The Conclusion: A 6 Figure Business That Fell Apart When I Was 16

http://www.sofamoolah.com/personal/the-conclusion-a-6-figure-business-that-fell-apart-when-i-was-16/

by MatCarpenter • 15 years ago

117 52 15 years ago

robtoo3• 15 years ago

(A good read, thanks!)

It should be obvious to others who the "major business in the MP3 industry" was when you see the product he was re-selling: http://www.sofamoolah.com/wp-content/uploads/2011/07/1p.jpg

What's not clear to me is how you could (according to the final paragraph) "lose a lot of money" when you seem to have had minimal overheads and (according to part 1) you were making a profit of $40.75 per unit.

Naturally you had some unsaleable stock left over, but at $2100 shipped per lot of 500, did this really make much of a dent in your final profit from the venture?

dools2• 15 years ago

I just posted the exact same question as a comment on the blog :)

ma2rten2• 15 years ago

Also why did he have to stop selling the usb drives?

sjs3• 15 years ago

He must have meant revenue of $40 per unit, not profit. They were selling for $55 and affiliates got $15.

robtoo3• 15 years ago

non-affiliate sales generated $40.75 profit per unit according to the first article.

affiliate sales generated $35.80 profit per unit by his numbers ($55 - $15 affiliate - $4.20 unit cost). I get the impression that affiliate sales were face-to-face and not the bulk of his business, although I might be wrong here.

I was purchasing these products for $4.20 each [including shipping and handling] so I could afford to undercut the competitors by a significant margin. A buy it now (BIN) price was put as $49.95 -- this would give me a $45.75 profit, minus the eBay fees which brought the profit down to around $40.75.

Sukotto• 15 years ago

You don't owe anyone an apology. You accomplished something great and you're doing us a favor by giving us this case study. Thank you.

So, I think you should re-write the first paragraph...

-----

FROM:

I really have to apologize for leaving you guys hanging on the first part of this story. I was undecided on whether or not to break the article up into 2’s and after some feedback on Twitter I decided to. Below are the middle and the ending. Again, I was undecided on whether or not to break this part up but I left it whole. Theirs 23 paragraphs, double the original. If you’re not sure what I’m talking about, this is the 2nd part on a story I posted yesterday. You can view the original here. By the way, this is the first time I’ve ever told this full story.

TO:

This is the second part of a 2 part series describing the rise and fall of my first business. Click here for part 1 where I describe how it all started.

-----

I look forward to hearing about your next business. Please consider posting about it as you go along.

[edit to add]

... come to think of it, I think you're in a position to emulate patio11 here (if that interests you).... creating a series of these kind of killer blog posts to help drive interest in your next business. I kind of imagine you spinning it as "Scrappy young person running a microbusiness".

Some post ideas that come immediately to mind:

- Go into detail about "I did research into growing markets and trends. I looked into manufacturing prices and retail prices"

- Finding suppliers

- Marketing research

- The mindset of "I want to convert this exposure to money"

There seems to me like there's a lot of potential meat there. Especially since very few (if any) people are posting about starting businesses around physical products. Everyone's talking about web-based SaaS or B2B or whatever... there's a juicy niche there if you want it.

And you can use the street cred the OP article gives you to get the initial velocity.

Actually, you might want to look at polishing up the story into a 10 or 20 min presentation and seeing if you can do a talk at a small business conference. That gives you additional exposure, and organizers often let you attend for free if you're part of the show.

[One last Edit]

So your next business is "to document our journey of making money online while also showcasing interviews with other successful entrepreneurs, display case studies that work and also give out material that our users will find helpful.". So it looks like my comment wasn't really necessary. I'll leave my comment as-is though. Good luck, and I hope it works out for you guys.

JonnieCache2• 15 years ago

I think that's just in response to the various complaints about unnecessary cliffhangers here and elsewhere.

While he doesn't owe anyone an apology, I think it's nice that he's happy to give one anyway. Politeness is always admirable, especially on the internet, and politeness above and beyond the call of duty doubly so.

FWIW, I couldn't care less about 'cliffhangers,' provided they are not deployed in a cynical effort to garner underserved subscribers, which is clearly not the case here.

tomjen3• 15 years ago

Spoiler: Another Entrepreneurial person shot down by a law suit that he didn't deserve but had no chance of winning.

At this point I wouldn't mind just killing every single lawyer on the planet.

dools2• 15 years ago

"that he didn't deserve"

Well, you don't know that. The images of the mp3 players he was selling basically look like a cheap knock off of the iPod shuffle. Apple spends a lot of money on their design and branding and it's their right to protect that investment, wouldn't you say?

This isn't the same as patent trolling.

gravitronic• 15 years ago

In some cases with Asian factories the no-name product isn't even a "cheap knock-off", it's from the same factory with the same design.

Say MP3 Factory A gets an order for 1000 units/day but has capacity to do 1400/day. The factory still runs the extra 400/day and sells them as no-names.

Note: this is probably not the case any more with most proprietary electronics because competition is fierce enough that a factory would not want to lose a client. It does however flood the market with cheaper equivalents for all sorts of other products: clothes, shoes, wallets, etc.

scythe2• 15 years ago

>I came to the conclusion that I wasn’t going to give up that easy and I went to see a lawyer. I figured I had enough money to present a decent battle – how wrong I was. I told the lawyer my story and what the situation was and the consensus was not good. Give up. I was told I could not win. Regardless of if I had a case or not, fighting a company this size was not worth it. Nowadays I can agree with what the guy was saying but being told to give up hit me hard.

Man, this sort of abuse of the legal system ought to be treated as a criminal activity, with prison time as an option for the execs involved.

somecoolguy2• 15 years ago

Dude, it technically is illegal to sell replica mp3 players. So the company had every right to shut him down. He's lucky he didn't get sued anyway.

scythe2• 15 years ago

You could be right, 'cuz I don't know the legality of "selling an mp3 player that looks like that mp3 player some other guy sells" and certainly not in Australia. However, I mean the use of the legal system as intimidation instead of arbitration, which is what happened here.

annon• 15 years ago

Even if a manufacturer didn't go for him, I'd be very surprised if the licensing fees were being payed for the MP3 codec.

heyimfromreddit• 15 years ago

tl;dr: Apple.

a3camero• 15 years ago

tl;dr: An Australian teenager imported knock-off iPod shuffle and made some $ until Apple said stop. He did.

masklinn3• 15 years ago

> tl;dr: Apple does not like people selling cheap knockoffs of their products for some reason

fixed that for you.

jarrettcoggin• 15 years ago

I think one of the biggest questions I have is:

What would you have done differently to make the business more successful/continue operating?

paulnelligan• 15 years ago

Nice story, I enjoyed reading this ...

I find it very difficult to believe that they can feasibly force you to stop trading under the same name ...

was there any way you could have continued with different products?

sjs3• 15 years ago

Honestly, I would have liked to know at the beginning that he wasn't just selling MP3 players but blatant copies of the iPod shuffle. I was wondering who would pay $50 for some crappy Chinese MP3 player. Obviously kids will if it looks like something cool and that's a pretty significant insight into why he sold so many of them.

klbarry• 15 years ago

I was in the same business in High School actually, selling bootleg mp3 players. I called them Dopples - an article of mine still ranks for the phrase "chipods".

DanielBMarkham• 15 years ago

Notes to people wanting to hustle and form a company/startup.

Note 1: Never underestimate the ability of the press and your fellow citizens to trash whatever you are doing. Because if you are providing value and making money, you are doing more than 99% of the people out there. They will punish you for this.

Note 2: Always expect a lawyer to call. The other 1% who are providing value have learned that the best way to keep making more and more money isn't to innovate; it's to use the political and legal system as a club to kill the little upstarts. Be ready for the club.

Note 3: People who end up making a lot of value usually don't think anybody would much want what they have. First sale comes as a nice surprise. People who have grandiose dreams of killing the market usually wander off into fantasyland and never produce anything anybody wants.

Note 4: It's all marketing and distribution. Know your customer and be able to get close to them. If you can do that, you can experiment with things until you find something that works. The market comes first, the product second.

jaysonelliot• 15 years ago

Did you look at the product he was selling? It was a ripoff copy of the iPod Shuffle.

Kind of ironic that you're accusing the Apple lawyers of trying to stifle innovation, when the kid was making his money from what was essentially a pirated product.

bh42222• 15 years ago

Is it any more of a ripoff then any of the other MP3 players which were manufactured specifically to compete with Apple? Except those companies were big and had lawyers of their own.

sjs3• 15 years ago

There are 100 other comments about all the things you mentioned. DanielBMarkham's comment is great, can't we just leave it at that or add to it constructively?

jdvolz2• 15 years ago

Am I the only one who is bothered by the comparison here of "I could be sued for" and "it's illegal for me to"? Just because someone can sue you for it doesn't mean it's illegal. In fact, if someone is suing you, it's likely that it's entirely legal for you to be doing it, otherwise, they would have just called the cops and saved on lawyers.

dangrossman• 15 years ago

That just doesn't make sense. Maybe you don't know the difference between criminal and civil law?

The police are not anyone's personal force, and what they enforce are mostly crimes, while a suit over this MP3 player would be a civil action. Nobody's going to show up and cuff you for patent or trademark infringement. The State is not involved in civil actions unless the party you harmed happens to be a government.

jdvolz2• 15 years ago

That was exactly my point. Just because the Terms of Service of some place says something doesn't make doing that action illegal. The cops won't come to enforce someone's terms of service.

somecoolguy2• 15 years ago

What were you calling them in your ebay listings? Were you just calling them "mp3 players", or were you actually mentioning "ipod shuffle"? I find it hard to believe that enough people search ebay for "mp3 players" to get that many sales. People searching for an mp3 player would usually just search for an ipod.

MatCarpenter2• 15 years ago

2GB MP3 Player - Color - Fast Postage

econgeeker• 15 years ago

What I really wonder, reading this story, is how he would have done if he'd gotten a product that didn't look like an iPod.

What percentage of his customers were thinking they were buying an iPod?

My nephew, one day, came to me excitedly telling me he was getting an iPhone and he showed me an ebay page with a "new in box" iPhone for $50. (he had $50 in birthday money to spend.) It was not an iPhone, but it looked like one. He's too young to understand, I think, the existence of knock off products.

grannyg00se3• 15 years ago

Why would you think it was an iPod unless it said iPod in the description?

Did your nephew's page mention "new in box iPhone"? You left the quote out of the iPhone so I'm wondering if it actually said iPhone in the ad. If it did that's a completely different situation. If it didn't then your nephew would've gotten what he paid for. A "new in box"....something that looks like an iPhone.

grannyg00se3• 15 years ago

Not sure why I'm being downvoted here. Is it normal to assume that a two blade razor is a Gillette two blade razor simply because they look the same? Unless it says "Gillette" somewhere you shouldn't assume it is such. I'm legitimately curious to know whether this person was selling phones under a false name. And moreso, whether the OP was selling his mp3 players under a false name.

thestranger• 15 years ago

Question for the OP: Did anyone complain to you that he thought he was getting an ipod, but instead got a knock-off? I think that if nobody thought he was buying an ipod, it would be perfectly reasonable for you to sell your mp3 players. In my experience however, some sellers deliberately mislead customers on sites like ebay to buy cheap knock-off products.

MatCarpenter2• 15 years ago

Not once.

nwmcsween• 15 years ago

The weird thing about this is most ports inspect goods and anything that isn't 'sanctioned' (most companies have regional distributors) gets put on hold, the company gets called and if it is a knock off the merchandise is destroyed and the receiver usually gets a visit by local police.

The Conclusion: A 6 Figure Business That Fell Apart When I Was 16

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