia CD-ROMs from the USA in the early years of multimedia. Initially I did an exclusive deal with a US distributor so that we could buy on a just-in-time basis, flying in restocking orders over the weekend. The good news was our market timing was impeccable. The bad news was that the core distributor suffered out of stocks and within 5 months went bust. Solution: Seeing the problem developing we rapidly built up other sources of supply.
We added video games sales which were booming. leading to £4 million sales in year 4. Having outgrown our office and warehouse facilities, we signed a 10 years lease on much larger premises. However, 55% of our business was export to Europe and the Pound went up 30% in three months and stayed there, making it impossible to sell at a profit. Solution: We changed our product mix, slashed costs, and refocused staff on the UK. It was the only year we lost money.
Later several key games console vendors moved to exclusive distribution models, making it impossible for us to source product. Solution: We withdrew from the video games market and refocused again.
The then-largest retailer of software (10% of our sales)reduced their software vendors from 70 to 12 overnight, cutting us in the process. Solution: We pivoted our service offering again and moved toward a more value-added model for etailers
In our 10th year, we almost sold the company, but two key software vendors changed their business models, undermining our profits Our potential acquirer also had a sudden change and strategy. The deal died. Solution: Refocused on a growth strategy.
Our largest technical product vendor, who had moved into the corporate space, suddenly hired a new UK Sales Director from a large company that had only used billion Dollar distributors. He cut us off without consultation. Solution: I approached the billionaire founder directly and got him to listen to me. He asked his new Director to give us a trial and we became their largest partner again.
Our largest etailer customer moved to a pan-European sourcing model, making it almost impossible for us to hold retail product inventory profitably. Solution: Changed our business model, closed our warehouse and refocused on technical products and services.
Despite growing 23.9%, CAGR growth was not a smooth line seeing periods of hypergrowth, plateaus and the occasional down year. We exited in a profitable trade sale as a specialist value-added distributor. Biggest lesson: Be prepared to make hard decisions quickly!