Too many carrots in one basket

Fortunately, we had a big break when we signed a deal with Fitness First centers to provide 10 of its prime branches with our raw juices. We were contracted to deliver 1,200 bottles a month, which meant monthly revenue of 120,000 Thai baht (THB 100 per 250 milliliters). Sadly, not many Thai customers understood the considerable benefits of drinking raw juice. It also seemed almost impossible to succeed from leaving the product to sell itself without a salesperson present.

Stock longevity and margin problems effect operations

Moreover, the juices’ shelf life was only five days, and that was in a refrigerator that maintained the bottles of juice within a strict temperature range. We spent nearly all of our money producing the juices and the sales were low. Nevertheless, we decided to continue with Fitness First because we believed having one of the top-five global brand fitness centers on our client list would boost our reputation.

Cash flow problems squeeze life out of funds to keep business running

However, around about that time, we ran out of money for further investment to scale up to the point enabling us to sustain operations or make a profit. In the end, we had lost more than 50% of our original investment. We tried to survive by setting up a kiosk-type channel on-site (Fitness First), selling juice by the glass, but that strategy failed to save us and we ended up selling to an English investor, who noted however that our branding was quite good.

Business scale, marketing, branding and customer awareness are vital

We learned that only the right business size will lead to a beneficial investment, that marketing and branding are vitally important, and that product development is one thing that cannot be ignored. Finally and crucially, understanding customer needs and behaviour are at the heart of a consumer goods enterprise.

Andrew’s takeaways – Avoid these mistakes to become a better investor

Logistics and inventory matters more than you think

It is often the case that new start-up companies place little focus on both inventory and logistics. When my best friend Dale and I set up our CoffeeWORKS factory in Thailand we spent the bulk of our money on the factory and the roasting machine, and did not think much about the inventory. But, when we contacted the green coffee-bean supplier, we found that he required a very large minimum order and since we did not have any history with him, cash on delivery. Those two things nearly killed our business.

In the above story, the perishability of the product was a major issue; this caused the product to need to be refrigerated and delivered often. Compare this to protein or energy bars that might be sold at a gym. This idea was not impossible but the cost of implementing it would probably cause it to fail.

Ignore working capital at your peril

Our recent research shows that about 60% of assets of companies around the world are long term, with the remaining being short-term, current assets. It is natural for traditional start-up companies to forecast their cash needs for long-term assets such as machinery and the like.

From my experience, most start-up management teams miss the current asset items. There are three main current asset items that a company must plan for or risk running short of cash: accounts receivable was on average has accounted for 13% of total assets, cash 10%, and inventory is 9%.

Mistakes in this story

6. Invested in a start-up company

• Invested in a start-up that lacked a clear business plan
• Invested in a start-up that lacked a competitive advantage
• Invested in a start-up that lacked adequate financial controls
• Invested in a start-up that lacked various sources of funds

Learn about the six ways you will lose your money and how to avoid them here.

The post Start-Up Entrepreneur Runs out of Investment ‘Juice’ appeared first on My Worst Investment Ever.

Weak expertise, poor sense of duty, and gender imbalance were key faults

Firstly, all the team members were working full-time and joined in with this business as a part-time job.

Secondly, none of us co-founders were coders or programmers, as we were all from marketing and sales backgrounds and did not have huge sums to invest in hiring a full-time coder.

Lastly, the nature of the business was centered on women, and three out of the four partners were men, who were not interested in the type of products we were offering.

Believing in a business and acting with dedication are crucial for success

What I learned from this was to never invest in a business in which the team members are not fully committed; that there always needs to be at least one team member who is really into the industry or has accumulated experience in it. And finally, apart from commitment, passion from the management team is essential.

Andrew’s takeaways – Avoid these mistakes to become a better investor

Investing in a start-up – just don’t do it!

Investing success is hard enough, start-up investing success is nearly impossible. All odds are against a start-up. Why would you trust your hard-earned money to such a high-risk investment? Oh, I know, “It just feels right”, or “it’s a hobby, I don’t mind if it fails” or “Nobody has come up with this idea”, etc. The reality is that survivorship bias is acting so strongly in this area that it will empty your wallet. All those successful start-ups you see, they are the very few survivors. What you don’t see is the graveyard of dead start-ups, trust me, it is an ugly place. So, about start-ups, remember my advice, don’t do it!

But if you must, the key to a sustainable start-up is a visionary leader

Key-man risk is a major risk in investing. If the key man exits, for most businesses the company collapses and all money quickly evaporates as the remaining staff fumble and fiddle to try to recover from the loss. But in this story, the opposite is the case – there was simply no true leader, no visionary. Without that person, most businesses will eventually fail. So, if you have the choice, invest with someone like Steve Jobs, the key man.

And what puts this company’s goods or services ahead of its competitors?

When it comes to start-ups, the founders and managers will be pulled in all directions and resources will quickly disappear. So, if you do invest, at least make sure that the company has one little niche where it has a competitive advantage. Finally, it is critical to stay on top of your investment, keep information flowing about what is happening, if not you could wake up one day to a big loss.

Mistakes in this story

5. Failed to monitor their investment

• Failed to review investment strategy regularly

6. Invested in a start-up company

• Invested in a start-up that lacked a clear leader
• Invested in a start-up that lacked a competitive advantage

Learn about the six ways you will lose your money and how to avoid them here.

The post Lack of Commitment Can Deal a Death Blow to an Investment appeared first on My Worst Investment Ever.