How We Slashed Costs And Became 40% More Profitable In Just One Year
This is a follow up story for Lever Gear. If you're interested in reading how they got started, published about 6 years ago, check it out here.
Hello again! Remind us who you are and what business you started.
Hi. I’m Mike Scully, the founder, and lead designer at Lever Gear. We design everyday carry tools and accessories that are multifunctional and easy to carry so you can tackle the little projects that pop up in daily life.
We currently make two products- the Toolcard Pro credit card-sized multitool and moneyclip and the BitVault, a watertight carry case that doubles as a compact screwdriver.
We recently launched our third product, the CableKit on Kickstarter. It’s a small USB charge and data cable that can fit on your keychain or clip into a pocket. The CableKit includes an adapter for a second connector type and a Sim card tool. We’re really excited about this product and should have our first batch of inventory in late November in time for the holidays.
This past year our sales have stayed about the same at $40k/month but we’ve cut our overhead by 40% and we’re poised for profitable growth moving forward.
Tell us about what you’ve been up to! Has the business been growing?
We’ve had an eventful year since we last spoke. I wish I could say it’s been steady growth but it’s been a particularly challenging year on many fronts including a failed product launch, production issues, and some employee departures.
When we last spoke, we had just launched two products on Kickstarter- the BitVault and BitLight. It was an ambitious plan to launch two complicated products as a small company but I wanted to launch them together because they shared many of the same parts and I wanted to give our customers a chance to pick the product that best fit their needs.
We successfully fulfilled the BitVault in time for Christmas, but the BitLight turned out to be too ambitious. A bunch of EDC flashlights was coming out at that time and they all used some incredibly bright surface mount LEDs. We tried to redesign the BitLight with the new LEDs so we wouldn’t be releasing an inferior product. But there were some technical challenges and the product became too expensive to be a viable product. So after sinking lots of time and money into the project we decided to pull the plugin April of this year.
This was a tough decision and a huge blow to our new company. I created a youtube video explaining our decision and what went wrong to our Kickstarter backers which you can watch here.
This probably marks the low point for our company and me professionally, but it had to be done and we’re on the other side. Even though we couldn’t deliver on the BitLight, we were determined to make things right for our backers so we refunded all of their money and promised to send them a free CableKit when they are available. It was an expensive lesson but the silver lining is that we received overwhelming support from our backers and it gave us a renewed focus.
We also experienced an unexpected blow when a large batch of our black Toolcards was destroyed during the coating process. Somehow, the steel was being contaminated even though we hadn’t changed our manufacturing processes. It has been a long, arduous process of testing the cards to narrow in on where the contamination was happening but we finally figured it out and should have inventory in time for the holidays. However, we’ve been out of stock of 25% of our product line for over 6 months and it has definitely impacted our sales.
The third challenge we faced this year was that we had four employees leave for various reasons. They all left on good terms to follow their dreams (or an offer I couldn’t match) but at first, I was unsure of how things would unfold. As it turns out, our employees leaving on their own accord was the best thing that could have happened to the company.
Our BitLight debacle and loss of Toolcard sales had put us in a cash flow bind and my payroll was way too high for our sales. I had always justified the high payroll as fuel for our topline growth but with stagnating sales and mounting debt, something had to give. Losing most of our team didn’t really affect our ongoing sales and it provided me we a great opportunity to refocus on what were the essential activities of the business and get our processes cleaned up. I feel like we are in a much better position to grow faster and smarter. After a difficult year, 2020 is shaping up nicely and I anticipate it will be our most profitable year ever with an even better outlook for the future.
What have been your biggest lessons learned in the last year?
Through all our challenges we learned a lot of (expensive) lessons. The BitLight project taught us not to bite off more than we can chew. It was a very complicated product with many different types of parts. We needed electrical engineering support and help with safety compliance issues and regulations. Fast-moving technology. It sucked a huge amount of resources from our company. Moving forward, we plan to launch simpler, yet still innovative, products that we can fund the development costs with crowdfunding.
It may mean slower growth to start but it’s sustainable for the long run and develop good habits that will make everything easier.
I learned that e-commerce is getting more competitive and expensive each year. You really need to be selective and vigilant with how you spend money.
I learned that adding employees can add productivity but also complications. Moving forward, I plan to add employees only when really need them, we have the systems and processes in place so they can work efficiently, and we have the revenue to support them.
I also learned that we need more emphasis on sales. As a D2C online brand, we haven’t focussed on direct sales but now that we have a few products in place I want to add a salesperson to grow the top line.
What’s in the plans for the upcoming year, and the next 5 years?
Our plan moving forward is to launch simpler products more frequently. By far our biggest marketing bang for the buck is launching new products on Kickstarter and the buzz that surrounds it. I’ve got a bunch of ideas for cool products in the pipeline and I’m excited to see them come to life. We can then plug those products into our sales channels which adds to the flow of baseline revenue. As our revenue increases and the team grows, we will be able to take on more complex projects.
I’m also excited about focusing on direct sales to some larger customers and retail. As we increase our product line, easier to talk to retailers.
My goal is to grow to the point where we have a small design and engineering team in place beyond just me, where we can really focus on designing more great products.
Have you read any good books in the last year?
Sadly between running the business and trying to spend as much time as I can with my kids, I haven’t had time to read much. I do listen to podcasts, though to stay current on events and learn about business. I just listened to a 3-hour marathon tweetstorm podcast about entrepreneurship from a guy named Naval called How to Get Rich. It’s probably geared more towards silicon valley tech types but has some great nuggets for everyone.
I also enjoy the interviews Mike Dillard does with entrepreneurs on his podcast.
Advice for other entrepreneurs who might be struggling to grow their business?
Focus on sales. When you have revenue, everything else is so much easier. Once your branding is fairly set and you have someone to take the routine stuff off your plate I would suggest finding someone who can sell your product. This is really advice to me.
Unless you have a reliable source of funding and a proven plan for growth, put profit first. It may mean slower growth to start but it’s sustainable for the long run and develop good habits that will make everything easier. Again, advice for myself.
Are you looking to hire for certain positions right now?
We’re looking for a motivated and effective salesperson with some experience to sell the crap out of some Lever Gear products. We have three great products and your territory is the whole world. Ideally, we’d want someone in Greenville, SC area but it’s open to discussion. If you love to sell and are into EDC email [email protected].
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
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