Year 1 – comes to Life

I was asked to write a chapter in an upcoming book about entrepreneurs in the early years.   Here is the pre-released copy.


Imagine that your company is selling $3 million USD a year in the United States, Canada, United Kingdom, and Australia, with a customer base rapidly approaching the 100,000 mark. Picture each employee, equipped with Standard Operating Procedures, Policies, HR manuals, and reports. Turnover is low. Simply put, things are stable. You devote a scant ten hours a week to daily operations, and the goods and services that you need come cheaper and cheaper because of the volume of business you’re doing. Team leaders run their various sections. There’s a calm and a peace in the business. You’re not afraid. You’re confident. And as such, you’re aiming to grow to $125 million USD in sales over the next five years.

Now imagine that none of this is a dream, and that it all started four years ago in a bustling market in China.

I arrived in Beijing, China in 2003, working for one of the big multinational corporations. The company paid for my apartment, gave me a car allowance, and paid me a tax-free six-figure salary. I had six weeks of holidays, some of them fully paid. It was a comfortable and easy life, but it was somehow unsatisfying. There was no challenge, no fulfillment, and the monotonous climb up the corporate ladder was becoming repetitive and downright boring.

I found myself in a Beijing market, taking in the local wares. The market sat amidst the urban sprawl of Beijing, and countless wooden tables were piled high with anything that might sell, from fresh fruit to knock-off tennis shoes. The market was filled with voices, haggling over prices in Chinese and English, the smell of fish and motor scooter exhaust heavy in the air. There, I bought a strand of pearls for my mother. I sent the pearls to my mother in Canada, who had them appraised. I got a call from her shortly thereafter, chewing me out for spending $500 on pearls instead of saving my money. Little did she know one remarkable fact: that I’d only paid $40!

I thought that maybe someone had made a mistake, so I quickly sent five more strands of pearls. They all appraised about ten times what I’d paid for them. I was blown away.

It was time to translate this discovery into something bigger. Armed with this tiny piece of information and a two hundred dollar camera, I went back to the market and bought ten more strands, an initial investment of about $800. It was easy: I used PayPal to get money from Canada and my little camera to snap photos of them. I’d need to describe the products, and I didn’t really know pearls, so I also ordered five books on them. I asked people in the Beijing market about pearls, taking in information on what they were all about. Unconsciously, I had begun to educate myself on the product. Not only was this easy, but it was fun, interesting, and exciting.

I launched a little website at Google had just gone public, and their Adwords program was the latest rage, so I took advantage and began advertising on Google. Initially, I kept the prices low, charging only twice what I had paid for the pearls myself. Imagine the feeling when the first order came in! The adrenaline mounted, and so did the sense that I was onto something big.

Between June and December I continued to grow the site. The pearls continued to sell, and my costs were substantially less than what I sold the goods for. I was in business. In the first five months, I made $45,000 per sale. After a little math, I calculated that I’d generated $10,000 in profit. Not too shabby at all. At this point, the system was simple: as I sold pearls, someone would run to the market to get more, and then we’d pack and ship them. My 5-month investment was $2,000, and I was getting $45,000 in sales, resulting in a net profit of $10,000. It was time to kick things up a notch.

I have always loved technology, but I was no e-commerce expert. So, again, I learned. I had read somewhere that reading ten books on a given topic would give you more knowledge on the subject than 80% of the people out there. So, each time I needed to educate myself to face a new challenge, I simply bought ten books on the subject and consumed them. I devoured new information like I was starving for it. I worked and I read constantly. I started putting big hours into it, because there seemed to be so many new things on the horizon that I needed to prepare for. There were a myriad of questions I didn’t know the answers to. How and why did people shop on the internet, and what would make them happy? The questions kept coming up, so I just kept reading.

I probably read well over 100 books and e-books in the first year, as well as countless articles. The hours continued to pile on. I was still working my corporate job, but when that work day ended, I’d develop my job, the one I was carving out day by day. In addition to my 40 hours for the corporation, I was spending 60 to 80 on my business. Weekends evaporated. That time was now devoted to study. I had become a monk in the ways of pearl distribution and internet commerce, and before I knew it that feeling of rising to a new challenge was back in my life.

My learning kept paying off, and the site sold more.. I learned that site design was important, so I found a designer to work on PearlsOnly Version 1.0. What I’d read was certainly true – my sales doubled overnight! I read more about Google and Adwords – got smarter – and, again, my sales doubled. Forecasting the sales, the first full year of operations would generate around $225,000 in total sales and $100,000 in profit.

There was a catch. I was getting very tired. I was pulling double duty by working two jobs, and my corporate work was becoming an impediment to my website work. However, I was still getting more money from my corporate job than I was from my budding pearl business. I was scared to leave the stable job and the cushy lifestyle that the company offered and plunge into the risk and the unknowns of the pearl business. But I loved the site work, and I’d grown to love the pearls. What I didn’t love was my corporate job. It was time to commit to one or the other, and the fear was crippling. What if sales dried up or people stopped buying? In the end, it was my wife who encouraged me to discard that fear. If it didn’t work out, jobs were plentiful. So, despite the fear, I gave up the ease and safety of my nine to five job, taking a dive from my rung of the corporate ladder, and committed fully to PearlsOnly on October 10, 2004.

With that change, the pressure immediately increased. I was struck with the knowledge that the sole income for my family was coming from this business. The hours, which I expected to decrease, increased even more. But even as they did, the revenue kept climbing. Everything began to come together piece by piece, like a puzzle assembling itself. Employees came on board. At first they were students with no experience for packing and shipping. I was personally handling site, customer care, design, and shipping issues. My employees had no experience, so their “help” tended to cause additional headaches and further drain my time. I was working up to 120 hours a week, but even though all of this was exhausting, it was exhilarating. My future was in my hands alone.

By 2004, we had eight employees and were making $1.2 million in sales. I was the pillar on which the business stood. All the questions came to me, and all the decisions were mine to make. Any balance my life had before was shattered. On a normal day I might have customer support to handle, a shipping problem to resolve, or even a total site crash to deal with. I was making about the same amount of money I had made at my previous job, but I was working three times as much. Doubt started to seep in through the cracks. I didn’t have time for friends or family. I had been consumed by my success.

I began to realize that my overworking was just another problem that I had to solve. Since I didn’t know how, I fell back on what had worked for me all along: ”The Ten Book Rule”. Only, ten books didn’t do it. It took 30 or 40 to educate myself on how to actually run a business of my own, and as the fog of doubt cleared the answer became visible: I couldn’t do it all myself. I needed to hire smart people, people that would work for me without draining my time. The process wasn’t easy. I set up organization charts, mapping out various functions of the company. I knew exactly what I needed, but it would take six people to fill the man hours I’d put in. It wasn’t so much that I was some sort of Superman, but I was a generalist – I needed to bring specialists on board to get the job done right.

So, I started hiring. An IT manager was my first great hire, and his expertise decreased my workload dramatically. I could breathe again. He also taught me one of the most valuable lessons I would learn: that documentation was a necessity. Before, I had despised these things, the mechanical and technical processes, the procedures, the documents. They all felt so “corporate”. But I came to understand that documenting these ideas was the only way to transfer this information from my head to those working for me. If I wrote it down clearly, I could simply give it to new employees to learn. It was a perfectly simple concept, but to me it was a “eureka!” moment.

I applied my Ten Book Rule again to learn about documentation – how people did it and what it meant. Slowly, step by painstaking step, I managed to extract myself from the everyday grind of the business. I was no longer in the business, but now truly running the business. It hadn’t been easy. My health and relationships had suffered, but the business had grown.

At the end of five years of growth, there are things I would do differently and things I would do the same.

The things I would keep:

1. The Ten Book Rule: I loved it then, and I love it now. I plan on sticking to this for the rest of my life.

2. Vision: I had a vision of how I wanted my business to perform and an idea of what it should look like long before that picture materialized.

3. Organizational Charts: Having a map of the company layout, even when my name was in all of the boxes, showed me where I needed to hire.

4. Self-funding: Investors and venture capitalists are a complication I had no interest in dealing with.

Things I would change:

1. I should have taken the hit to my wallet and hired high quality experts early on, reducing my work load in the beginning.

2. I would strive to bring on the right people earlier in the process, and if I couldn’t afford them, I would share ownership of the business to get their involvement.

3. I would control the rate of growth, slowing it down to better manage a balance between my work and my personal life.

Ultimately, being in China did prove to be helpful, but it was not they key to success. It came with its own host of challenges. Finding quality labour was difficult, I had no access to credit, and I spoke no Chinese. The catalyst for success was the realization that it’s possible to get a great product source cheaply. Having known that, I could have set up shop anywhere else in the world with the same success.