All too often, when you hear about successful entrepreneurs, you only hear about what went right. The memories of their mistakes and missteps dissolve and only their glorious moments remain. That's not the case with Frank Farwell, who founded the apparel catalog WinterSilks in 1979, propelled it to the Inc. 500 in 1986 through 1988, and sold it in 1990.
Farwell, is now a small-business expert and author of the book "Chicken Lips, Wheeler-Dealer and the Beady-Eyed M.B.A.: An Entrepreneur's Wild Adventures on the New Silk Road" (Wiley, 2011), which has been nominated for the 2011 Financial Times/Goldman Sachs Business Book of the Year award.
Farwell is candid about his mistakes and says each helped him improve himself and his company.
"There were plenty of painful setbacks along the way," Farwell said. "But each of them was a blessing and led to a better solution to the original problem."
Here, he shares five of his "blessings" and the lessons he learned.
Hold the phone. — When rapid growth became too hard to handle, I outsourced our 800-number telephone lines to a subcontractor with phone banks in Arizona and Nebraska. On the surface this looked like it would save us some money and solve a lot of staffing headaches. I was dead wrong. The subcontractor's phone agents did a far worse job than my own employees. They made data entry errors and gave inaccurate information to our customers, thereby alienating them and damaging our reorder curve. After six weeks of such "efficiency" I took the phone service back in-house. On the surface it cost a little more to do it right, but with all things considered (knowledgeable operators with a stake in quality service, happy customers, fast shipping, and 2 percent or better reorders) it was far less costly.
The moral of the story: Don't outsource dealing with your customers. Handle them in-house, with kid gloves. You'll get to know each other better, customer service will improve , and overall profitability will strengthen.
Pressed into service. — I made an unforgiveable blunder when I switched our fall catalog printing contract from a proven Milwaukee printing facility to a small regional printer with a new Italian press and a suspiciously low price. You guessed it—I was their first big customer, and they did not yet understand how to operate their fancy new Web printing press. After a few days of agony and the peak season approaching, I switched back to one of the proven Milwaukee providers and their Germanic expertise and quality control. If only I had done a little more due diligence on the new vendor, such as talking to other customers of the fancy new Italian printing press. In 10 minutes on the phone I would have discovered there were no satisfied customers yet, and I could have tucked my tail between my legs and run the other way before any real damage was done.
The moral of the story: Check out key vendors before switching your business to them.
Know thy vendor. — I used 14 different importing agents in Hong Kong, South Korea and China over a period of seven years before finally settling on two very good ones (one Swiss, based in Hong Kong, and one American, based in Shanghai). If only I had known about these two in year one, instead of year seven, I would have saved myself a lot of heartache, wasted time and cost.
The moral of the story: Once again, more due diligence up front is less costly than trial and error over the long run.
Employee appreciation. — When our first busy holiday selling season ended, I had to cut back staff so the company could survive the slow summer months. I called the slowest worker into my office, hemmed and hawed, and then, as delicately as possible, terminated her. "Just for the summer," I said. As the months passed and other employees turned over, I realized the person I had fired was, in fact, the most valuable one I had. She was reliable, steady — if not fast — and took her job very seriously. If I could live my life again, I would hire her back.
The moral of the story: Dedicated employees are hard to find. Take good care of them, and try to find alternative work within the company to carry them over slow periods so that they will be available when the fast season starts up again. Staying financially alive during the down season can be the secret to overall success.
Banking on relationships. — When my wife and I sold our house in suburban New York and moved to Madison, Wis., we put the proceeds of the house sale in a certificate of deposit at a local bank. The bank was very happy to take our $120,000, and we figured it was the beginning of a long, happy relationship. Well, I was overly optimistic. The bank would [only] loan [our business] up to $120,000, but not a penny more. This stifled the growth of our business until I could find a bank that would loan more. There was a lot of mental anguish during those months, but it taught me to take a bank relationship very, very seriously. When I found a bank that would take over our CD and loan us more, I went out of my way to educate them about our business — its seasonality and importing demands (since our product, knitted silk garments, were not available from any other country). Once our new banker understood our business, he and I planned our credit requirements a year or more in advance. I showed him the inside workings of the business several times a year, and he became a cheerleader for us.
The moral of the story: Find the right bank, and the right banker, and keep him educated about your business.
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