The decision to start a business is a funny thing. Like it or not, there's no amount of previous job experience or prestigious business school degree that can truly prepare someone for the realities of the job. In fact, it's the failures you experience in those first years, not the preparation, that provide the most effective schooling.
In 15 years as CEO of Dazadi, I've experienced more than my fair share of business failures – including losing $1M of my family's money. Rather than allow those failures to destroy us, I've taken the time to understand the lesson within each and from that, have worked with my family to transform this little online recreational game company into a flourishing $22M business. These are three of the more poignant lessons we've learned along the way.
Lesson 1: Chase profitability, not market share
My brothers and I founded Dazadi in 2002, in the smoldering embers of the original dot com bust. People thought we were crazy, but in our opinion, the timing couldn't have been better. With most companies exercising extreme caution when it came to building a business online, competition was light and we had a lot of leeway to experiment with the most effective channels for driving conversion. We sold on Amazon, as well as our own website, and grew from $100,000 to more than $2M in revenue in the course of three years. For us, ecommerce seemed too simple.
Then the 2008 financial crisis hit. As it turns out, when people are struggling to make ends meet they buy groceries, not recreational products. Our sales plummeted. Rather than cutting inventory to focus on the items that were selling well, we made the naive decision to expand our product offering and sell items at market rate in the hope that the low cost and product volume would facilitate market growth. Not so.
We realized too late that we were chasing the wrong goal. Rather than find an effective way to increase sales and profits over time, we threw money at an economic problem and we paid a cost – to the tune of $1M.
Lesson 2: Focus on what works
It took that $1M hit for us to realize that, to survive long-term, we had to be strategic about inventory and our omnichannel presence. Amazon had always been a strong sales channel for us, and as such, we focused on growing revenue there more than on any other channel. But by this point, competition had picked up and made it increasingly important to also drive traffic to a branded site where we could own the customer relationship. Although we invested heavily in marketing, it just wasn't helping to generate website revenue the way Amazon was.
We needed a change.
Not only did we eliminate our marketing department, but we took the time to understand the factors that drove success on Amazon, and committed to replicating them across our other channels.
This was a strong start towards reaching profitability, but we still had some other challenges to solve. This year, we made the difficult decision to drop all our dropshippers, which meant a $2M cut in revenue. I cried myself to sleep for weeks, but the fact of the matter was that our order performance metrics were significantly lower when working with dropshippers than when fulfillment occurred internally. Dazadi would ultimately be more successful long-term when we drove 100 percent of the inventory, so we took the leap.
Beyond improving the customer experience, this was an opportunity to curate our inventory, so we drastically reduced the number of SKUs offered and focused on differentiating the brand through private label products and site-exclusive SKUs.
Lesson 3: Use the right tools, and don't settle
With 100 percent of fulfillment occurring internally and our team committed to growing our website presence, it was important to find an ecommerce platform that could support all avenues of our business. Our previous platform required extensive time and financial resources that proved to be draining to a small company like Dazadi. Not to mention, we were in constant fear that the smallest change to our back-end could mess up the entire system.
If our recent operational pivots proved anything, it was that ecommerce is a complex beast. From inventory and shipping to site design, customer engagement and omnichannel selling, there are hundreds of details that need to be managed to keep an ecommerce business running smoothly, and we couldn't afford another million-dollar mistake. Identifying a platform that could facilitate this management without draining resources was of tantamount importance, and finding BigCommerce made all the difference for Dazadi.
After years on a custom build, we had developed an ERP (enterprise resource planning) system finely tuned to the intricacies of our business. It was the heart of our operation, and we weren't willing to give that up, even though the rest of our platform was subpar. Instead, we found a platform that provided a robust feature set to manage all the minutia of ecommerce, while still giving us the flexibility to directly integrate our ERP. One well-designed tool changed the game for us entirely – and to think, we spent our first decade without it. The lesson? Know what you need to run an effective business, and refuse to settle for anything less.
No one builds a perfect business out of the gate. We're all subject to a few stumbling blocks along the way, but it's the entrepreneurs who embrace (and learn from) failure rather than allowing it to define them who will find the most success.
About the author: Jason Boyce is the co-founder and CEO of Dazadi.
Edited for clarity and brevity by Nicole Fallon.