Back in ’09 I wrote The Bootstrapped Office. At that time we had the simplest, most basic work spaces at our warehouse and at home. As should be the case, there were a million things more important than the aesthetics of our office:

Thing is, our customers will never see our work area. So when things go good for us we invest in better technology, employees, new product lines, new marketing initiatives, and a little bit in ourselves. Those things matter in our business. The aesthetics of a work area don’t.

That was 100% true back then. The office was incredibly basic. When we first moved in we put new flooring in, but otherwise we just left it as-is. Now, as we’re bringing in more employees and we’re more profitable (i.e. we’re looking for write-offs), we finally decided to turn our tiny office at the warehouse in to a real office. This year we had the new heating system installed (which included a new electric heating system for the office), replaced the light fixtures and ceiling tiles, painted, replaced the molding, and finally this past week purchased new desks and chairs. The result is the photo above.

Mike has some before and after photos on his blog from the weekend in 2008 when he and Greg put the new flooring down. Let’s just say the room didn’t look very good back then. Here’s an example:

It took a while, but it actually feels like a real office now. We turned a pretty ugly room that hadn’t been used in years in to a rather serviceable office. It looks nice and it’s comfortable. We’re working on some custom Pure Adapt artwork for the walls to really tie it together.

Things like this might seem minor, and to some extent it is a minor improvement, but it’s just another sign that we’re moving out of that crazy-insane-bootstrapped-start-up-mode and in to a more stable situation where we can spend a little more time on some of the secondary things like this that make for a better work environment for us and our employees.

There were two oil heating units, one for the office and one for the warehouse, both of which looked like they were no less than fifty years old. The place hadn’t had an occupant in over five years, so the oil at the bottom of the tanks had turned in to almost exclusively oil sludge. The heater that was supposed to be heating the warehouse was pointed directly at a cement wall about five feet away, and about ten feet away from a garage door that looked about fifty years old as well.

We figured we’d do everything we could to make the most of a bad situation. We sprayed foam in every gap we could around the garage door and anywhere else in the place that we thought air was getting through. We spent thousands of dollars over the years having the heaters maintenanced in hopes of adding a few percentage points of efficiency. We kept garage doors shut unless it was absolutely necessary. We installed programmable thermostats to try to optimize our oil usage. The list goes on.

None of it worked really. When you live in the northeast, you’re dealing with several months of freezing temperatures. You need good heating. This was not good heating. From the first week we moved in it was nothing but a disaster. The oil tanks were improperly filled by the company we contracted out and the heating system turned off. We thought we had a full tank of oil. Turns out we were running off that old sludge.

That was when we realized the other thing that sucks about oil – it’s expensive and you need to pre-pay for it. The first real fill-up cost us over $3k. Detailed Image’s slowest months are January and February. It sucks having to spend thousands and thousands of dollars to pre-pay for heating when your cash flow is at it’s tightest, as it especially was during those first two winters.

And who can forget the smell. The smell of oil burning made my stomach sick (or, you know, maybe more properly, breathing in burning oil made my stomach sick). My clothes would smell like oil when I’d go home. There’s no way it was safe for us or for our employees to be breathing that air in from those shitty heaters.

When it became abundantly clear that those heaters weren’t going to get the job done, no matter what we tried, we started complaining. We were able to get the industrial park to put in a new garage door, free of charge. That was a huge win.

Then our lease came up for renewal. Again, the price that we pay per square foot at this place is really cheap. Like half as much as we’d pay for similar places around here. So it’s not that easy to negotiate a major expense like a new heater. Thankfully, we have Greg, aka “the pitbull” who was able to take their initial offer – a propane system that we paid for – and eventually get them to agree to a natural gas heater that they paid for. Natural gas was highly preferable to propane for us – it’s cheaper, we avoid pre-paying, and it doesn’t smell.

Then sometime around early March – still heating season in these parts – the large oil heater stopped working completely. We suffered through the end of winter with the one tiny heater meant for the office area, taking solace in the fact that a new heater was coming.

A few months later they started installation on the new heating unit. The coordination between the natural gas company and our industrial park’s team of contractors stretched out the installation until yesterday. I kid you not. This took a solid 5 months to install. During that 5 months they probably spent 10 man days total working on the unit. It was freezing in here last week, but again, we put up with it knowing that things would be better this winter.

Finally, finally yesterday the unit was turned on for the first time. Of course, they gave us a cheap thermostat. So this morning I installed a nice programmable thermostat and we finally should be all set.

The heater is a beast! Here’s a quick pic I snapped with my phone:

It’s meant to warm areas twice as large as ours. We were skeptical about it’s ability to heat our entire place, but it’s doing a great job. You can feel it all the way in the other corner of the warehouse. It’s a much more evenly spread warmth than we ever had with the crappy oil system. We’ll be able to keep the temperature at a much more comfortable setting in the dead middle of winter, we’ll still probably pay quite a bit less, and we won’t have to pre-pay for it and keep track of the tank levels.

This has been a thorn in our side since the day we moved in. It has taken up way, way more of our collective time than I want to think about. But now it is finally solved. Sometimes you can never anticipate the crazy shit you have to deal with as a business owner.

2010 Review

I’m really amazed by what we accomplish every year. At times it seems like things are moving slow, but when I take a look back I can’t say I’m disappointed in the least. Some of the highlights:

• We started the year by closing Tastefully Driven, our Amazon store, and stopped shipping internationally
• We launched the Ask a Professional Detailer Blog on Detailed Image, managed by Todd, which had a major impact on our growth
• We hired our first full time employee
• We built and launched LockerPulse
• We had our record year in terms of revenue and profitability

Those are just the highlights that come to mind. We had a lot of other little “wins”. The more I run a business, the more I realize just how hard it is, and therefore I’m that much more appreciative of what we’ve built.

Changes to Our Team

Over the holidays George decided to leave the company. We’re thankful for all of his years of hard work, and of course we’re all still good friends and wish him the best in his future endeavors. I’ve always maintained that business relationships are like entering a marriage that’s guaranteed to end in divorce. There are just too many variables in life to expect a group of partners to run a business forever and ever.

Our lawyer was adamant from the start about the importance of having a rock solid operating agreement. Thankfully, we were smart enough to heed his advice. We reviewed and updated it yearly, the most recent update being in mid-December, a few weeks before George made his decision. Given that almost everything related to a partner leaving (either due to choice, being forced out, death, or disability) was clearly outlined, there wasn’t much to “negotiate” and therefore there wasn’t much to stress about (or potentially fight about). From a legal standpoint the transition was able to happen in a matter of days instead of dragging out over months or years, which is always best for all parties involved.

There’s definitely a lesson to be learned in all of this. Once you become bigger than a one-man shop, it’s absolutely in your best interest to sit down with a good lawyer and draw up an operating agreement, and then review it annually. No questions asked. For the few thousand dollars you’ll spend over the years you get a piece of mind that’s priceless.

New Warehouse Lease

After some uncertainty, we’re staying put in our warehouse for another three years. Greg did a great job negotiating the new lease. Essentially we wanted to continue our existing lease, but also wanted a new heating system put in. Our oil heaters are ridiculously old so they’re expensive to maintain and horribly inefficient, and oil itself is expensive. We’ve been having problems since when we first moved in. After some back and forth we came to an agreement. They are scheduled to begin work on a propane/electric hybrid system in the next week or two.

I think our general consensus is that we’ll be looking for a new place to move after this lease is up, which means that by this time in 2013 we’ll probably be looking. Not only will we likely need more physical space for our products, we’ll also likely need some “real” office space, and I think we’ll all be ready to have a little nicer, cleaner, more modern place. Obviously things could change, but that’s the thought right now.

What I Expect in 2011

While the past few years have been largely about new development projects – the new Detailed Image cart in 2009 and LockerPulse in 2010 – and about becoming more lean and efficient. There likely won’t be any new sites in 2011, and the operations are pretty well optimized. We also have a great team in place, from our owners to our employees and contractors, so I don’t foresee much change there either.

This year is all about growing what we have. We’ve all had to work a little harder recently and pick up some new roles and responsibilities, but we’ve still managed to push ahead full force with our plans. For DI, there are a lot of marketing initiatives we weren’t able to get to in the past. There are also a lot of things we want to do with all of the data we’ve accumulated over the years (think: a more targeted and customized shopping experience). For LP, we have a lot of great features planned, and I hope to build on some of our recent momentum and be aggressively marketing the site in the coming months. I fully expect it to be a significant source of revenue for us by year’s end.

We’re all looking forward to a fun, innovative, and prosperous 2011!

…And I’m sure there will be some more surprises mixed in as well

All of that is even more impressive when you consider that in January we closed Tastefully Driven, stopped selling on Amazon, and stopped shipping internationally. Amazon in particular was a large portion of last year’s Holiday sales. This time around it was all domestic Detailed Image orders.

We were prepared for the spike in volume. We all went into the warehouse on Friday, Sunday, Monday, and today (Tuesday) to help pack orders. Unlike UPS, FedEx ships on Friday so we were able to get the first wave of orders out the door on Friday. A little after noon on Cyber Monday I was able to snap a few pictures of the orders for the weekend and Monday up until that point:

Most definitely our largest pile ever, although today was pretty close. Take a quick peek back at the photos in those posts from 2008 and 2009. It’s amazing to see how many more boxes we shipped out this year.

A lot of preparation goes into this six day stretch. It all starts in August when Mike begins to gather data about what we did last year, what trends are going on in retail, and puts together a tentative plan for us to use as a starting point. We meet in late August or early September and begin to do everything that’s necessary. We need to plan inventory and finances accordingly, which can be tricky because this time of the year is sandwiched by our four slowest months (September, October, January, and February).

On my end, the majority of my contribution comes in September and October when I’m programming in any new features that we’ll need. A few examples from this year were the mobile site, the free shipping upsell system, and a feature in our back-end that allows us to quickly edit an order to save precious customer service time (think of an AJAX invoice that lets you add products, remove products, change quantities, change prices, change shipping methods, change addresses, and more).

The actual days themselves were pretty anti-climactic for me this year. Mike has a ton of work executing the sales (newsletters, site banners, etc), Greg has a ton of work with customer service and inventory management, and George has extra customer service and accounting to do. For me though, this is the time where I see the fruits of my work, rather than scramble around like in years past. The site is really stable – I think I only received one technical question from a customer. Our processes are really refined and efficient. So, given my relative lack of pressing work, I did my best to help Charlie out in the warehouse in any way that I could. To be honest though, things went pretty smooth considering that we probably ripped through almost 40% of our inventory.

Contrast that with my posts from previous years where I was mentally and physically drained from the utter chaos. It’s a pretty awesome feeling to see everyone and everything come together like this. It gives me confidence that we can scale by several magnitudes without having to overhaul anything major. Which, on the DI side of things, frees us up to really focus on growth, and that really excites me.

This helped pulling speed immensely, but it didn’t solve all of our problems.  Our packing slips didn’t actually say which zone the product was in so it was still hard sometimes to find a product in a brand that encompassed five shelving units.  The idea of snaking the puller through the warehouse, while making sense in theory, didn’t play out on the average order and just served to confuse people by ordering products in reverse order for half of the rows.  And most importantly, as us owners removed ourselves almost entirely from the pulling process, errors climbed above our acceptable level.

So we decided to start over.  Today we unveiled our new system, one that should be a marked improvement.  Throughout the entire process everyone was involved, particularly our employees who actually do the pulling.  I made sure to run everything by the guys in the warehouse at each step of the way to make sure it passed the common sense check.

Anyway, here’s what we did.  We now have a “three-dimensional zone” where every product is categorized by it’s row, shelving unit, and shelf.  This is the image that’s in our Admin system for whomever might be working in the warehouse and entering new product locations in the future:

The packing slip now shows the zone in the first column.  We also bolded any quantity of two or more, which has been a common mistake for us to make.

We all pulled some orders today to test it out.  My initial thoughts were that it sped up my pulling time quite a bit.  I was able to see which row to start at and just go right to it, rather than thinking “I’m pulling a Meguiar’s product, which row is that in again?”  If there’s anything we might change, I could see us getting rid of the letters from the zones (so R1-U-7-S3 would just be 1-7-3).  We’ll play that by ear and solicit feedback from everyone who tries it out and then go from there.  Like with anything new, it’s good to give it some time and see how it plays out over the course of a few weeks before tweaking it too much.

After I completed work on the packing slips, I tried to estimate how much time was spent on this project, from conception to reality.  I came up with about 10 hours total.  There was probably an hour of discussion. I probably spent 2 hours programming it. Charlie probably spent 7 hours total logging all of the products into our new system and then marking all of the rows/units/shelves with large magnets. Not bad at all.

The other nice thing about this is that while it will almost certainly speed up pulling and reduce errors, it will also make training a new employee much easier.  You can literally give a new person one of our packing slips and it will tell them what box size to use and the exact location of each and every product.  While they’ll probably be slow at first, they’ll also probably be pretty accurate right from the start, which is what’s most important to us (I mean, if I told you the exact product name and the exact shelf it was on, it would be hard for you to pick up the wrong one, even if you knew nothing about our products).

All in all, this should be a big gain for us, especially considering the minimal time spent.  I think it’s also significant in that it’s the last major warehouse procedure change that I see us making in the near future.  We’ve built the processes that we’re going to be scaling with, and there’s still plenty of scaling left before those processes will need to be revisited.  Aside from minor tweaks, we can turn almost all of our focus to the stuff that makes us money on the front end.

Updated Pics

This is what our product selection looked like just after we moved in on 2/25/2008:

Pretty bare. Like an empty cave. Compare that to yesterday:

Inside the little room there’s our shipping computer, laser printer, label printer (courtesy of FedEx), and printer/scanner/copier/fax that we bought because we have to send so many faxes to our vendors (eh):

Order Packing

Not much has changed since November of 2008 when I wrote a post about how we pull and pack orders. However, while I was taking the pics I realized that if I got up on top of one of our tables I could get a birds-eye view of almost the entire process. I couldn’t resist.

This is what it would look like if the iGuy tried to pull an order for us:

Essentially:

1. The invoices are printed out along with the FedEx labels, both in alphabetical order so that each pile is in the same order. Now that we’ve done away with international, Tastefully Driven, and Amazon, it takes less than 5 minutes to process and print all of the orders regardless of volume.
2. The puller (in this case the iGuy) takes the top invoice and top shipping label, checks to see if the name matches, and then proceeds to pick a box. Our box size system suggests a size. I’d say it’s right 85% of the time now.
3. Because of our new layout and inventory zone system put in place last Summer, the invoice is ordered in the order that the products appear on the shelves, sending the iGuy in a zig-zag pattern through our warehouse to get all of the items for his order.
4. After he’s finished, the iGuy checks his order, puts it on the table, and moves on to the next one. A checker will review the order and pass it along to the packer who seals it, puts the label on, and pushes it forward onto the table that is in front of the garage door where FedEx backs up to pick up the packages.

The Future

How long are we going to stay in this location? My answer: as long as we possibly can.

We view our warehouse as a competitive advantage for a number of reasons, namely how affordable it is. We can probably expand a few more rows with our current design. We just freed up a few shelving units by clearing out all of the TD products. By early 2011 we’ll probably need a full redesign. We plan on turning our rows the other direction and putting the shelving units back to back. The shape of our warehouse lends itself to fitting more shelves in the same space if we go in this direction. By going back to back you can eliminate one aisle for every two rows. We estimate that this will allow us to at least double capacity (plus, remember that inventory does not need to grow as fast as sales – you can double in sales and go up only say 25% in inventory if you order more frequently and do a good job of projecting sales).

The lease itself expires in February 2011. I see no reason why we won’t sign the new lease that will put us there until February 2014. We have a clause that allows us to renew at essentially the same rate for another 3 years (I say essentially because the increase is pennies on the dollar). We’re going to request a few minor improvements, but other than that we’re happy. Our proprietor also owns a ton of warehouse space in the area and we have a clause that allows us to break the lease at any time for no charge as long as we move to another one of their properties…a nice way out in the event that we need more space than anticipated.

Overall, I don’t think that we could have found a better fit. The place we almost moved into in the fall of 2007 would have been a disaster. Even if we made it out of that winter without going broke (I’m not so sure we would have), we would have definitely run out of space and we would have definitely had a hell of a time getting freight deliveries without a shipping dock.

In a lot of ways, we lucked into this place. Despite what some people will tell you, luck definitely plays a role in becoming successful. We’ve had our fair share of bad luck since starting the business. This warehouse, however, was one of the lucky things that has helped propel our growth.

That’s insane. I’ve never seen anything like it. Normally they just have a handful of relatively new, clean trucks sitting outside.

After a quick Google News search, we may have linked it to this accident on January 26 on I-40 in Tennessee. If so, I’m happy to hear that everyone survived…but also mystified at HOW everyone survived…

We basically obliterated our sales from last year over the same Thanksgiving to Cyber Monday five day stretch. Monday was our largest single day of sales. We shipped a record number of packages (even though we shipped a lot on Friday when most businesses are closed). And despite the slow sales early in November, we had our best month ever by 25%.

I wanted to snap one big photo like I did last year, but it didn’t work out like that. When FedEx came around 3 PM we weren’t even close to done. They had to send another truck a few hours later to finish off all of our packages.

Here’s what it looked like when the first truck came:

Here’s our driver starting to load his empty truck with our packages:

Also, we noticed that our driver has a freaky Michael Jackson mask on the right side of his truck (look closely at the photo above) so I couldn’t resist snapping a photo of that:

Imagine wearing that on Halloween?  That would scare the shit out of me!

And here’s what the second truck had to pick up:

While it’s fresh on my mind, a few quick miscellaneous thoughts:

• We picked up a few new brands while it was slow in Oct/Nov and I think it hurt us a bit with our other inventory by forcing us to be too lean.  Next year we’ll have to set some of that extra cash aside to stock up on our best sellers.  We’re out of a few of our big items and for the next week or two it’ll be a pain to juggle everything that’s on backorder.
• The site held up surprisingly well.  I say “surprisingly” because when we had a 25% off one-day sale during the spring there were all sorts of issues.  We made a special effort to fix all of that in preparation for the next mad rush.  The server never skipped a beat.  We had no customer complaints this time.  Phew.
• Still, a few minor technical issues arose during the madness so I had to do some quick programming fixes.  Just the nature of the beast.
• Days like Monday are soooo tiring.  It’s physically tiring because you’re scrambling around the warehouse for 8+ hours.  It’s mentally tiring because you’re trying to juggle all sorts of things in your head  – are we out of stock on this?  when is it coming?  did someone email the customer?  did we set it up in our backorder system so anyone who orders now will get auto emailed and have their order moved out of our shipping queue? has anyone talked to this customer?  if it’s going to be a while, should we offer refunds or credit?  who is going to handle that? etc, etc.
• There’s a certain sense of comraderie that evolves from these chaotic days.  Everyone is worn out, but it’s a good kind of worn out.  It validates our hard work.  We had so much fun watching the new orders come in every few seconds all day long.
• It’s amazing how much difference another year’s worth of hard work makes. All of the little things add up.
• Hands down my inbox was more full than ever before.  I tried to stay on top of it all weekend.  One of the rare times that I kept it open all day long.
• If we were this busy every day I think I’d go insane.  Then again, two years ago a normal Wednesday now would have left us with the same feeling.  You can definitely grow too fast.  Anyone who disagrees has never dealt with the growing pains that any successful business goes through.

Tonight I’m going to relax and try to get myself back to neutral. We’ve still got some pretty big sales left before Christmas so I’m anticipating we’ll continue to be pretty busy.

On the back side of our office there’s this little storage area.  I started experimenting with shooting pucks towards the goal from behind the storage area.  With all of the stuff in the way of the goal it’s become quite a challenge.  We shoot from the red x in the picture below:

Here’s the view from behind:

It looks easier than it is.  We don’t allow lame little lob shots over the top – you’ve got to drill it through.  We’ve only been playing for a week or two, but no one has hit the target from back here.  We can get it in the goal pretty routinely (1 in 5 shots maybe) but the target is real hard to hit.  You need to keep the puck low enough to hit the target, but high enough to clear the boxes and wide enough to miss the bins. Even if you get that part right, there’s the paper towels, the push cart, the vacuum, and the oil stick that get in the way:

We’ve each hit the screws just above the target a few times, but never low enough to hit it directly.  When we do get it in the goal low enough, it’s generally to the left by a few inches.  Very frustrating, but very fun.   This is so much fun that over the past few weeks I’ve found myself staying late on Friday afternoons to shoot pucks with Greg.

Here’s the thing:  we’re not afraid to create our own culture.  We like to work hard and focus, but we also like to play around and act like we’re 12 sometimes.  That’s why we play hockey, listen to 90′s rap music while packing orders, and fly around on razor scooters that aren’t supposed to hold more than 143 lbs:

I’ve heard of companies that provide free alcoholic drinks for their employees.  It’s not a big deal for them to have a few beers while on the job.  Or there’s Zappos, who holds interviews over vodka shots.  It’s great if that works for them, but we’d never ever allow that.  It’s not us.

Our company culture has become a reflection of our personalities.  If you allow that to naturally happen it will shine through in everything you do – from your relationships with vendors, to customer service, to your relationships with your employees.  People will see through you if you aren’t genuine.  You’ll also probably be less happy.  It would be really easy for a company that’s growing as fast as we are to start changing.  To start becoming “too good” for certain things.  We can justify not doing just about anything in the name of “it’s not worth my time”.  But we genuinely like what we do, and we genuinely care so we keep working hard, we keep valuing every customer, we keep going out to dinners on the company’s dime to celebrate, and we’ll continue to shoot pucks at our shipping dock.

Being that we’re a bootstrapped company, our work areas are more focused on simplicity and affordability and not so much elegance and creativity. It’s all about setting up areas that get the job done. We need to be able to do our work comfortably without distraction. Nothing more, nothing less.

Here’s what my desk at the warehouse looks like:

A $40 table from Walmart, an old chair from my parents house…and nothing else. Space for my laptop and a few other things. We painted the walls and put in the flooring ourselves.

At home it gets a little more “robust”:

That printer was $99 about 5 years ago and is in dire need of being replaced (then again, I print like 20 pages/year so…). I spent something like $60 for the mesh chair on clearance at Office Max, which is super comfortable on my back. The table is my parents old kitchen table. And the rest of the laptop docking setup, as explained in a bit more detail in my Pimp My Desktop post, was very affordable and is highly functional for what I do.

Some people would look at those workspaces and see a million ways to make them “better.” Thing is, our customers will never see our work area. So when things go good for us we invest in better technology, employees, new product lines, new marketing initiatives, and a little bit in ourselves. Those things matter in our business. The aesthetics of a work area don’t. Now, if we were a financial planning company that had clients meeting at our office daily, it would be a complete 180 – the aesthetics of the website wouldn’t matter nearly as much as those in the office.

If you’re starting a bootstrapped business, every penny matters. You have to be able to identify which expenses are necessary and which ones aren’t.