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Sunday, October 22, 2017

Defining Your Own Success and Hitting Your Stride

One of the reasons that I started this blog was that I wanted to inspire other people to start following their passions and living the lives that they want to live. I have written extensively about my journey, so far, starting from the moment that I left my position as a partner in a public accounting firm. What I haven't really done though is write about where my passion for stamp dealing got started and just how long I had wanted to do what I do. I also haven't talked much about defining your own success, and I have recently discovered just how important this is. The rest of this post will explain why. I owe a great deal of credit to Steph for most of what is to follow because she has been trying to drill much of the insights I am going to share here into my head for months. But I am a stubborn man, and I have to make an idea my own before I can fully accept it.

As a child I had wanted to do many things when I grew up from construction (being a builder), to being a doctor, to being a fireman - normal fleeting goals for a kid looking to emulate something he or she respects. But all of these things were fleeting, and they all fell quickly away after a time. However, when I was about 8 or 9, and I had been into stamps for a couple of years as a collector, I was visiting my local dealer, when I realized how much I wanted to work with stamps as a dealer. Of course back then, I thought that the only thing to being a dealer was buying and selling, and indeed that is all I saw the dealers I came into contact with doing. But as I matured and grew as a collector, I began to develop ideas about what would be good for the hobby and other collectors. I began to see very large unmet needs within the collecting community. I developed a passion for philatelic research, and the desire to share that research with the philatelic community. I began to desire to make it my career to meet these unmet needs and to engage in philatelic research and to publish my findings.

But back in the early 1980's this was all but impossible unless you had a lot of capital. There was no internet, and without the internet there was no easy way to reach your customers. You had to advertise in print, which at the time was horrendously expensive. You had to carry a large inventory because if you didn't, there would be no easy way to obtain the stamps that a customer had ordered. You couldn't start small, and build up very easily because you generally had to buy in bulk, and many auction firms at that time sold only to dealers and you couldn't bid unless you were a dealer. So there were a lot of barriers to entry. Publishing was expensive and had to be in print form. For a kid, just starting out, with no money, it seemed like an impossible dream. In addition, all of the stamp dealers that I met seemed to be only modestly well off. None of them seemed rich, and to my young mind, this seemed problematic. Although I really didn't care about money that much, I cared a great deal about having society's approval, and the approval of my family circle and my parent's friends, etc. Being a stamp dealer, just didn't quite cut it, it seemed, for my university educated mind. So I abandoned the goal of becoming a stamp dealer, and focused instead on building a career in Chartered Accountancy. Stamps were relegated to a hobby.

I worked very, very hard putting in many late nights, and weekends. Eventually, after 20 years and four firms, I made partner. But there were some things about my life that I began to notice, and those things became more and more pronounced as time wore on:

  1. I never felt like I had enough - I made $150,000 per year for the last few years in my role, and even after paying taxes, it was a shitload of money - at least for me. But I never got to feel good about it because there was always an unspoken expectation from those around me that one must always strive for more: a better neighbourhood, a new car, a bigger house, private school for my son, remodelled bathrooms and kitchens, 3 vacations a year, meals out weekly, maxing out RRSP's and on and on. No matter how hard I worked, or how much I made, the subtle message I picked up was that if I wasn't doing better than last year, I was a failure. 
  2. The people around me in my day to day life, were for the most part, except for my friends, Steph and her family, were people who could only talk in these terms. These people would inevitably ask me "how's work?" when they saw me after a long absence. Every conversation was either about the economy, or keeping score in some fashion: bragging through disclosing their kids' accomplishments, taking about the housing market, their latest home reno project, or vacation they went on. 
  3. The work I did on a day to day basis started to mean less and less. It became less about helping a client succeed and more about managing other people and playing office politics. Very rarely did I get to focus on a project that I thought important or meaningful, that I could actually see through to completion. 
  4. My knowledge base was constantly being devalued: tax changes every year would render advice I had given clients the previous year useless. A fact that would be true one year, would be false the next. As a result their was no building of knowledge - just new knowledge supplanting the old. I wanted to build something, not have to constantly re-build. 
  5. As a result of all the above, life started to feel pointless, and I became depressed to the point of suicide. There were many moments at my desk, when I was alone in my office, where I would have blown my brains out if I had a gun. Thank God I didn't. 
Then, in December 2012, after all the sacrifices I had made to reach the top of my profession and provide a loving, stable and above all comfortable environment for my wife and son, my wife informed me that she couldn't be married to me anymore. We were in the middle of a $70,000 home renovation. The demolition had literally just been completed and the work started when this happened. I was 6 months into my role as a partner. Suddenly I was plunged into the worst identity crisis I had ever had, as I realized that my entire life as I knew it had been for nought:

  • I had no house.
  • I had no significant assets except for my stamps.
  • I had no family because I had been estranged from my family of origin for years, and my wife's family had cast me aside - politely, but cast me aside nonetheless, and I was at risk of losing my relationship with my 18 year old son, who was trying to figure out what he wanted to do with his life. 
  • I had no passion for my job and even less now that the sacrifice of doing it served no purpose.
It was during this period that I decided to continue my part time hobby e-bay business to see if with more time and space, I could improve it and make it a substitute for a retirement fund.  It was still a hobby at this point though. Then I met Steph about a month after I moved out. Steph listened to me talk about my passion for hours and it was she who suggested that I could succeed and become a full time stamp dealer. She told me that she didn't care how much money I made, she would support me if this was what I wanted to do. She didn't want me to stay in public accounting if it did not bring me lasting happiness.

So suddenly my career acquired a new purpose: to generate cash flow to buy inventory for my business, to support me while I made my business plan, and to accrue savings that I could live off while I got the business running. I kept working in my job for just over two years and saved enough for a year, secured other investors and started the business full time in July 2015. 

The hardest part was still to come though.

I was initially on cloud 9, as I expect all entrepreneurs are at the start-up stage. This is the stage while you are buying your inventory, setting up your website, and otherwise rolling out your business plan. In your own mind, as long as this isn't complete yet, you tell yourself that anything is possible, and you don't worry too much about sales and profitability. My life had an abundance of meaning, I quit at 5pm every day, I worked out 3 mornings a week, had weekends off etc. Life was amazing. 

But soon, it became clear that not all my investor money would materialize - I would be $50,000 short of the funding called for in my business plan and my money started to run out faster than expected. I had no idea what to expect in terms of sales, but they were initially very slow. There were sections of my inventory that I spent a solid month working on every day, like the 1954-1962 Wilding Issue, and no sales from my listings for months. But eventually the sales started to grow, slowly at first, and then faster. However, not as quickly as I had hoped for.

I had been very thorough in preparing my business plan and attempted to base it on the most realistic assumptions that I could. However, you will quickly learn that no matter how conservative you are with your estimates and assumptions, the reality will likely be different, and usually not as good as anticipated on paper. This is the point where I believe entrepreneurs hit "The Wall"

The Wall

The Wall is the very demoralizing fear of failure that begins to settle over the entrepreneur as he or she sees the money draining away and the business succeeding to some extent, but not nearly as outlined in their business plan. It is the time when they hear all the voices in their heads from all the people in their lives who have been influential telling them that they should follow the standard Life Plan, which consists of:

  • Going to university.
  • Finding a stable career and working your way up.
  • Buying a house.
  • Having a family.
  • Saving for retirement.
The entrepreneur begins to question, when they have hit The Wall, whether this has all been a horrible mistake, because the usual markers of success that they have been inculcated with their entire lives are not present in their life. This feeling can go on for months, and in my case, it has lasted the better part of 10 or 11 months. 

It is what you do when you hit The Wall, that I believe makes or breaks your business. My response was to look for ways to reduce the burn rate on my cash. Toronto was costing around $6,000 per month, which was way too much. So we moved to Saint John, New Brunswick, where we reduced our cash outflows by nearly half, bought a house, and were able to start a second, Bed and Breakfast business to bolster our cash flow. At this point, I began to feel that I had climbed "The Wall". After moving here I simply redoubled my efforts and started working until 2am every day. 

The problem was that up to this point, it had not fully occurred to me that my original business plan was simply unrealistic. I had originally envisioned a plan where I would get all of my inventory listed on E-bay and once this was done after 2 years, I could go into maintenance mode on my listed stock and work to expand the business, hiring employees as the business grew. I assumed that the business was fully scalable so that once I had the inventory listed, my sales would grow proportionately to $20,000 per month. 

However, it soon became clear that listing stamps took way longer than I thought, and there was no way I was going to get through all my inventory in 2 years. Further, it became apparent that it is inefficient to list items that exist in a quantity of 1 because once that item sells, the labour that went into listing it is gone. So even though my inventory is very large, it became apparent that I would still need to continue buying in order to get my item quantities high enough to make the listings worthwhile. Some items can be a quantity of 1 or 2, but it is important to have enough multiples that the section doesn't sell out before I have had time to replenish it. Since I have such a large inventory to list, it may be months before I can go back and replenish an issue I have already worked on. So I have to have a good quantity of it to start. I hadn't factored this into my original plan! 

To make things worse, while sales were growing, they were not growing in direct proportion to the amount of listed material. Also, I started to notice several patterns that suggested that E-bay manipulates the visibility of items based on how much material is listed. I don't have any foolproof evidence of this, but I have noticed that if I stop listing material, my sales drop. Whenever I do a lot of listing, my sales go up, and it is often material that is completely unrelated to what I just listed. What are the chances that the buyers always just happen to be looking when I do these listings? It is possible, I suppose, but I think that what is happening is that more of my items are promoted in search on E-bay when my listings are fresh. So in order to keep sales increasing, I have to keep listing.

So needless to say, I started to hit "The Wall" again, as I became fearful that I would never get the material listed on time to get monthly cash flow to the point that I wouldn't be in debt anymore. I started to worry that my debt would never be paid. I started to worry as well that the business would never grow past the point that it is now. This weighed on me for many months and that weight has only recently begun to lift. 

So What Changed?

While I was focused on "The Wall" and hearing all these depressing voices in my head, I was scarcely noticing several other indications of the success of my business model and its components:

  • I was regularly getting new customers every week.
  • My letters and brochures that I introduced in July were causing a larger proportion of new customers to become repeat customers. They were significantly strengthening the relationships that I had developed with existing customers.
  • As a result of these stronger relationships I was now getting regular orders outside of the online marketplaces and requests for material that I didn't have, but could source for the customers. 
  • I was getting at least one e-mail from a customer every day asking a question, or otherwise engaging me in some way, whereas in the first year of the business, I could go days or weeks without getting one e-mail. 
  • My number of followers on my blogs began to grow, as did my daily readership. Not only that, but the source of my traffic began to shift from predominantly Facebook where I was sharing my posts, to online searches for the blog, and direct visits. In the absence of followers, this was the best evidence I had that people were now specifically seeking to read my posts, rather than just casually glancing at them on Facebook. 
  • The modern material that I was listing was selling very well - as least as well as the early material, and it was way, way more profitable.  
  • Customers were beginning to send me material on consignment, which is a clear indication of trust. 
When I decided to become a stamp dealer, I had a very clear vision of the type of dealer I wanted to be. I did not want to be a generalist dealer who only focuses on selling whatever stamps he or she thinks they can make a profit on, in whatever manner involves the least amount of work, which is how 99.999% of stamp dealers approach their business. I wanted to pick a clear specialty and then do everything in my power to enhance the full collecting experience of people interested in my specialty, which at the moment would be Canada and British West Africa. For me, this would mean that I would:

  • Build and maintain the most in-depth and extensive stock possible and sell it in a way that would give collectors maximum flexibility to buy only what they want. That would mean that stamps would be listed individually, or in at most very small groups of 2 or 3 stamps, but not in large lots or sets, that a collector wouldn't want if they already had part of a set. 
  • Research my specialty in depth and publish articles online that would disseminate my knowledge for free, thus helping to raise awareness of the collecting possibilities in my field, and make the material more popular, while giving collectors a convenient reference source. My posts would be designed to forever change the way collectors perceive the material I am selling, even if they do not decide to collect it themselves. 
  • Design and produce accessory products such as colour keys and albums that collectors could use that would enhance their collecting experience.
  • Offer to accept their unwanted stamps on consignment or for outright purchase, so that when the time comes for the collector to exit the hobby, or otherwise dispose of stamps that they no longer want, they, or their relatives have a convenient way to do this. 
All of these things take a tremendous amount of time, and consistent effort. They are all long-term projects, in the sense that I may not get to some of them, such as the albums for years. But there is a very clear purpose to what I am trying to do, to the point that nothing I do on a day to day basis does not contribute in some way to the accomplishment of the above vision. 

So what does it matter if I am carrying balances on my credit cards at 18% interest, as long as I can make the payments? So what if I can't pay my investors as quickly as I would like? If being in debt allows me the freedom to continue to follow this plan that is clearly succeeding, even if that success is not at the rate that I had originally envisioned, why is that a problem?

I began to see that as long as I can sell enough to pay the debt service payments, as well as the regular living expenses, there is no problem, even if the amount of debt increases temporarily. As long as there is growth and forward momentum in the business, then there is no problem at all. Between the Bed and Breakfast and the stamp sales, I simply cannot see cash flow being so low that I can't manage those payments. Even if I have an extraordinarily bad month, I can always pick up a few accounting gigs from the local firm that I have a relationship with. 

I have now hit my stride and I realize that I am no longer in startup mode. I have developed a routine that builds the business according to the above vision, and my job now is to see it through to completion and to not worry too much about the day to day sales. The business that I am running now is the business, even if it wasn't quite what I had planned. All the important elements that give my life meaning are present, and that is the most important consideration. 

So What Was Holding Me Back?

What caused me to hit "The Wall" and what prevented me from seeing my success clearly was the thing that I believe causes most entrepreneurs to be too hard on themselves, and to double down, neglecting their relationships with friends and loved ones: continuing to apply the success paradigm that they developed as employees. 

Unless you grow up in a family of entrepreneurs, chances are you have been raised to view life with a conservative, scarcity-based mentality. You are taught to seek out the sure bet rather than take risks. You are taught that debt, other than mortgage debt is bad, and that paying interest any longer than you have to is irresponsible. You are taught that it is critical to save for retirement. You are taught that accumulation of money and assets is the name of the game. So you come to view success through this lens. This is the lens that the troll that keeps commenting on my blog sees life through. It is simply difficult to imagine viewing success primarily in terms of working towards a purpose other than money and the accumulation of financial wealth. 

But here is the thing: if I were to have focused on just sales and accumulating wealth, I would not be able to follow the long-term vision that I have, because my focus would be continuously short-term. I might be very successful financially, but my work would begin to lack deeper meaning after a while. There is also a very real chance that this approach will fail. In contrast, the long-term approach works because I am creating real value for collectors:

  • I am showing them collecting possibilities that they may never have seen before.
  • I am providing them with insights and information about their stamps that were not widely available before.
  • I am selling them stamps for their collections that are accurately graded and described, at fair prices and giving them some flexibility in what they ultimately pay. 
  • I am providing a depth of selection to customers that is simply not available anywhere else online.
  • I am enabling them to get money for stamps they no longer need, without having to do the work themselves and allowing them to leverage my customer connections and business reputation to sell their stamps. 
  • I am providing highly personalized service and letting my customers know that I am there to help them whenever they need me. 
  • I am actually changing the face of modern Canadian philately in the sense that it will be difficult for collectors to see Canadian stamps in quite the same way again after reading my posts and receiving my service. 
The longer term model takes much more effort and persistence to execute than the short term approach does, and from the outside looking in, it can seem like it is less successful initially. But, as it gathers momentum, it becomes clear that it leads to stable cash flow that persists even if the listings stop temporarily. It is much, much harder for my competitors to emulate my business model precisely because it takes so long to execute, and I am already so far ahead. In contrast, if I approach my business the way other dealers do, there is no competitive advantage, because I am not offering anything that my competitors aren't. Then, the only basis on which to compete is price, and that is what you see with most dealers: they often complain that the internet has depressed prices in the stamp market and made it harder to do business. However, that is not necessarily the case, as I am discovering. 

So to get out of the rut and away from "The Wall", it is essential to replace the old paradigm of success with a new one:

  • You are successful if you are following a long-term strategy, your business is growing, and you are able to pay your basic living expenses and manage your debt. Time is on your side, and your business will strengthen and grow as long as you are implementing your strategy and focusing on value creation. 
  • Saving for retirement is not critical if you build a business that is successful and have a large inventory that will continue to sell, even when your efforts to grow the business cease. There is no retirement age, so there is no need to actually retire, and so it is not essential to save for retirement in the way employees have to do. 
  • You are successful if your relationships with the people important to you are intact, and you have time to do the things you love, while obtaining purpose and meaning from your work.
This paradigm of success is a shift away from the paradigm whose focus is on obtaining power over others in an organizational setting, and accumulating financial wealth and "stuff". Instead, it is a focus on obtaining meaning and obtaining money as needed. The paradox, I believe is that eventually, as you create more meaning, you will create more value, and as this happens the money will come.