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My Builder’s Console Log

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Transcript

[00:00] The theme for today's episode is just start. Not Nike, just do it, but just start. So, I'm going to give you my entrepreneurial experience up to this point. But specifically, we're going to dive into a three and a half year story of me building a product-based business from the ground up. Everything I learned there, the pitfalls, the good things, the bad things, everything. Let's jump in. Welcome back to Builder Console, episode two. And knowing my luck, right before I started recording this, I drank some water, spilled on that blue shirt.

[00:31] So, we got a nice little Berkeley shirt right now. Let me give you some context of my experience of a little. So, flashback all the way back to 2018. At this point, if you're familiar with Juul, this was a nicotine pod-based system that started around 2015. So, the market was pretty fresh. When creating Lou, its purpose was to do a battery pot system, but have no nicotine in it and just be a 0% nicotine vape liquid that individuals could smoke in order to quit nicotine. Its use case was to mitigate the need of oral fixation, like eg this

[01:03] situation. If you ever smoked cigarettes or nicotine, you know what I'm talking about. It would suffice that feeling and that urge and you're able to smoke something that didn't have nicotine in it. That was like the product. That was the use case. But this was the experience. So 2018 starts. Up to this point, I was coding apps from when I was 12 or 13, just putting on little apps. I was making good money, you know, for like a 14-year-old, 15year-old, whatever it may be. I was coding apps. But, you know, I wanted to dive my feet into a product based business. I'd seen a lot

[01:33] with Shopify and wanted to learn more of this side of creating a cool little business that could generate revenue. But for some reason at the age of 18 I found myself entering a higher risk industry of vapes. But at the time the way we marketed it was an aroma theapy inhaler. And I had seen other competitors in the industry that were selling similar products on Amazon. Therefore, in my head, I was like, "Okay, well, if these guys can sell non-nicotine vapes and market them as aromatherapy inhalers, that means

[02:04] there's a market here for me to get that free traffic from Amazon and then obviously take the next step there of building the Shopify website to start selling in-house. So, knowing this, the start of this business costed around 1.3K and this was for the development of the actual device itself. contacting manufacturers in Shenzhen, China. I had created a supply chain where the actual vape liquid itself was separate from the actual device, connecting those two dots and was able to start shipping those into the USA into fulfillment centers.

[02:37] And during this time, the regulations around these kind of products was very lax. Therefore, I could ship this through USPS very cost-ffectively. These were small devices that could go throughout the entire states and have no issue receiving to the consumer. And the theme of today's episode is just starting. There was a lot of R&D I did originally when I was looking towards marketing and creating this product. But I just started. I was like, "Okay, how do I contact manufacturers?" Alibaba. Alibaba gets me in direct line with the people that can make the product now.

[03:08] Message them. How do I message a manufacturer? You learn through just talking to them the different types of dictation you use in these kind of conversations. A very important thing I learned there was when starting business with another business and you're coming from the background of being an individual or a small founding team, you are coming with loyalty. Eg. If you accept me in your manufacturing chain, you give me your products, can we do this at a discounted rate and I will go ahead and have you as my main

[03:39] manufacturer if this business really does well. Long story short, I was able to really solidify relationships with that manufacturer for three and a half years and you know got really good rates and got a really good relationship with the team found in Shenzhen China. So from this having the MVP product seeing if it works knowing it works we put in our first order of a,000 units and these thousand units we didn't have enough money to buy packaging. So we quite literally sent every single one of these devices in an envelope that we packaged.

[04:09] We put the envelope on there. We put like blue C++. At the time we had like little things for the flavors. So orange was C++. Uh I think blueberry is B+ just for like a little bit of branding. And then we sent those a thousand envelopes to an Amazon fulfillment center and started fulfilling orders. And you know like any business in the beginning you get like two or three sales in the month and you're like okay you slowly start growing projecting that out. The first year ended at 28k of revenue. The second year ended at 97K of revenue and by the end of the third year it was around 260K

[04:41] of revenue. This all came through the process of iterating on the product, building the product, and going from a disposable type of device to finally raising enough money through the money we made in the business initially that first year to do our first major investment into the battery and pod system, which costed us to do a soft launch of a,000 units with a,000 flavor pods associated with that to be around $10,000 wired for that shipment for shipping inven. atory and destination.

[05:14] So, what this does by just starting and to be fair, I think by putting myself in a high-risisk industry, it forced me to learn more things about business than I would have otherwise not learned if I was just selling t-shirts. By being in a high-risisk industry, it forced me to really understand the legal system, how to operate this kind of business in the legal system, and be more riskadverse, especially for the nature of the product itself. I mean, we went as far as going the extra step here where we used a

[05:44] third-party lab to confirm that the liquid that we used doesn't cause popcorn lung disease. It was the best on the market for the production of this kind of product. In addition to this, because of the nature of the product and the amount of money we were pulling in, we had to buy insurance on the product. And what was crazy, especially the difference between a product based business like this comparative to software, is just the burn associated with that was pretty high. I from what I remember I believe the insurance costed us around 12K a year no matter what and

[06:15] that would cover us in liability cases when it came around the actual product itself if something were to happen through this journey though and just just starting and just going and basically going through these hurdles you learn fundamental skills that could be applied to other things in other businesses no matter the realm of the business itself for example through this it forced me to learn more about design and Photoshop the actual design of the packaging, the way we brand the actual product through Photoshop. This was a transferable skill that I used later on

[06:46] for YouTube and the thumbnails and front-end design for software, front-end design for websites. Photoshop and design is a very transferable skill no matter the industry. So, it's a very good skill to learn early on. In addition, when selling a product like this and just starting, it forces you to learn how to build out a website. Now, right now on my YouTube series and everything I'm showing now, I could in theory build a duplication of Shopify. But at the time when I was just approaching this, I was only familiar with iOS app development. So, I just

[07:17] became really good at Shopify. Years of experience were put into that to build out a Shopify store that would convert and also connect all the dots. How do I get Shopify to connect to a fulfillment center? At the time of this entire business, we're using a thirdparty fulfillment center called Ship Bob. And then we were also using a freight service in order to expediate how fast the product would receive into the mainland. And through this process of just starting, this isn't like day one. I got that MVP product and I was like, "Okay, now I need to do this, this, this, this, this, this, this." And like I just drew it all out. I already knew I

[07:49] had to get some type of legal insurance. I already knew I had to get a third party fulfillment center. Like a lot of this stuff came with the day-to-day, the monthtomonth of realizing it through the process of just doing business itself. You can have a nice blueprint, a nice whiteboard of everything you think you'll need to do for the business, but in reality, the only real way for you to understand what will be needed for your business is just by operating, just doing it. So, as a high level, the structuring of how we approached this was MVP, proof of concept, sell units.

[08:22] Okay, we've made enough money on our initial proof of concept. Now, we're going to invest in decisions that we think are going to on the longer term horizon be very beneficial for the company. So, that's when we invested in the tech and the inventory to be built for the battery and pod system. And then from the battery and pod system, one of the last things we did for the next investment was we took that money we made there and invested into CBD devices, connecting the manufacturing dots there, which was kind of crazy to be honest with you. that was creating the units in China and then having the

[08:52] units sent to a filling center in California where CBD hemp was legal. And there's like a weird loophole with CBD hemp, at least at the time, where it's actually legal in all 50 states if you create the formula correctly. Don't hold me to that. It might have changed by the time this video goes out. But in reality, at the time, you could sell a CBD vape in all 50 states, and there wasn't many legal implications around it. This stuff is no joke. This stuff required me to pay lawyers a lot of money to understand that I'm operating in the correct way when doing this kind

[09:24] of business. But here's the kicker with this entire situation. This was three and a half years of my life that I dedicated and went full blast on. Just work, work, work, work, learn, learn, learn, learn. By the time we got to the CBD device, we were still good. We still had good cash flow. Everything was golden. But then out of nowhere, the government just hit us like crazy hit us. During 2020 and COVID, there was pork passed in the bill to essentially make an umbrella policy where anything that was inhaled was now deemed as a

[09:54] cigarette. And now that our product was deemed as a cigarette and there wasn't really a way around that, the legal implications just went up 30x. And on top of that, the government had actually banned the shipment of these kind of devices in USPS. Therefore, you had to seek third-party fulfillment providers that would actually ship a product like this. And what's crazy and kind of like an inside job, which I'll be surprised, it's big tobacco. The only fulfillment center that was willing to ship these kind of products, we went from a cost of

[10:25] around $5 a unit for shipping all the way up to $15 to $20 per unit for shipping. Just shipping and handling. That's it. It was provided by a shipping fulfillment center. I forgot the exact name to be honest with you, but it started with X something. What we realized is that this fulfillment center would only onboard vape businesses if you had achieved a million dollars in revenue. And then later on when I was investing in stocks and just kind of searching around Finn Viz a little bit of different stocks to invest, I noticed a vape company obviously piqued my

[10:57] interest a little bit. After diving more into the research reports, what I realized is that after this legislation had passed, the industry itself had lost 93% of vape businesses. What's even crazier is we were one of those businesses. We basically got the full wind of that 93%. Now, I'm not going to go conspiracy on you on why this happened or the implications of this of probably why this happened, but you know, long story short, in capitalism, you want to cut out the competition. And through overregulating the heck out of

[11:27] something, that's a sure way of cutting out competition. So, not only are we going to get hit here because now our product is deemed a cigarette, but we're also getting hit here due to the actual shipping itself, there was only one option. And in order to get into that option, it was already gatekeeped. It was already specialized for higher clientele. So, through that, that put us in a position where it was either grow or die in another country. Since I already put in three years of my life up to that point into the business, I was looking for viable pivots. I was looking

[11:57] for possibly taking the entire product, ripping it out of the USA and entering into the Australian market. The reason the Australian market seemed viable for me was the way that the legal system works out there is they don't do an umbrella policy when identifying anything that's inhalation as a cigarette. What they do there is they actually categorize it. Therefore, if your inhalation device has no nicotine in it, it is looked at by the law with way less scrutiny. It's like, okay, wait, this isn't a cigarette. This is like an aromatherapy inhaler. Less implications around it, at least for

[12:28] Australian law. There was other countries we're looking at as well. So, this was a situation. It was very high stress where we were going to have to replace and move $50,000 worth of inventory into a separate country just to get out of the situation that was happening in the USA. We were even looking at Canada because their laws were pretty lax as well. But just to put a bow on that story, I kind of sat down and I realized, do I want to put another three years of my life into this business and restart in the Australian market when we've literally been working

[12:59] at the USA market for three years or do I just need to just start something else? And at that time, I made the executive decision that you know what, it's time to cut loose ends. It's time to start something else. which parlays with the theme of today's episode of just starting. But here's one thing that was learned through this entire experience. And this is an analogy used by a lot of people, but in business and reaching success, sometimes to get to the top of the mountain, you'll get 75%

[13:29] the way there. You've gotten 75% up the mountain. You're up that trail. But sometimes you got to turn around and start at the bottom of the mountain again. And that's what happened to me there. We got this coming to a quarter million. I was rejecting to 500 if the USA just laxed on the laws. But we didn't and we had to pivot and I had to exit this company, go down that huge mountain of 75% three and a half years of my life I had to walk all the way down at the base level of that mountain and start again. But the one thing

[13:59] gained from going 75% up that mountain was the knowledge and experience of just operating and running a business. So, if you are fresh to starting a business or maybe you're already running a business, there are skills that aren't just transferred to straight, hey, this is how much money we made. There are skills that you're learning that for the next business you do, you're off the ground way faster. This three and a half years of experience led me to the cardboard cats, which in the first episode, you know what happened there. Exited that in

[14:30] three months. I just knew right away, boom, out. I just knew from my experience. I'm like, you know what? This is a dead end. And then after that led me to the software. And up to this point, this has been two years of the software and this YouTube channel. And as you can clearly tell, the skills that I learned from those three and a half years of business experience were easily transferable to this software business and this YouTube business to get me to the point where I'm at now of getting here in two years. In reality, this probably would have taken way longer if

[15:02] I was a complete novice and I tried to do YouTube with no background experience on how to operate and run a business. So, the takeaway is simple. Your first entrepreneurial journey or business, you might not find the needle in the haststack. That might just be a learning experience. In business, in life, you're going to fail a lot. But through those failures, the next time you run into that failure, you're going to be able to solve it. Like boom, Cardboard at homes made the LLC, made the bank account, made the credit card, started advertising. In three months, I was like, "Wait, nope. Out." Just knew. I

[15:35] just knew from my experience when to cut looses faster. And this really parlays as well with coding and developing. when developing software, when developing web apps, one thing I remember was Stripe documentation and that taking me two days to really fully grasp and be able to integrate monetization into my application. After learning those pitfalls, learning how to handle that kind of code, going through all those errors, the next time I needed to integrate monetization into an app took me two hours, not two days, two hours. Failure builds and compounds to the

[16:07] point where when you do cool things or you want to start new businesses, it is fast because you have all that experience of what not to do. So, that just about does today's episode of Builder's Console Log episode two. Where is episode three? Don't worry, it's coming out next week. I see you in the next builder's console log.