Someone did steal my idea, a sales rep I fired. He took my product samples and copied it down to the flaws (small errors I had made in CAD), and on top of that made their product in Taiwan (vs mine USA), and they had much better execution, marketing, and much deeper relationships in the industry. They quite literally got the front cover of every industry catalog, of all the major distributors in all 50 states (1). I have estimated that by the time they got the first 40' container of product in from Asia that they were double our size; we worked out of a 16'x16' garden shed at the time (2).
I have battled them for 10 years and they just sold for 12 million. I would be happy with 1 million. But the truth? The truth is that having a competitor HELPED not hurt. The sales conversations went from "why would I buy that?" to "How does it compare to the other guy?" . in short, their aggressive marketing towed me along in their wake. The geeky informed buyers would buy the USA made original (mine), and the mass market would buy his.
The main outcome is that I could stop spending marketing on advertising, and focus on innovating and product development. Since my industry is distributor based, and my competitor was #1 in all of them, the best way to compete was to out innovate. Also the easiest, and most fun way. Anytime a new truck comes out I usually have a 3-6 month exclusive window before his overseas operation can deliver product. We pick up a lot of new wholesale customers when that happens.
I think that the outcome could have been worse without the 'copy'. For years we couldn't have made the product any faster, we had massive growth in sales. $90K first year, $500K second, $800K, 1.2M, 2M .. it was hard to buy steel some months we grew so fast. In the end. a competitor is not the end of the world, it is a way for the buyer to make a choice - this guy or that guy. It can be easier to sell if they have someone to compare to; when they have nothing it is a little disorienting for a buyer and they tend to not buy anything.
1. product: leveling kit for trucks, so people can put aftermarket wheels and tires on. Another 20 companies copied the product afterward but we don't hear much about them.
2. We have moved twice. From the 16x16 garden shed, to 6800 sq ft, to the current 15,000 sq ft. We now employ 10 people and 5 robots.
He also followed our sales guy around and went into every reseller right after him. He has a bag full of tricks. In the end, here we are. At least every day I don't look at the mirror and see a liar and thief looking back at me. I am ok with it at this point.
It's very saddening how much discrimination and hate this society has and still is suffering from. Their grand-grand-grand-...-parents were ruthlessly killed, today they're accused of taking jobs away from other citizens. The media keeps creating horror stories portraying them as the ultimate evil, and the only time someone ever people stop whining is when there's a war to win. It's very nice and refreshing to see a different attitude.
Actually we are! We are a little unusual for having 50% female employees in a industry that is 99% male. I think I like the robots more than the humans most days though :)
Yes, the conversations with customers totally changed once he was on the scene. Instead of them asking "What is your product again?" in a confused voice, they would ask "How are you different from the other guy?" which then gave a nice opening to tell the story, and get the customer most of the time. Everyone loves the underdog.
Revenue on physical products is dramatically different to profit.
Given that growth rate and the need to invest in new facilities and production facilities (ie, robots) it wouldn't surprise me to find the OP is running at break-even.
We are mostly cash flow limited, and credit limited. For example I am trying to buy 4kw laser cutter right now and I am having trouble getting financed. The business is 11 years old, but because of things it is a 3 year old LLC that looks like it doesn't have enough business history.
Yes. 2008 was very hard on my industry and everything went to hell. I started the year with 23 employees and ended with 10. I developed a chronic health problem and sold out to my partners and the sales manager, and carried the loan (nobody was lending for anything at the end of 2008). I had to repossess the business in 2011 when they stopped paying me for 6 months.
It has been a long, long, slow climb back to the business being healthy. Real revenue in '12 was about $800,000 and we have climbed about 20% per year since, but we are constantly cash limited. I would be happy to sell and do something else, and that much money would fund the 'something elses' I have in mind. The business is not fun anymore, and I am trying to pivot it a new direction but the Queen Mary takes time to turn around.
I think he meant he hopes to eventually get some money out of them for stealing his design, and that just one-twelfth of their recent sale price would be satisfactory.
I'm pretty sure he was comparing the value of their company to his not saying he was hoping for them to randomly cut him a check for 1/12th their selling price.
He was saying that he didn't even have a grand aspirations as what his product was worth, a smaller payday would have made him happy, if fates had just been less cruel.
Actually I took a tiny payday in 08 because of health problems - $200K over 10 years for a third of a $2M per year business with 66% gross margins. Nobody was buying or lending any money at that time and the stress was killing me. I was 38 with children and developed arrhythmia. My wife and I decided it was better to risk being broke to being dead. Fates have been plenty cruel, but things are looking better these days.
I don't have the money to sue, and I don't think it would be worth it anyhow. It would be great though if the group that bought him decided that they wanted to roll up the other players in the industry. If I get the chance I am selling. We are probably number 3 for unit volume in the industry and the only independent one. It could happen :)
Yes, I learned that one 25 years ago. I had a tool truck, selling tools to mechanics at auto shops and for half my area I was the only one. One day a competitor showed up at all these shops that I had an 'exclusive' on. My sales to them went up, because they now had some point of reference. My stuff was 5% more expensive, but 25% better. With something to compare to, it now appeared to be a better value than previous.
What a great write up! It's so refreshing to see people not succumbing to the life of fear that is pushed upon us so heavily by all aspects of modern society.
I am pretty much unemployable, so the only choice was to make it work somehow. Don't worry there was plenty of fear, I just could do anything about it. "Feel the fear and do it anyway" is a favorite expression in my household.
Stockdale's quote has been taped to my wall since 2008
“This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
Quite pleased to hear this. I take the same view with competition. Its bloody hard work to educate your market segment.
I have come across a few fintech startups who have voiced the same opinion. They don't feel threatened by the other startups playing in the same space trying to change people's habits..
We fired him* mostly because he was a real jerk to deal with. I found out later from other people in the industry he got fired a lot, mostly for being very abrasive and difficult to work with. A friend of mine fired him 4 hours after hiring him. After I fired him he actually shut down his rep agency (20 product lines and 7 reps) to focus on competing with me. That really surprised me that he would close his company to go head to head with me, at that point I realized I must have a way better idea than I thought.
* technically we fired his sales rep agency, since all 7 of his reps sold our line, his company repped for about 20 product lines at the time.
Someone did steal my idea, a sales rep I fired. He took my product samples and copied it down to the flaws (small errors I had made in CAD), and on top of that made their product in Taiwan (vs mine USA), and they had much better execution, marketing, and much deeper relationships in the industry. They quite literally got the front cover of every industry catalog, of all the major distributors in all 50 states (1). I have estimated that by the time they got the first 40' container of product in from Asia that they were double our size; we worked out of a 16'x16' garden shed at the time (2).
I have battled them for 10 years and they just sold for 12 million. I would be happy with 1 million. But the truth? The truth is that having a competitor HELPED not hurt. The sales conversations went from "why would I buy that?" to "How does it compare to the other guy?" . in short, their aggressive marketing towed me along in their wake. The geeky informed buyers would buy the USA made original (mine), and the mass market would buy his.
The main outcome is that I could stop spending marketing on advertising, and focus on innovating and product development. Since my industry is distributor based, and my competitor was #1 in all of them, the best way to compete was to out innovate. Also the easiest, and most fun way. Anytime a new truck comes out I usually have a 3-6 month exclusive window before his overseas operation can deliver product. We pick up a lot of new wholesale customers when that happens.
I think that the outcome could have been worse without the 'copy'. For years we couldn't have made the product any faster, we had massive growth in sales. $90K first year, $500K second, $800K, 1.2M, 2M .. it was hard to buy steel some months we grew so fast. In the end. a competitor is not the end of the world, it is a way for the buyer to make a choice - this guy or that guy. It can be easier to sell if they have someone to compare to; when they have nothing it is a little disorienting for a buyer and they tend to not buy anything.
1. product: leveling kit for trucks, so people can put aftermarket wheels and tires on. Another 20 companies copied the product afterward but we don't hear much about them.
2. We have moved twice. From the 16x16 garden shed, to 6800 sq ft, to the current 15,000 sq ft. We now employ 10 people and 5 robots.