How I Lost $100,000 From My Failed Business
Today I'm going to tell you about the biggest failure of my life which involves losing $100,000 from my last business. If you want to learn how not to run a business then this video is for you What's up everyone and welcome to rareliquid a channel where I draw from my experiences as a former investment banking analyst at JP Morgan to make videos and content about career advice and tech investment as a friendly reminder I post videos about tech investing on the weekdays and career advice related videos on the weekends With that said, today's agenda looks like this. I'll first provide the background behind the failed business to provide a little bit of context, then I'll talk about how we lost one hundred thousand dollars, and lastly I'll share how I feel about everything. Before I get started, I did briefly want to touch upon why I'm disclosing all of this honestly pretty embarrassing information. I think a lot of people share their successes because naturally it's just really easy to share that and so people's perceptions about how to achieve success is really warped because I think what people don't really know is that, for instance, for a successful entrepreneur usually that path is paved with a lot of failures to actually get to that success and I basically just wanted to share with you some of the key lessons that I kind of learned as I go over this whole story of my failed business and hopefully there are things that you can take away or maybe you'll just think that I'm a complete idiot so we'll see anyway it's story time. First
off, let's jump into some background about that failed business the business was called Asthetic Studios and it was a fashion brand with a vision for becoming the Nike for artists and creatives. Our idea basically was that when you think of an athletic clothing brand you think of Adidas or Nike but when you try to think of a brand that stands for creativity or artists then a dominant brand doesn't really come to mind. Our plan was to first partner with smaller artists and then work our way up to really high profile artists you know our dreams were to eventually work with like the Kanye West and Murakami's of the world and we were able to first secure six partnerships with artists who came from kind of all over the world one was from Russia, Chile, the UK, Canada, and the US. All together combined the artists had a little less than one million followers on instagram and so our plan was basically to have them market the clothing and then we would just kind of keep using that funding that we got from our initial sales to fund future collections Now there's a lot of ways to start a clothing company but for us, basically we felt that if we had really really cheap products that we just printed on like let's say some kind of Gildan blank, then we thought that there'd be no differentiation and so we wanted to own the entire supply chain process So what that meant was we ended up going all the way to China where we sourced some luxury fabric then we ran around Korea looking for suppliers to produce, which is where we ended up actually producing, and then we later shipped all those products to the US for fulfillment and so basically what that means is just sending the orders to customers Just to kind of show you guys all the details we put into each garment, we embroidered the artist's name on the sleeve- we used a super high quality heat press vinyl method for the design prints, we also used a really high quality french terry cotton for hoodies and everything was custom cut meaning that we decided on the measurements to the very last centimeter To top it all off, we added a flyer with each artist and each flyer was specific for each product and each design and we also added a tote bag that was 3M printed so basically it means that if you take a photo of the bag in the dark then it'll look like this where the print design and everything reflects and shines in the dark it glows in the dark. What I was actually
really proud of for our hoodies was that we designed a hidden pocket that could fit in a phone so I'll show you what I mean I have one of our hoodies here and you know how most of the times your hoodie pocket is kind of useless because you put something in there and you kind of run or move then basically you're gonna lose whatever is in there if it falls out right? But this pocket is pretty much so I have my phone in here and if you put it in there it won't fall out because there's a hidden pocket and see I know that was a terrible demonstration. So that was our first collection and in our second collection we used natural dyes to create a tie-dye effect and that's why you see me wearing a lot of tie-dye shirts in my channel if you've been following and basically natural dyes are involved using plant-based materials to dye your products versus chemicals that a lot of factories use which are a lot more cheaper and less expensive but also more harmful to the environment My co-founder friends and I spent weeks dying the entire collection by hand in these huge pots washing each piece a few times, we ironed them packaged them, and man it was just such exhausting work That's why I wear my tie-dye shirts pretty often in my videos I feel like I just kind of have like a bit of an emotional attachment to them. Another important piece of context is that we were using really high quality raw materials but we had really low quantities because we were a new brand and so we were pretty much ordering everything at the minimum levels that we could and so this is really a deadly combination in a consumer goods business This is because basically your suppliers have all the leverage- when we were in this whole Korea looking and running around to find suppliers pretty much nobody wanted to work with us and so the one that eventually did accept us- we were super super grateful to be able to work with them they did a great job for us but at the same time they had all of the leverage when they were charging us and that kind of resulted in pretty high costs for a fashion brand and at the same time, because you're new as a company, your products you know you're you're not as established and so your revenue is not as predictable and so eventually what this means is really high costs, unpredictable revenue, really a deadly combination. The reason I'm providing all this context is that
hopefully you can see that what we created were really custom garments and not things that we you know just cheaply printed off of some blanks and so in the next part of the video when you see the costs that are going to be really high hopefully you'll understand a little bit more why they were so high- we had some pretty grand visions for this company and brand and where we wanted to take it and so we didn't think that we could compete by just creating some really mediocre products and so yeah let's move on to the next part of the video. But just real quick in case you're ever thinking about starting your own business and want to strengthen your business background, I'd highly recommend checking out this course on Udemy called An Entire MBA in 1 Course the instructor Chris Haroun has an MBA from Columbia and also worked at Accenture, Goldman, and Citadel all really great companies and has started a few companies of his own and is a venture capital investor as well The course has some pretty interesting topics about raising investor money, managing finances, and how to value your company, and for full transparency, Udemy is sponsoring this video but I have used udemy before I even had a YouTube channel as you can see here I found this course after searching on reddit for reviews on the best SQL courses and also highly recommend this one if you're trying to build out your analytical skills You can use my links in the description below to get over 60% off of these courses and any other course you find on Udemy Okay so as I said let me now share with you how we lost the one hundred thousand dollars This part of the video is going to be broken down into three sections First, an overview of the costs and revenue. Second, a list of the largest one-time costs and third, the dumbest things we spent way too much money on Starting with part one here is an overview of the costs and revenue as you can see our biggest costs were on the raw materials aka the cogs at $81,621 and what's probably an interesting fact for you to know is that we produced across two collections around eighteen hundred units so that resulted in each of our items costing on average forty five dollars which is insanely high for clothing We then spent thirty one thousand four hundred fifty five dollars on marketing and as a new fashion entrepreneur, I really didn't budget in marketing enough into our projections Now $31k might sound like a lot but really isn't in the grand scheme of things and really what I realized when I was working in fashion is basically fashion is all about identity and branding. Basically whenever you wear something it's a representation of who
you are as a person and so you know I looked at some like Off-White shirts that really felt like garbage to be honest like just really really normal t-shirts but they were selling for something like three to four hundred dollars because of the brand right? And that's why I kind of realized later on that fashion is not really about quality all the time, but also about just the branding and you have to put in a lot of marketing dollars to really establish that brand The next largest amount was paying the independent contractors we worked with at ten thousand seven hundred dollars and there were no other wages paid because my co-founder and I literally didn't pay ourselves a penny for two years and worked a lot of odd jobs and used our savings to survive and pay off everything. Also just to clarify one thing when I say that we lost $100k I put in half of that and then my co-founder put in the other half so it's not that necessarily I lost 100k it was more of a 50-50 kind of thing But anyway travel was for our trips across asia and R&D was mainly spent on samples we bought at stores and test samples with suppliers some of whom we didn't end up working with so that was just money that we lost Everything else is pretty self-explanatory but in total we spent around $145,000 over two years and only netted around forty thousand dollars in revenue so that's about a one hundred five thousand dollar loss So yep we lost a ton of money and I also have to clarify that we did not intend to spend this much- when we initially started we were thinking okay let's launch this brand for something like $50,000 And as time just kept going on we were kind of digging ourselves deeper and deeper into kind of like a sunk cost kind of situation where we had spent so much time and effort and money to get to a certain point and all of these unexpected costs would come up and then we would just be like okay well we have to launch the first collection right? So we just have to pay for it and so we kept spending more and more and things just eventually started to pile up In retrospect we also probably should have called it quits after our first collection but then we had some leftover fabric and we didn't want to call it quits right away so that's why we launched our second collection and then eventually lost more money. I actually think that's one of the really big parts of entrepreneurship that you probably don't hear that much about which is just that when things aren't going well there's this constant battle that you have to struggle internally of whether or not you should give up and when to give up but you've already put in so much time so you don't want to give up but at the same time you do because you don't see a really bright future and you just kind of have to keep pushing forward until eventually you realize that, okay, economically this doesn't make sense and let's call it quits That's a really hard thing to balance calling it quits and also moving forward both of those are really tough decisions and yeah that's basically what we had to go through constantly throughout the past two to three years when I worked on Asthetic Studios. But anyway let's go to
part two which is the list of the largest one-time costs and here is our top 25 and you can pause the video and look through them if you'd like but there are a few that I want to point out As you can see, most of the largest one-time costs were related to COGS and again it's because we're putting so much into the customer and product experience at really small quantities This $4,944 customs fee was something we were hit with when we sent our fabric from China to Korea and we totally did not plan for it and it was unexpected and this $4,500 fulfillment cost was a minimum that we had to pay to work with a fulfillment center but we ended up moving to a different center so that was just another few thousand dollars that we lost We also hosted pop-ups in Los Angeles and San Francisco before Covid-19 and they turned out pretty well and we were slightly profitable. Here are some pictures of the events but again I think we spent a little bit too much on these events. Another thing you see here are the collaboration payments and these were payments that we paid to our artists to make the designs and I'd say we paid above market price because we were really mission driven as a company and focused on compensating artists really well- we even gave them 15% revenue share which is pretty generous. We also spent about $10,000 on our first photo shoot because we wanted to have a really professional lookbook and let me talk a little bit more about this photo shoot. Our collection theme was nostalgia and so for one of our scenes, we spent
one or two hundred dollars on ring pops which are a throwback nostalgic kind of candy and we filled them inside a bathtub and I bring this up just to kind of show you the lengths we went to in order to create a really creative lookbook. Here are some of the other photos in our lookbook and I think they came out pretty well but looking back- again, we kind of spent way too much money and in our second photo shoot we learned our lesson got our friends to model and basically did everything for free and I think everything still came out pretty well But anyway, let's go to part three and that is the dumbest things we spend money on which kind of is a lot of things- probably some of which i've already covered but let me point some other ones out. One thing was including a tote bag with each purchase which cost us about two thousand dollars for about fourteen hundred of them- I think it was a really nice addition and customers really loved our tote bags but I think we were just going way too overboard with trying to make our customers really really happy compared to the existing resources we had Another item was what we spent on creating our logo- we hired one artist at the beginning for nine hundred dollars but didn't like the logos he created so we ended up hiring another designer who was super professional and we paid her seventeen hundred dollars for it The designer we worked with had a lot of fancy degrees she had a lot of experience working with a bunch of other companies so it's not like she just whipped something together- she actually spent probably a few weeks coming up with a lot of different designs for us to take a look at and so yeah it was a pretty legit process, but again, something we spent too much money on for our rareliquid logo you know my co-founder just designed it himself and we just did it for free and looking back that's probably what we should have done. The last item I'll point out is the 975 dollars we spent on tissue paper we bought about 5,000 custom printed tissue paper because it was the minimum quantity for a custom print and we just thought that we would need it in the future but now we have thousands left that will probably just end up in recycling Okay so, as you can see a lot of bad spending that I'm really not that proud of but I will kind of say two things- the first is that spending about 145k over two to three years of running a business, especially a consumer goods business, is actually not that much especially if you consider you know actually if you were to properly pay people like me and my co-founder we didn't get paid anything from the business so we spent everything on our products and the kind of customer experience and all that and the second thing I want to mention is that we actually out of the 600 plus orders that we got, we only had one request for a return order. And we had a very standard return policy so it's not like we
made it impossible for people to return their orders or anything and that's actually something I'm pretty proud of basically I think that our customers really loved our products- it's just that we weren't selling enough for whatever reason. If I did have to kind of analyze that whole situation though it's probably that the people who actually got our products really liked them because we did so much to make sure it was a great product then we added all these extra bonus kind of things like the flyer and the tote bag but our problem was really with marketing- we just didn't have enough brand equity that was out there and then when we were marketing on things like facebook ads and whatnot, people would just see on their phones what our kind of t-shirts and hoodies look like and they would just look like really really normal garments and we were charging pretty premium prices for them so that's why it would be really hard for us to keep making those sales. Next up, let me talk about how I basically feel about all of this First of all if I could go back, I would probably have closed down the business after one collection probably also made a lot of other spending changes but you know generally speaking I don't really have much or any regret from working on Asthetic Studios As you may know or may have watched from one of my previous videos about why I left JP Morgan and investment banking, basically what happened is that my mom was diagnosed with ALS and so during that time after I quit and decided to start a business I was really in this mindset and belief where I just thought that I needed to really truly follow my dreams and passions and ever since I was 10 years old I had wanted to start my own business And so when I finally did take that leap and was working on Asthetic Studios, truly each day--although there were so many really really tough and challenging moments-- I really enjoyed kind of each day that I was working on Asthetic Studios it felt like one huge fun kind of product or I mean project that I was working on and so that's kind of why I feel like I didn't really have any regrets working on the business. My whole experience with the fashion brand is really what led to rareliquid which is already profitable and I feel like has a pretty bright future ahead, and so what I really the way I really perceive everything is that rareliquid is just a continuation of Asthetic Studios and what I really mean by that is that I gained so many valuable experiences and lessons from working on Asthetic Studios and really the most important thing I would say is just the mindset and practice of being an entrepreneur When I just compare my two different experiences I had previously of investment banking where I was at a desk job, learning a lot growing as a professional but kind of limited in my scope of what's possible, then I worked on Asthetic Studios where I was meeting a ton of entrepreneurs and just really trying to think very creatively of how to grow and expand a business, picking up all these random skills I never thought I would need to pick up and really hustling every single day to make something out of nothing right? And I think all of that really combined into what is now a rareliquid and I think that you know what I'm working on now can grow eventually into a seven-figure business over the next few years and I really also enjoy working on rareliquid- I can express things creatively kind of like research companies when I'm focusing on the investing side when i'm working on the career side you know kind of be able to teach things that I've learned from my previous experiences so in general every day I'm kind of feel like I'm pursuing both a passion and a career by working on rareliquid and I feel like it's such a blessing honestly to have this kind of mindset where I really enjoy what I'm working on Another important reflection I had is that Asthetic Studios was basically an experience where I was doing everything from the ground up and I didn't have a lot of expertise if any at all in fashion- people actually my friends would often kind of make fun of me for my fashion so it's actually really funny that I started a fashion brand but anyway now I feel like with rareliquid, I'm more in a comfortable spot where I feel like I do have a bit of a competitive advantage because not a lot of ex-finance or bankers basically like create YouTube channels where they can you know share their thoughts about how to invest in companies and things like that or maybe recruiting advice and so I feel like there are other channels out there who may have similar backgrounds as me but there aren't that many basically and I also can use a lot of these skills that I gained from investment banking and entrepreneurship to kind of create this rareliquid business that I am you know created which is just like so many different types of businesses combined into one and if you want to learn more about my the different revenue streams that I'm working on you know check out this video which is my latest update video of my attempt of trying to go from zero dollars to one million dollars in earned revenue in 12 months So yes, I lost a lot of money actually considering my opportunity costs where I could have been making something like two to three hundred thousand dollars a year if I just stayed at JPM or worked at some other like private equity job it's actually much more, but you know with that said I feel like all of this was a huge learning experience- I'm very happy actually right now with where I'm at. Like Steve Jobs said in one of his
I think his Stanford commencement speech you can only connect the dots looking backwards, and I feel like that's so true right now in my life where all these things happen to me some of them positive a lot of things honestly pretty negative that combined into where I'm at now and I try to view everything as a positive experience. A few more things before I let you go- if you want to win five percent of my june 2021 youtube earnings then look for this picture of Warren Buffett on my instagram, the instructions are there they're super easy and I'm also giving away another five percent to high school or college students who I guess it's like a tiny little scholarship fund basically there are links to both of those giveaways in the description below As I've mentioned in previous videos, I award ten dollars to the first commenter and another ten dollars to a random commenter, so here are our winners today if that's you just DM me on instagram and you can also get ten dollars in free bitcoin if you sign up using my links down below for Coinbase and Gemini and you can also get some free stocks if you sign up for Weeble and Moomoo Check those out if you're interested hopefully this was an interesting video for you let me know in the comments if you'd like me to touch upon anything else that maybe you're interested in Thanks as always for watching hope to catch you in the next one peace out [Music]
2021-06-17 08:36
