Monday, March 21, 2011

Do we focus on women's shoes or explore other product categories?

Spending a lot of time in the online retail space, and also in China we constantly see great online retail opportunities in Australia, much of the time in product categories unrelated to Shoes of Prey. Some of these we get really excited about to the point where we'll take a few weeks to work out the supply chain in China, then spend time researching the market in Australia, and being entrepreneurs it hurts to have not gone ahead with any of these new business opportunities. The question we keep coming back to is:

"Do we focus 100% on Shoes of Prey, or do take up one or more of these other opportunities?"

Arguments for focusing on Shoes of Prey:

  • To build a new business from scratch to the size of Shoes of Prey would take a lot of investment in both time and money. To double the size of Shoes of Prey, while not a simple task is probably much easier.
  • There's a saying that "retail is detail". Working on a second online retail business might mean we miss the details on both so we fail or only achieve moderate success on two businesses instead of strong success on one.
  • Our competitive advantage probably lies in our brand and the relationship we have with our customers. We wouldn't be utilising that advantage in starting a new business outside the Shoes of Prey brand and customer base, so why not focus on maximising the value from our existing competitive advantage?
  • When we've spoken to any potential external investors or anyone with experience in starting and running a business they say focus is definitely better than starting a second business.
  • We already work an incredible number of hours each week on Shoes of Prey, to start a second business we'd have to either hire more people or forgo some of the projects we're working on for Shoes of Prey.

Arguments for starting a second online retail business:

  • Diversification - Mike, Jodie and I have self-funded Shoes of Prey. The majority of our savings and years of our work are tied up in one investment. If something happens to Shoes of Prey then we're not diversified at all.
  • We're entrepreneurs at heart, we love working on Shoes of Prey and it almost entirely consumes us but we also love starting new businesses. While I had thought it would be impossible for me to enjoy something more than working on Shoes of Prey the thought of starting something entirely new has an additional spark to it.
  • While we're passionate about the Shoes of Prey business and our parts in it, Mike and I aren't passionate about the Shoes of Prey end product - women's shoes. That's not a major issue for us, I love the customer service, marketing and operations side of our business which I focus my time on and Mike loves the technology and operations parts of the business that he works on. Jodie and Susie all love shoes and they take care of the parts of the business where that passion is critical. For Mike and I there would be an additional spark of excitement if we could work on a product we loved.
  • In comparison to starting Shoes of Prey it would be so much easier for us to start a new online retail business. We now understand sourcing and shipping from China and we have an office and a team based in China. We have relationships with PayPal and NAB for online credit card processing. We've learnt an enormous amount about online marketing. Developing a brand, pricing and a product range are all things we understand a lot more than we did 2 years ago. Doing the programming for another online store would be a breeze for Mike, Mel, Charles and Bel. We have a great customer service team who could assist with a new business. There would be significant economics of scale in running another online retail operation together with Shoes of Prey.

We're regularly torn on this issue and debate it frequently internally. We'd love to hear your thoughts, should we focus on Shoes of Prey or start a second online retail business as well? Have you had experience starting two separate or only semi related businesses at the same time and how did that work out for you?

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  1. Hi Michael,

    In the 7 plus years of running Amplify I've had the same discussion with business partners and myself on more than a few occasions. Each time an opportunity arose I'd ask myself two questions:

    1) Could the main business survive without me - as you noted it takes a lot of energy and focus to do another startup.

    2) Could I (and my family) survive the extra hours it would take the get the startup off the ground.

    Up until recently, the answer has been no.

    One of the great aspects of being an entrepreneur is that you get run the show (be your own boss) and if you wish have a great life to go with it. While it's essential to work the long hours when required (I put in 18 this weekend) it's also important to strive for longevity and the right work/life business.

  2. Hey Michael,

    Your blog itself says "A diary of our adventures, successes, failures and everything we learn as we attempt to start a business or two." I think it may be a question of not if but when you look to other opportunities.

    I think Richard Branson's approach to building Virgin could help you a bit. Any new Virgin business is the result of at least one external individual's idea/business plan. This gives Virgin one or more 100 per cent focused and committed individuals to the startup. Virgin will then inject its resources, experience, know-how and brand to get it off the ground.

    Perhaps looking for a committed partner and then injecting Shoes of Prey's resources, experience, know-how and brand (if relevant) is the best approach?

    Hope this helps and that you and your Japanese Shoes of Prey team are all doing okay.


  3. Hi Michael,

    Richard Branson didn't look at diversifying into airlines and mobile phones when Virgin Records was 18 months old. He did all that much later when the brand and the business was well established. Invest in your business model, your key staff, your systems, your product, your brand - your strategy. At this stage, you still haven't worked out how to market your existing customer base for repeat business eg. your newsletters (ref your recent post). They happen to be your best ROI market. What you've built so far is working very well. Focus on developing it much further. Become passionate about getting the customers passionate about your product. Successful businesses are never just about the product eg. McDonalds. Diversify later.

    All the best,
    Hilary Thacker
    Wedding Dress Express

  4. Michael

    Tom, David and Hilary all make good points.

    I'd say "diversify don't dilute". IE work out when it's right for you to divert your full attention from ShoesofPrey. You need to plan your exit strategy. That might come about when a VC gives you lots of funding for growth but on the condition of adding their own CEO.

    In the meantime, perhaps you should look into setting up a holding company (vulturecultureenterprises, anyone?) where ShoesofPrey might be the only operating business at the moment. But it'll get you thinking about prioritising what comes next.

    Good luck


    ps - maybe this'd be a good question to put onto too?

  5. Hi Michael,

    I would say a good look through your financials will give you the answer.

    Are you making a profit now that you and your partners are happy with? will the business be making a profit in 2 years you will be happy with(do the projections realistically)? and again for 5 years?

    In my experience this is where start ups should focus instead of thinking about that big buy out from google that will come one day- as it probably wont happen. Forget the traffic, users etc (except from the perspective of conversation rates, revenue per member etc) and thing PROFIT. its the best asset any business can have.

    If you have a really good business that is making you good profit - you should be too busy and having too much fun to be thinking about diversifying so early into your companies life cycle. If things aren't going so well, then dont waste another minute and start planning that next better idea and use your assets and knowledge to bring it to life.

  6. Hi Michael

    A few thoughts/suggestions on this:
    1.Is the proposed 2nd business a spinoff of Shoes of Prey (ie not directly related to shoes but in the same sector ie fashion?) or is it in a totally different sector similar to Virgin? If the former, then I would agree you've got a great platform - and target audience - with which to launch it.
    2. I think you need to define what you and Mike are passionate about. If not shoes, then what?
    3. Taking into account previous comments - do you have the financial and work capacity to launch a second business right now? It would appear not.

    From reading your pros and cons, I think the answer may be that you DO start a second online business, using the SoP template/experience/knowledge base - but just not yet. Hard, when you want to be first to market but if you start the 2nd business before you're ready, then you may well end up with none worth having.

  7. Thanks everyone, some excellent thoughts here and the variation in opinions seems to match closely with our swaying thoughts on the subject! Agreed that it's quite early in the life of Shoes of Prey to be thinking such things, and ideally if we did do something else we would tie it in as closely to what we're doing with Shoes of Prey as possible.

    Thanks for your thoughts everyone!