Insider #17: Running on Empty

We’re still hanging in there!! Don’t let this Insider make you think that it’s all bad…some really good stuff is actually happening for us (i.e. we have a book coming out next year). We’re just having a little bit of a cash issue…which tends to bring out more of a down-beat attitude in this issue.

Lessons Learned

Alright, the final numbers are in and Father’s Day was a HUGE disappointment for us this year. In fact, we’re down 50% compared to the same time last year. Now, we’d like to blame this decrease in sales on the economy and are pretty sure that reduced consumer spending probably had something to do with our dismal performance. But, we’d be making excuses and putting blame on factors external to the company. The truth of the matter is that we made a big mistake with regards to understanding how our distributors and retailers were actually selling MouseDriver (a.k.a. “selling through”). Turns out that most of our channel partners had purchased way too many MouseDrivers during the 2000 Holiday Season and were sitting on a ton of inventory. Instead of ordering more product from us, our partners were focused on moving through all of the MD’s sitting in their warehouses. The good news here: MouseDriver is still selling well to customers. The bad news: we completely forgot to take into consideration that our channel partners may have ordered too much inventory. The technical business term for this issue is called “channel stuffing” (too much product in the distribution channel) and it effects your planning, budgeting, cash flow, etc because you expect to receive orders…and cash. We ’d like to refer to this issue as a “tremendous pain-in-the-ass”.

Let’s talk about collections. Collections is the process of “collecting” on all the money that is owed to you by distributors, retailers, companies, etc. Last year, we were pretty lucky when it came to collecting payment on our orders, only writing off $3k in bad debts (companies that never pay you) on $600k in sales. This year we’ve already run into problems and it’s coming from a very large golf distributor in which we thought we had a great working relationship. Turns out that these guys owe us $30k (they’re almost 100 days late in paying us) and there’s no sign of them paying us anytime soon….which is putting us in a tremendous cash crunch. So what do we do? After many, many, many attempts to get a hold of the distributor, we had no choice but to hire a collections agency (who charges us 25% of what’s collected) to help us collect on our debts. Now, you can look at the collections agency approach in two different ways; 1) it will help you collect your money, but may also help you destroy any working relationship with the company or 2) it proves to the company that you’re serious about doing business and that they better think twice before screwing you over in the future. We’re obviously shooting for number 2 above and hope that these guys realize that we’re not just some fly-by-night company looking to have product on the shelves. It’s amazing how something like this really sheds a bad light on business in general.

Speaking of cash. We’re pretty low on it! In fact, from a personal perspective, both of us are close to being out of cash Now, this doesn’t necessarily mean the company is going under. Quite the contrary. We’re starting to penetrate the larger department stores and mass merchandisers (thanks to a more than willing and ambitious Insider subscriber) and we have a book coming out next year (see next paragraph). This issue here is that we won’t see any of this cash (and results from the book) until Q1 of next year at the earliest. So what exactly does this mean? Well, it means that we should be in a good cash position next year and should have a ton of momentum to catapult the company to another level. But, if we don’t find some way of bringing in cash over the next 6 months, the two of us will have to attempt to find salaried jobs in the worst economy that San Francisco has seen in over 10 years! The lesson learned here: if you have a single, very seasonal product, you need to make sure that you have cash in the coffers to keep you afloat during cash-tight periods…which is very tough to do when all of your cash is being used to manufacture more product.

Let’s talk about something a little more positive now. The book! We finished the final manuscript of the book (after hours and hours of writing and hard work) and submitted it to the publisher last month. We can’t go into to much detail right now with regards to the book (the publisher wants us to hold off a bit before we start screaming and shouting), but we can give you a few high-level facts that we know thus far. So here goes. The title of the book is The MouseDriver Chronicles: The True-Life Adventures of First-Time Entrepreneurs. The book is scheduled to release in hardback in January 2002. We are the #1 listing in Perseus’ (our publisher) Winter catalog. And, everyone who has read the book thinks it’s informative, practical and downright funny…kind of like the Insider on steroids. Anyway, we’re pretty excited about the book and in our most unbiased opinions, really think that the it’s going to be a success (in addition to helping us bring awareness to MouseDriver, Platinum Concepts and the two of us). We’ve got some great marketing ideas for the book (especially from a “word of mouth”/viral and website perspective), but can’t really start doing anything until later in the Fall. If anybody out there has some creative ideas on how to really get the word out there regarding the book, feel free to share them with us…we’re all ears!

What We’ve Done

  • Developed an internal marketing strategy for The MouseDriver Chronicles that will support our publishers marketing plans.
  • Found a “sales rep” through The MouseDriver Insider who has been extremely effective in getting our product in front of big retail buyers.
  • Presented to large department store buyers and secured verbal orders (not purchase orders yet) from The May Department Stores and hopefully Dillard’s and Macy’s.
  • Continued researching our new product idea and getting a better feel for the funding environment (or lack thereof).
  • Began negotiations with large distributors in Mexico and Europe. It’s amazing how much international interest there is when the US economy starts to tank. Seems like all sorts of opportunities exist overseas.

Priority Goals

  • Find a way of getting our hands on some cash over the next six months. Otherwise, we might join the thousands in San Fran looking for new jobs.
  • Penetrate the mass merchandising market (Wal-Mart, Target, etc) and hopefully get some orders for delivery in 2002.
  • Market the hell out of the book and enlist the help of others who have been following our story over the past two years to assist us with this massive task.
  • Put together a presentation for our first official business conference in San Diego in October. We’ve been invited to speak at the ThInc Out Loud Conference (put on by Inc. Magazine). Very cool!

Mood Meter

Honestly, we’re a little down right now. There’s all this great stuff that’s going to happen in about six months, but, personally, we may not be able to hold out that long. What we really need is for some HUGE break to surface over the next few weeks…..anything to bring our spirits back up.


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