The ecommerce landscape changed dramatically during the four years I was in business. When I started OMGTEA, it was a different world. Facebook was a place to go to connect with friends and family, ecommerce was still in its infancy, and influencers were only too happy to accept products in exchange for posting. It was a more wholesome time. The future seemed so bright; and for a time, it was. The overwhelming shift towards online consumerism gave birth to a new type of business, the likes of which the world had never seen: the Instabrand. By utilising social media, it became possible to experience explosive growth and reach consumers all over the world. I was lucky enough to experience this first-hand.
Despite everything, I was very conscious of how fragile the ecosystem was and the fact that it could all come crashing down at any moment. I decided to get out while there was still time. As sophisticated as online marketing channels are, they are simply too unstable and unreliable to sustain a business’ long-term survival. While many businesses are able to pivot and diversify marketing channels to sure up survival, I wasn’t the right person to save OMGTEA. In the end, I didn’t feel comfortable reinvesting in a business with such a shaky business model. There are only so many times you can bet on a losing horse. Over the years, I had developed a good sense of what makes a strong business. OMGTEA didn’t tick any of the boxes.
From the beginning, I didn’t quite grasp how much money a consumer product business needs to be making in order to have enough capital to reorder stock, reinvest in new stock, and take money out of the business. I like to explain that, during my time in business, I made enough money to do nothing, but not enough money to do anything. I would have needed a huge capital investment to transition OMGTEA from an Instabrand into a mature company with any sort of longevity. One of the central problems with the OMGTEA business model, aside from the marketing, was a lack of flexibility. Ordering a tea blend from China might cost $30,000 and leave another $15,000 worth of packaging sitting in a warehouse in China for another 24 months before it can be used. That meant that I had to be prepared to use the same packaging design for at least two years. Two years is a lifetime on the internet. Owners of service-based businesses can change a service offering in seconds by updating a website. Owners of consumer product businesses have to commit to decisions for years at a time. Since it is so hard to predict the future and the marketing channels are so unstable, legacy decisions restrict a business’ ability to innovate and pivot with changing consumer trends and preferences.
Building a business is a lot like building a house. When we build a house, there are several things that we need to think about before we break ground, from the location of the section and the number of bedrooms to the ceiling height and kitchen layout. While the goal is to design a house that satisfies our needs and wants, we also have to think about what will appeal to future buyers. At some point in the future, the time will come to sell. If I was to build a property in central Auckland, I know that certain suburbs are more desirable than others and I know that most buyers want at least three bedrooms and two bathrooms, a nice kitchen, an outdoor entertaining area, and some space for children to run around out back. There are certain metrics that all buyers look for, because they also know that they will have to sell the property in the future if they purchase it today.
I know that the consequence of building a two-bedroom house rather than a three-bedroom house is that it will be worth $200,000 less in the eyes of most buyers. I know that most buyers think that a nice kitchen adds $150,000 to the purchase price, even if it may only cost $30,000 to make and install. I know that most buyers devalue a room by tens of thousands of dollars simply because they don’t like the colour scheme — something that can be easily changed. Buyers need to be able to imagine themselves in a space. They need to be able to see themselves having a BBQ and entertaining their friends. They need to be able to see themselves sleeping in a bedroom. They can’t do that if the walls are covered in Manchester United wallpaper and the carpet is bright pink and the bathrooms don’t have doors.
Why is it that we don’t think of small businesses in the same way? A business, like a house, should be built with saleability in mind. I wish I had known this when I started my business all those years ago. As is the case with houses, business buyers are all looking for similar things. Most buyers want a business with good cash flow that is going to continue to operate and grow in the future without a significant capital injection. Instabrands aren’t built to last. They are built with short-term cash flow in mind at the expense of long-term stability. While the comparative analogy between building a small business, and building a house makes sense in theory, it overlooks just how difficult it is to succeed in business. While there are processes and guidelines in place to facilitate the building of a house, there are no processes or guidelines in place to facilitate the building of a business. There are no plans available or drawings to follow. The only option for most small business owners is to start building and hope that, with time, a recognisable structure begins to take shape. Sometimes, it doesn’t go as planned.
My words do a poor job at conveying everything that I experienced during my time in business. Most business-related books contain chapters with neatly packaged ideas. The problem is that that’s not how you learn. When you actually experience business first-hand, you don’t learn about pricing one day and product design the following day and intellectual property the day after that. It’s a messy and often counterintuitive process. You learn a million fragmented lessons each day, and hope that you can piece them together over a period of years to create mental models that will frame your thinking and help your decision-making in the future. When I finally pieced everything together, I knew that it was time to move on. Sometimes you need to burn something to the ground before you can build it back up again; you just have to have the courage to light the match.
So, what comes next?