Launching New Business: Pivoting

July 7th, 2011 by Slabs | Print Launching New Business: Pivoting

My friend and Datran colleague Aaron Hunter, a mobile guru, Carnegie Mellon computer science grad and budding entrepreneur himself (check out his mobile app AwayText), mentioned how startups generally pivot twice before achieving success.

Pivoting is adapting or making major changes to the business to take it in a new direction. When I was in law school my boredom led me to computer programming. My first self imposed challenge was to build an e-commerce site. I worked waiting tables for a seafood restaurant called Second Street Bar and Grill. I asked the owners if they would like a website to sell their t-shirts. A month later and I was up and running. I had t-shirt images and a fully functioning site – but no customers. I think I sold 3 shirts that first year.

It was exciting to create something, but the goal of any business has to be to make money. The novelty of having built an e-commerce site wore of quickly when my hard work didn’t result in any substantive cash flow.

At the time I was dating a girl from NY and we came up with the idea of selling custom clothing. This time I felt I had a better model. There would be demand for the product because it was something we wanted that no one else was doing at the time (2002), and we would leverage Ebay to find customers. Two industrial sewing machines, a few bolts of fabric from the garment district in NY, and we were in business. Every week the sales rolled in. However, there was one big problem. Selling on Ebay requires you to mark your prices down substantially. A few orders came from the site via repeat customers and we got a fair price for those orders, but most came through Ebay. After the cost of products and labor, which we were doing ourselves, we we’re making minimum wage or less.

The business lasted for about a year and I think I netted $14,000. Enough to cover my expenses, but hardly the million dollar baby I was after. We decided to close shop and liquidate the fabric, and that’s when things got interesting. The fabric was sold via Ebay and went for 3x to 4x what we paid for it. Hmmm, interesting. We went back to NY and stocked up on the fabrics we thought would sell well (novelty items you can’t find in big block stores) and tried again. Same results. Pivot #1.

You can check out that business: MJTrends.com. My wife now runs the company in her spare time and I consider it a mild success because it makes up a decent chunk of our income, however, it’s not the game changer I was seeking.

I did learn that you have to be open minded and receptive to change. Had I not pursued fabric after closing down the clothing company, I never would have stumbled onto MJTrends. Read my next installment to hear about how I got customers to MJTrends.

 

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