Adam McFarland

I bet you think I just haven’t been posting much this week because we’ve been busy getting acclimated to the warehouse. Right? Right? Nope - I caught a wicked cold and have spent most of the week home sick getting very little accomplished. This was supposed to be the week where I started my ‘new’ routine, but that’ll have to wait until next week.

Speaking of next week, we could end up spending the majority of the week working with the oil company trying to figure out why our heater mysteriously stopped working today. That should be fun.

With the move and everything that it has involved, combined with George and I being sick the past few weeks, and George losing his laptop to repair for 2 weeks, I would have expected sales to have struggled. Nope. Detailed Image exceeded expectations by about $15k of additional revenue for February. We’ve spent so much time on total BS this month that sales weren’t doing so great I think I’d be in full-out panic mode.

Is there a point to all of this rambling? Yup. All of this has put us behind the 8 ball a bit with Tastefully Driven. A month ago we were way ahead of schedule, and now we’re cutting it really, really close. The site will launch 4/1 regardless (I’ll make sure of that), but I want it to launch 4/1 with 100% of our pre-marketing plan executed (haven’t started yet…eh) and 100% of the rest of our marketing - like our PPC - prepared.

I’ve also learned that vendors move slow as shit. Every vendor I’ve contacted for Tastefully Driven has been extremely receptive to Pure Adapt and has bought in to the Tastefully Driven concept…which is great. Once they’re sold however, I basically say “we need to place an order ASAP, how fast can I pay you?”. The majority have taken weeks to place the first order, and then weeks to ship the first order. Wtf.

In most cases we’re working direct with product manufacturers, which is an archaic world where fax machines still get more use than computers. One company even told Greg that they charge extra to “ship to companies south of the Mason-Dixon Line”. The Mason-Dixon Line??? Is this 1820 or 2008? Thanfully we are NORTH of the Mason-Dixon line. Whew.

To take product photos, take initial inventory, stock shelves, etc, we really need to have everything in our hands by the middle of March….which I’m confident won’t happen for all of our products at this point. There’s a chance that 75% of it will be here by the end of next week, but the other 25% are going to be pushing it. We could literally be receiving products the last few days of March and photoing them on 3/30 or 3/31. Lesson learned: contact new vendors 3-6 months before you plan to begin selling their products.

Does TD have to launch on 4/1? Of course not. Nothing has to be done. But I won’t let us screw this launch up, even if it means working every waking second the next month to get it right. A few unforeseen road blocks only motivate the shit out of me. In a way, the more daunting the task, the more focused and driven I am to get it done. The easy thing to do would be to postpone the launch to 5/1 - but that’s just not how I work.

As soon as I wrote my last post about our moving time chaos, Murphy went into hiding an everything started going right for us.  Friday we packed everything.  Saturday we spent the entire day moving, but we were able to do it in two truckloads and the weather turned out to not be all that bad.  Sunday George and Greg loaded all of the products on to shelving units while Mike and I set up the computers and the network (our Sprint Mobile Broadband Card + Linksys router is working great thus far - download speeds are well over 1 mbps with three computers running at once, and the Skype VOIP phones all work well).

Here are some pics that Mike took throughout the weekend:

Loading the truck…

The Industrial Park entrance as we pulled in…

Empty warehouse with just our shelving units…

Products off of the truck…

The way we left it last night (good enough for now)…

I’ll admit, it does feel pretty cool to all be working together in our warehouse today

Today we finally start the move to our warehouse.  All week long Murphy’s Law  - whatever can go wrong will go wrong, and at the worst possible time, in the worst possible way - has been in full effect.  Among my favorites:

• The hard drive on George’s brand new laptop died yesterday, and his most recent backup was the end of January.  He has been the main point of contact for everything move-related, so this was a big hit.  Remember to back up your files kids!
• I’ve been jumping through hoops trying to get my identity theft situation cleaned up.  I’m one step away from getting my lawyer involved.
• The National Weather Service has issued a snow advisory for the next two days while we’ll be moving.  Because loading stuff on and off a huge truck and driving several 30 mile round-trips isn’t hard enough, we now have the element of snow to deal with.  There are just enough hills on the way there to make it a challenging drive.

Despite the general stress of moving, taking no salary, and all of the obstacles getting in our way, it’s a really exciting time for us.  The silver lining in this week is Detailed Image sales are just going bonkers, which bodes well for the busy spring time just around the corner.  I’ve also had good luck contacting vendors and placing initial orders for Tastefully Drive, which is a good sign.  Overall I think we all are a bit over-stressed and are working with the mentality “if we can just get through the weekend, everything will be OK”.

Today we’ll be packing up, with tomorrow being the big move day.  I’m going to try to remember my camera to take some pics.

It’s the dirty little secret of running a business. I hear about it all the time, but rarely hear it publicized. It’s glossed over by Karen Northup of Corefino in this Churchill Club Video, and it’s mentioned by store owner Dan Fox in this article: founders of seemingly successful businesses who don’t take a penny of salary for themselves.

The reasoning is quite simple: it’s expensive to run a business, and faced with the choice of paying themselves or furthering the business, most entrepreneurs will choose the latter 10 times out of 10. This past weekend we made a similar decision to not pay ourselves any salary from now until June.

Crap. I thought you guys were doing great. How are you going to live? Should you be moving in to a warehouse? Why did you get rid of clients if you need money? Aren’t you freaking out?

I’ll get to those in a second, but since I was the one who pushed for the idea, let me explain my reasoning.

Our Problem

We are thriving in our current situation. We could continue to ship from Greg’s basement, pay everyone’s salary, chip away at our revolving credit card debt, and save some money. But we’d be slowing our growth…to the point where we’d be turning down great opportunities solely because we couldn’t handle the capacity.

While cash flow is good, it’s not good enough to cover:

• The costs of moving into a warehouse. Hidden expenses are everywhere: a $700 deposit to the electrical company, oil heating (meaning we need to fill our tank in advance), the Town of Guilderland requiring a Knox Box, etc. On top of that, there are the not-so-hidden expenses like almost $10k down (first months rent, last months rent, February pro-rated, + a security deposit) and the cost of furnishing the place.
• Expanding Detailed Image. We have vendors that want to work with us, with products that we know will sell at great margins, but we don’t have the space to carry them right now. At a minimum, we’ll probably need $10k - $15k to do this right.
• Initial expenses for Tastefully Driven. On top of development and marketing, we are going to need to spend $10k + on initial inventory to do that right.

All of that adds up on top of normal operating expenses. It was causing us quite a bit of stress.

Our Options

Here are our options to pay for it all:

1. Take on more debt, something we don’t want to do. Revolving credit card debt for inventory is one thing…building up credit card debt and maxing out every line we have is another.
2. Ask for a personal loan. Banks don’t like loaning money to companies that have been incorporated for less than 3 years. We know a handful of people willing to loan us money, so this would be a definite possibility.
3. Give up equity in the company for an influx of cash. This is what most growing companies in our situation would do (I think). However, we’re not really into giving up our stock and our control.
4. Pay for it ourselves.

What would you do? #1 would put us in a bad spot for the next few years. We’d constantly be floating credit between cards and taking on new lines/cards to pay it off. #3 is something we just don’t want to do at this stage in the game. We’ve put in so much sweat equity that we want to have 100% of the company when it reaches the next level. #2 is a good idea, but it’s my belief that you should never ever ask anyone else for money until you’ve exhausted every penny that you have. How hypocritical is it to ask for $50k or $100k and then pay over half of it back to yourself in salary? Just doesn’t seem right to me.

Which leaves us at #4. Each of us has done a good job saving money, so it would seem to make the most sense to have the owners pay for the growth. We certainly have enough cash between the four of us to make it happen.

FAQ About Our Solution

Why not just take the money out of your bank, give it to the company, and keep having the company pay salary?

Every time we do payroll, we have to pay the payroll company and pay taxes (matched by the company in some instances…so it’s double). But by living off savings and taking $0 salary, we avoid those expenses and make the impact on the company’s bottom line all that much better. Plus, we will all show less income on our taxes at the end of the year, which is another tax break. Doing it this way will add an extra 30%+ to the money we’re all putting in.

How are you going to live?
As I said, we all have enough in savings to live for 3 months. We wouldn’t have done it if we didn’t. Down the road when we need another wave of funding to expand we might have to consider other options, but this solution is ideal for this instance. Sure I’ll have to be a bit more careful with how much I spend, but nothing extreme.

I thought you guys were doing great?
This is the hardest to explain to people. We are doing great. Revenue for February 2008 is over 3x what it was in February 2007, our first full month with DI as part of Pure Adapt. Sales have grown exponentially and will likely continue to do so. But there’s only so much you can do with your revolving cash flow without giving it a “boost”. We needed that “boost” to get us to the next level, and we’ll probably need another one in a few years.

Why didn’t you just keep client work for a little longer?
The cash from client work was nice, but it was offset by the impact it was having in slowing down that exponential sales growth. The time required to raise $30k - $50k in client money would wipe out so much of our time that we wouldn’t be optimizing the use of our best assets: our e-commerce platform and our warehouse space. To be blunt: I’d rather take $0 salary and work on what I believe is best for the company and what I enjoy the most. My partners all agreed.

Aren’t you freaking out?
It’s kind of the opposite. We were freaking out when we were worrying about where the money was going to come from. Now we can all focus on the task at hand. Consequently, I think we’ll all be happier and be more productive.

There’s also something to be said for sacrificing for something you believe in. Had someone swooped in and gave us $2 million I don’t think we would have had the same unity, focus, and drive as a team that we do by making a common sacrifice. We’re all giving up a lot to make sure we do it right.

——-
In the end, I feel like by doing this for 3 months we’re advancing our company by at least 9 months. It’s the quickest means to the end that we are working towards.

I *almost* didn’t write this post. I thought it might be a case of too-much-information. I thought about it for a few days, and I still wanted to write it - mostly because I felt I’d be cheating the readership of this blog by not painting an accurate picture of our company and how it impacts my life.

When it comes to matters of web development and SEO, I’d like to think that more often than not I make the right decisions. When I am wrong, I’d also like to think I learn from the experience, minimize the damage, and apply it to the future.

Of course, that’s assuming that being wrong is a bad thing.

Last summer, when we first committed to developing the Detailed Image shopping cart ourselves, we had an array of potential features that we had to pear down before launching. If we didn’t, we’d have spent six months doing what we needed to take three. The majority of the most important features made the cut, and it was easy to wait upon the rest…except for one that really sparked some discussion: packages.

My rationale was that there was no need to have pre-made packages for people if we had our dynamic upsell system. So we launched in September without packages, and eventually added them in January. I spent less than a day programming the feature (the inventory management on the back end was what made it somewhat challenging), but for the most part I did it because George and Greg wanted it done…not because I really thought it would make a difference.

I was wrong. REALLY wrong. There isn’t a day that goes by where at least two packages don’t sell. That’s a big deal - take a look at the packages available: most are over $200, and some are close to $1k.

Kudos to my partners for pushing the feature. Hey, I guess if I’ve got to be wrong, it’s good to be wrong in a way that puts more money in our pockets.

We fired our accountant the other day. And we did it with a month left to file our corporate taxes. The reasoning isn’t important - let’s just leave it at: he works for a very reputable firm but we saw nothing but very unprofessional activity from he and his peers throughout our dealings and we wanted to stop the bleeding before it got worse.

When I tell people about decisions like this - quitting my job, getting rid of all of our client work, turning down a questionable lease to a place we loved, saying ‘no’ to a potential partnership with an industry leader, etc - I usually get the same reaction: “wow, that was a ballsy move”.

Not really. I/we are just doing what we believe to be right. Right for everyone personally, right for our company, right for the other party, and morally and ethically right. When I’m faced with a decision like that, it’s usually pretty easy to make the correct call if I’m honest with myself and how I feel. When it’s a decision that involves my partners we usually call a meeting, express how we all feel, make a decision within an hour, and move on. Honestly, there’s really nothing ballsy about it. You only get one shot at life and it seems more ballsy to me to identify a problem and do nothing about it.

Often times the fear of the resulting situation outweighs the reality. We solved our accounting issue with relative ease within a day. On short notice we called in a favor with a part-time accountant we know to handle this years taxes, and we have gotten several referrals for next year. We’ll start calling in May once tax season is done, and again we’ll work hard throughout the year to establish the type of working relationship we expect. I’d rather start from scratch every year until we find the right one than continue to invest in a bad relationship.

One thing we learned quickly when we started adding up the costs of a warehouse was that everything is more expensive when you’re a business. It’s as if every service provider hears “business” and immediately jacks up the price 50%.

As of Monday we had everything squared away except our internet access, which has always been a bitch every time I’ve ever moved. That’s why we got out in front of it and about two weeks ago George put a call in to Time Warner Cable to inquire about getting Road Runner in our warehouse. They told him they needed to send out a technician to see if the building was already wired, and that they would get back to us in a few days. Well, after harassing them several times they finally called George on Monday afternoon:

They wanted $4,000 to run cat5 cable into our warehouse! To be fair, they either wanted $4k OR a contract of any combination of phone, internet, and TV exceeding $300/month for the next five years. Never mind we don’t want phone or TV from them. Oh, and I failed to mention that the same Road Runner that we all have in our houses and pay $50/month for costs ~$200/month for “business class” at comparable upload/download speeds.

Suffice to say, our answer was a resounding NO. Unfortunately we looked at other local internet providers and they were all in the $200-$300/month range, which is still freaking ridiculous for a biz of our size.

So we started to get creative. I’ve always been fascinated with mobile broadband cards so we started looking into the alternative of purchasing an unlimited data transfer card for each of us for $60/month. Then we got the idea: what if we could buy one card and somehow get it to work with our router? I took a quick look on Sprint.com, and in 3G areas like our warehouse the connection speeds were comparable to Road Runner.

Then Mike found this Linksys Router that actually has a PCMCIA slot in it and is designed to work with Sprint Mobile Broadband Cards!

Freaking awesome right! We’re all pretty in tune with the tech world and none of us knew anything like this existed (at least legally anyway).

George and I went to the Sprint Store in the mall on Monday night and got a 3G mobile broadband card for free with a rebate. Then we took our unopened router to Best Buy and returned it for this one, which was actually cheaper than the original router we purchased. Let’s sum up: we’re getting similar service for $0 down and $60/month when Time Warner wanted $4,000 down and $200/month. Ha - take that bitches.

Last night George and I went to the post office and mailed in the final copy of our signed lease. Wow does that feel great! We’ve been looking for a place since back in August, and after having a few places fall through we finally found the perfect location for us.

First things first - in our struggles to find the right place we learned that there are a lot of grimey people in this business that are difficult to work with and try to rip you off. This location is managed by the Galesi Group and I wanted to make sure that I gave them the credit they deserve for being a pleasure to work with. Not once have they not returned a phone call, or not given us a completely honest answer. Even more amazing: our location is by far the smallest that they manage. You know you’re working with good people when they treat their least important client like gold.

On to the warehouse. It’s located in the Guilderland Industrial Park, about a 15 minute drive from Albany. I really love the Guilderland area (and so does everyone else) so I anticipate that we’ll all move closer to the warehouse within the next year or so. The warehouse itself is exactly what we needed: essentially a big freaking empty room that’s in good condition.

The park used to be a military depot (and is still zoned as such) so we get cool little perks like 24-7 security and no sales tax on anything shipped to our warehouse. I’m not sure if this has to do with the zoning or not, but it’s my understanding that the park charges a flat yearly rate per square foot to everyone. This worked to our advantage immensely because we got prices that a 200,000 sq-ft place would get, which is why we were able to afford a 5,300 sq-ft place for the price of a 1,500 sq-ft one. The lease is a 3 year lease, but we built in a renewal provision to renew at only an increase of 20 cents/sq-ft/year, which means we’ll probably be in there for 6 years unless we explode and need a larger place. We’ll only be using about 1,000 sq-ft to start off, so we’d have to grow a lot for that to be the case.

Here’s how Google Maps shows the massive industrial park - we’re just a tiny corner of that building…about the size of a football field:

We’ll be moving next weekend (2/22 - 2/24) so I’ll be sure to post before and after photos.

When hulu - Fox and NBC’s joint online video venture -was announced I didn’t give it much thought. ABC already allows people to view episodes of popular shows online, so I figured this would be much the same. Mike signed up for the private beta but I didn’t bother. After getting his invite Mike told me it was awesome so without much thought I decided to put my name in for the beta and see if I could take it for a spin.

Now I’m addicted to it. Seriously, it’s amazing.

Miss an episode of The Simpsons? It’s on hulu the next morning. Want to watch an episode of 24 from Season 1? It’s on hulu too. Do you love old shows like Arrested Development or Futurama? Yup, they’re on hulu.

The best part is that I can login from any web browser and within seconds have an episode running in decent full-screen quality. No software, no downloads, no fees. There are only limited commercials - about 45 seconds per 20 minute episode, all from the same sponsor.

Even cooler, I’ve started discovering new shows that I’ve never watched before. A lot of friends have told me that It’s Always Sunny in Philadelphia is hilarious. I honestly didn’t even know what network it was on yet alone what day and time, but I threw on a few episodes from hulu the other day and loved it so much that I went over to Amazon and purchased the first two seasons on DVD! This is exactly what they hope people do considering it’s a free service, and I’m more than happy to fork out $29.99 for some DVDs if I really like a show…so everyone wins

I’m really excited to see what they’ll do once they come out of private beta. I’m actually HOPING that they start charging. I’d gladly pay $10 - $20 a month if they:

• Made every single episode available all the time (right now it’s spotty at best for most shows).
• Made more movies available….not just a few “classics” like The Breakfast Club.
• Got a few more networks to sign up. I don’t like anything on CBS, so I’d settle for ABC and their family of networks (including ESPN of course)
• Sold me (or rented me) a hulu box that I could plug into my TV to watch. This sort of blends in with the On-Demand service that most cable providers offer, but I think hulu is already better than On-Demand so I’d just assume have my own hulu box. Who needs a DVR when everything is available anytime you want it? Hell, who needs DVDs if everything is available anytime you want it (assuming the quality is on par)? This would kick the crap out of Apple TV

Oh, and you can also embed full episodes on your site:

Now that I’ve got all of the client stuff out of my system, I want to “officially” announce our upcoming site Tastefully Driven.  Here’s how it came about:

• Towards the end of 2007 we realized that our Detailed Image shopping cart was outperforming our expectations and started brainstorming other types of sites where we could ‘copy’ the cart and get similar results, the most obvious being a re-branding of many of the cleaning supplies on DI as home electronics care products.
• Then we had a handful of other site ideas before that one ‘ah ha’ moment:  all of our ideas all focused around high quality products that appeal to upper-middle class males in the 25-40 age group.  Why not start a whole site around premium male products - be it health and fitness, electronics care, cologne, or just about anything else you could think of.  The site would have several different “stores” within it, but would all be seamlessly tied together into the same shopping cart.
• In addition to the obvious SEO benefit of keeping everything in one place, we’d only be maintaining one site instead of many.  We’d also - and this is the big kicker - be able to build a community around the shopping cart because of the commonality among product lines.  If you’re into nice cars, you’re probably into good wine and nice clothes, for example.
• We had previously purchased the domain TastefullyDriven.com to use for a future car forum, but fell in love with it because in our minds it signifies someone who is “intrinsically driven by tasteful products”.

So sometime around the beginning of December we made the decision that Tastefully Driven would be our future.  Since incorporating Pure Adapt Inc in December of 2006, we’ve really only focused on growing existing sites like DI and SportsLizard and have yet to do one project from scratch as a team.  This is finally that project, and above all else we need the camaraderie that comes with doing something all together.

From a programming standpoint, Mike and I have been working ridiculous hours the past few months to turn this cart into something that’s measurably superior to DI…or any shopping cart short of Amazon or Buy.com that I’ve experienced.  We’re probably 90% done with the design and development of the site, which is cool because we’re not launching until 4/1 and we’ll actually have time to pre-market the splash page and acquire email addresses (something I’ve never had the luxury of doing before).

At the earliest we’ll be moving into our warehouse next weekend, which leaves about a month and a half to contact vendors, get approved for accounts with them, receive our first orders, input the items into the database, photo them, and put up content around them on the site.  So while programatically we’re waaaay ahead, this side of it is going to be tight.  George is up to his neck in warehouse-related stuff right now, so hopefully once that’s settled he’ll be able to dig in and take care of this before it becomes a real issue.  And I suppose that this is not too big of a problem to have considering all of the other potential issues out there.

So if you get a chance, head over to TastefullyDriven.com and sign up on the splash page.  We’ll be giving out $100 gift certificates randomly to people who sign up (the number is not yet determined….if we get 1,000 emails we’ll do a few, but if we get 10,000 we might do 10 or 20).

Also, special thanks to Scott Middleton who emailed me a correction to the layout on the splash page that he saw in his browser.  Clearly we threw that up quickly and didn’t give it the QC attention we normally give a page.  It’s all fixed now