Thus in today's post, I will share two specific examples of adversity that have surfaced over the past few months and weeks, the worry that they caused me and how Steph and I have managed to climb out of the hole that worry over these things can place us entrepreneurs in.
Example #1 Loss of A Key Investor And Pressure From The Bank
When I started this business and made our business plan I saved enough money for us to live on for 18 months, i.e until January 2017. We were debt free, and I sought funding from four investors for $50,000 each. That money would pay for the inventory the business would need to purchase and other expenses it would need to pay in order to be able to execute the business plan to its fullest.
The first problem came in the form of delays with my lawyer. I went with a guy who rents an office in my old firm since I figured that things would get done quickly since he wasn't very busy, or so I thought. Well here we are over 8 months later and only this month, will I be able to finalize the shareholder's agreement and issue the shares to my investors. Because of these delays, I have lost one of my key investors who had to bow out due to other financial demands that cropped up in the meantime. Had we been in a position to finalize the shareholder's agreement back in August or September, my investor would have been committed and that would have been that.
This has caused a lot of worry because we have loaned money to the company that we can't get back and I owe my bank money that I could have repaid, if I had only had access to these funds. Last week, I received a letter from my bank that they were going to raise the interest rate on my line of credit from 5.69% to 8.69% - a 3% increase!! This filled me with immense worry because I understood the significance: if a bank raises your rate by 3% it means that they view you as one of their highest credit risks. This means in turn that my credit rating must have fallen sharply this past year. Immediately I started worrying, not about the actual increase in interest, which is annoying, but more about the possibility of the bank calling my entire line for repayment. Over the next three days I imagined all these scenarios in my head, where we receive the letter from the bank demanding their money and are then forced to liquidate large amounts of the inventory to pay them, and then have to deal with angry investors and so on an so forth. The more I thought about it the more dire the scenarios became. Pretty soon I could feel myself just being sucked into a negative vortex.
But then, mostly at Steph's urging, I decided to try and think about this rationally. I looked at the bank's letter again. It was a boilerplate letter dated April 8. I had gone into the bank on February 28 the year before. So it was becoming apparent that in all likelihood, the review that gave rise to this letter probably happened in March - a year after I opened the line. Then it all became clearer: this letter was probably the result of some annual review process that the bank applies to ALL lines of credit, not just mine. I googled "(my bank name) Line of Credit Rate Increase" and sure enough, I found a Globe and Mail article which talked about how my bank was sending these letters to clients either increasing or decreasing rates. So I now knew for sure that this letter was not the result of my account being singled out. Next, I thought about the likelihood of the loan being called and realized that if my bank had viewed this as a sufficient risk to require repayment, that they would have called it now, and they hadn't. My loan is already close to the maximum allowed amount, and I know that it will only decrease over the next 12 months. So I know that the only way that this loan might be called is if at the next annual review, the balance hasn't gone down. So what that tells me is that I have until February next year to find a replacement investor.
Fortunately for me, I have already spoken with one of my former clients who has already expressed interest in becoming an investor. He won't be able to move on that until October 2016, and given what has just happened, I'd be a fool to rely on just him. So I have to look actively over the next several months for an investor. Fortunately for me, I have several very good relationships with former clients, many of whom either have the money to invest themselves, or may know people who they can introduce me to. So that is what I am going to do - make a list of prospective investors and contact them to see if they would be interested in becoming investors in our business. All of a sudden, the picture does not seem so bleak.
Example #2 Consternation Over Whether to Remain With E-bay
E-bay has introduced several new policy changes that are going to create a lot of extra work for us and these changes have ignited a fear within me about what other changes might be coming in the future. Worse, I started to read the comments on the community boards, and I must say the amount of negativity on those boards is depressing to say the least. I actually wrote a post about how we are struggling with our decision. Again the more I thought about the changes E-bay has forced on sellers and worried about the changes that were coming, on top of worrying about whether we're being ripped off with the fee structure, the more depressed I became about the whole thing. This weekend I was sick in bed with a cold, so I decided that rather than just lie there, I would start to take action to explore the alternative of opening my own webstore on Auctiva Commerce. I signed up for their free trial and started watching tutorials on Google Adwords to learn about how to design ad campaigns.
For some time now, I have had an inkling that maybe we'd do better with a webstore if we took all the money that we are paying E-bay and paid Google Adwords instead. However, I realized that to make this decision, we have to know how much of our traffic is coming from Google already and how much is coming from within E-bay itself. If it turns out that most of it is coming from within E-bay, then it means that any customers our webstore would get from Google are a different type of customer from the ones we have now. That is not necessarily a bad thing, but it does mean that if we cut the E-bay cord completely under those circumstances, we cannot count on the same level of traffic and sales as we have now. On the other hand if most of our traffic is coming from organic Google searches, then it means that E-bay is essentially a waste of money.
I attempted to access our traffic reports to answer this question, only to find that E-bay has disabled them. I don't know why and immediately began to speculate that maybe it is because most traffic is coming from Google. But rather than jump to that conclusion, I decided that from yesterday onward, I would, in addition to sending our new customers a welcome e-mail, I would offer them free shipping on their next purchase if they would tell me how they found our listings.
As of today, we have had 4 responses to the 6 e-mails I sent yesterday. All four people said that they found our stamps through a casual browse of e-bay's listings. None of them searched Google specifically, and none of them were searching from within E-bay itself. In addition, two customers this morning that bought yesterday clearly came from within E-bay given that the items sold were either penny auctions, or were listed for sale just yesterday. So at least for now, that is telling me that E-bay is actually doing its job, and that if we want to improve our sales performance there, we may have to tinker with the way items are listed - maybe not using Good-Till-Cancelled listings anymore and opting for shorter listings with auto-relist on Auctiva, or maybe regular sales. I'm not sure yet, but I'm confident that Steph and I will figure it out.
The webstore idea still seems good, and because we are already signed up with Auctiva, any listings we create there can me moved to our store should we decide to do that. So it would appear that the best strategy for now is to sign up for the cheapest subscription we can right now, keep the store "warm"so to speak and then gradually direct items that are not selling on E-bay to the store. Then as we list items there, we can experiment with Google Adwords to see if we can get any traction.
So out of this adversity and the worry that came along with it, I was forced to consider alternatives and with the advice of Steph, we were able to find an alternative that has allowed us to make contingency plans such that we are no longer 100% reliant on E-bay, or at least we won't be a year from now.
Hopefully, these two examples will illustrate the kinds of obstacles that can crop up if you are trying to establish your own business and some techniques for how you can keep the negativity at bay. I do think that one take-away from all this is that if you are worrying and using that worry to take action that is a good thing. I think the kiss of death for many entrepreneurs is putting on blinders, being inflexible and not exploring better alternatives. In our example, had we not worried about material taking too long to post on e-bay:
- We never would have found a better, faster scanning program.
- We never would have investigated Auctiva as an alternative to posting listings directly on E-bay.
- Have continued to be 100% reliant on E-bay, since they would have had exclusive ownership of all our content. If you look on E-bay, there is no way to download your listings to a CSV file. You can upload from a CSV, but you cannot create a CSV file. So essentially, all your product descriptions typed out over many hours are E-bay's for the taking. By creating them in Auctiva we now have saved copies of every listing we create, that will never disappear from Auctiva unless we delete them. What's more under Auctiva's terms of service, we are deemed to own all of our intellectual property. Conversely on E-bay, their terms of service expressly state that THEY own all your intellectual property, even though YOU paid them.