Winding Down My First Business, Moving Onwards + Upwards

Posted by Michael Michelini on Apr 04 2012

This post is the real deal, many of my close friends have been advising me not to post this, but I’m not going to cover up, make up some fake business deal or share transfer. I am living and learning, and I am not afraid to openly blog my business and life experiences.

I hope you guys get something out of this post, this is coming from the heart, and I am not fully proud of what I am doing. But it will help me grow, and help me focus, and these tough calls you need to make differentiate the real entrepreneurs from those who “want to be”.

One big thing from all these startup events, meetups, startup weekends is I am learning so much about my own businesses and my own personal strengths and weaknesses. I think in business, and in life, learning about yourself, knowing what you are good at and where you need improvement are key to having a fulfilling and happy life.

For those of you who know me in real life, and also have been following along on this blog, have seen I have been struggling with one of my first businesses:

history of my first e-commerce business from 2004

I set up in 2004 in New york City with my roommate and hometown best friend – NYBS, New york bar store.

We started on a handshake, signed up for an ecommerce shopping cart package at one of those MLM hotel sales pitches, and thought we’d become internet millionaires overnight. We had no idea what products we would sell, but Andrew would take care of supplier, operations, and copywriting – I would take care of financial, web marketing, and IT. We would share customer service evenly. We knew what drop ship was, but couldn’t find any quality suppliers at the time, and started selling on eBay. We found a niche in bar supplies – BUT NONE would drop ship (directly ship to our end client), so we wholesale stocked in our studio apartment in New York City – both while having our dayjobs.

I remember not even knowing how to register a company – AND I WAS WORKING ON WALL STREET. No one could help me in my job, they were all corporate workers and never started a company. My parents couldn’t help, my friends from college and hometown couldn’t help. Finally I found out about SCORE.org (Society of retired executives) that are volunteers of retired business men and women who help startups. The old retired wise man told me to IMMEDIATELY OPEN A COMPANY, and I rushed to city hall and opened a general partnership at the county clerk.

I HAD NO IDEA WHAT I WAS DOING.

Later, I was at my fraternity in Stevens Tech, and I got my younger fraternity brothers to help out with the e-commerce warehousing, and my dad told me to call Bruce Williams and I was on live radio with Bruce, HE YELLED – close that NYC general partnership, you are taking unlimited personal financial risk as well as you are in the highest tax zone in the country! Man…so I had to figure out how to close down the company, and I found a tax accountant in New Jersey and opened a C- class corporation in New Jersey. I got tax notices from NYC tax bureaus, I had no ideas.

Then our stock filled our NYC apt, filled the Fraternitiy house, filled my friend’s basement, filled the self-storage at the UPS store in Kearny, NJ, to a west jersey warehouse, then to a 3rd party fulfillment warehouse in early 2006. I had no idea what all this stuff was when I started, and kept learning as I went.

I tried buying from China directly in mid 2006, and kept getting miscommunications and delayed orders in customs in USA. Overnighting cashiers checks to different logistics companies.

I had no idea what I was doing, and I felt I had no one to help us

In late 2006, I tried to buy into the business with my life savings and quit my dayjob at Deutsche Bank – but my 2 other business partners, my good friends, didn’t seem to like the idea of me taking a majority stake in the company. We had no corporate bylaws, no rules…what could I do? So I started Shadstone Sourcing in early 2007, a B2B sourcing company for small businesses like NYBS and quit my Deutsche Bank job. Spent the summer in San Diego, doing both NYBS and Shadstone Import / Export business.

I FELT SPLIT IN HALF doing 2 businesses, putting “2 different hats on”, not being able to focus. And this was summer 2007!!!!!! I remember crying on the kitchen floor in my San Diego apartment feeling ripped in half….trying to do too many things.

Later in summer 2007, I was recommended to read Tim Ferris’s four hour work week and I have to say, it inspired me….I hired virtual staff, mid-American housewives whose husbands worked in the military and couldn’t work steady jobs, and outsourced some IT and research to India.

I booked a trip to China in September 2007, and thought I’d spend a month in China to learn more. China was insane, so much opportunity, I had to come back and focus in China.

My NYBS partner, Andrew, in early 2008, went fulltime w/ NYBS and we got him a basic salary to focus on and try to build up NYBS from a part time business to a fulltime business. I would be in China developing products and sourcing from factories.

That was the plan going into 2008.

Andrew worked day and night on NYBS. Building up resellers, agents, new products, attending trade shows. I respect what he did. But the sales didn’t build up, it was too much manual work. we got another friend, Brian, and IT dude to help automate and build a supply chain system. But it didn’t get executed. Cashflow problems, cut his salary. Andrew needed to get a job, we had to re-organize, refinance, and ultimately I decided to merge it with Shadstone. I wanted to streamline, to create a international e-commerce business, SEO, branding, marketing between China and USA. Marie was with me in Shenzhen and got excited to get involved with this new business to her. Marie built up Philippines customer service operations, while I stayed in China with the IT and SEO team.

I left China in Q2 2010, Google China left, costs were rising, I was doing English websites and e-commerce, why am I in China? Thought I would outsource everything to the Philippines and re-build this business and automate and outsource everything.

Kept thinking that keyword Lifestyle business design. People always seemed interested NYBS, that it was the perfect business to automate and outsource and get residual income.

This business has never made more than $3,000usd a month in profit.. And thats with financing inventory, international sourcing, factories. And that was when Andrew was doing it 15 hours a day, dealing with tons of suppliers and logistics companies and warehouses and IT systems.

2011 and most of 2012, my mind and my heart have been elsewhere. I am doing consulting between China and USA. I am organizing huge e-commerce and startup events. I am traveling.

I’ve been looking for partners, alliances, options, and nice people and friends always get interested, but I think they don’t want to tell me, its a supply chain nightmare, and it needs to buy a lot of stock, warehousing costs, shipping lead times from China to USA. A lot of stress and financial risk for not a lot of potential profit.

Emotional connection to my first business

When I merged NYBS with my Shadstone consulting business, my old partners, and still my good friends asked me to make sure this business lives on. That they see me as the most suitable person to take over the business and that while they are not owners anymore, they want to see it survive, and thrive into the long foreseeable future.

So I have always had that internal burden. That I must fix this business, automate it, outsource it, streamline it, prove that it should exist.

I have considered selling products that aren’t exactly bar products, like electronics and gifts…but that is so strange….so weird. Thats what my China SEO team in 2010 was begging me to do when I was leaving China.

Being my birthday, as well as 2 big events last week: 1. having my google analytics account deleted, and 2. the below email from Andrew my old business partner and still one of my best friends:

the email that set me emotionally free….

subject dood – come on….
Andrew
to Michael Michelini
date Fri, Mar 30, 2012 at 2:29 PM
Important mainly because of the people in the conversation.
hide details Mar 30 (5 days ago)

Why am I taking calls from Tony 0000 apologizing on behalf of NYBS for no response when he’s been trying to order kits for a month?

Can you just call him and take his money?

50 Gift 10’s sold – 215.000.0000. I don’t need a commission on it.

Andrew

Reply
Michael Michelini to Andrew
show details Mar 30 (5 days ago)
000000000 says shipping is 182usd

Reply
Andrew Moran to me
show details Mar 30 (5 days ago)
Ok, well….Tony still has no idea whats going on, all he knows is hes’ trying to communicate and getting no response.

So he’ll need a response.

Andrew

Reply
Michael Michelini to Andrew
show details Mar 30 (5 days ago)
Just have him call 000000000 directly

Reply
Andrew
to me
show details Mar 30 (5 days ago)
I gave him NYBS’s number of the website as he only had my personal cell phone number as a company contact.

Reply
Michael Michelini
to Andrew
show details Mar 30 (5 days ago)
No one there to answer….

Im about to give the site away….to 0000000 or something. Or do u want it?

reply
From: Michael Michelini
Sent: Friday, March 30, 2012 10:34 AM
To: Andrew
Subject: Re: dood – come on….

Just have him call 0000000000000 directly

Reply
Andrew to me
show details Mar 30 (5 days ago)
Honestly, I feel like all the sleepless nights spent of fixing everyones problems and keeping all our clients happy is out the window and Id have to start again from scratch. We’d have to find a new crop of dropship clients, wholesale clients, etc because we burned up all the ones we had.

I dunno – can we just get this one order taken care of and if you’re not going to be able to fill it in the future, just let him know. Its just basic common courtesy – he counts on NYBS for supplies, and if NYBS cant help, they should just let him know.

Andrew

Reply
Michael Michelini
to Andrew
show details Mar 30 (5 days ago)

screwed man…. quoting shipping to us like 3x higher than a few months ago and arguing me on the phone

Reply
Andrew
to me
show details Mar 30 (5 days ago)
Cant he just do USPS? Those were like $70 or $80 I think to ship even from NY to Philly if I recall, and that was a couple years back. So I know its not cheap but $182 does sound like a lot.

Or can we just ship on NYBS UPS or Fed Ex account? This way, we’ll know 100% the that shipping is being billed at actual cost.

I’d suggest too just call the buyer and say yes, we have them in stock, but we’ve been trying to work out the shipping price as its suddenly coming up as $182, and you can put the order through now with that shipping or if not you’ll look for alternates and just ask what you want him to do.

From a clients standpoint, no matter the client or situation, you can be busting your ass on their behalf, but unless you call and say “I got your message…I’m working on a resolution….here’s what I’m up against” they’ll never know and presume you’re ignoring them….then the very work you’re doing to keep them happy is a total waste.

For instance, I missed a call this morning from a big account that’s missing their Amex deposits. First thing I did was call and say “got your message – let me look into it”. I was able to figure out what the issue was, wasn’t even on our end, but if I just started working on it and didn’t tell the merchant, I’d have another call from them, this time pissed totally pissed off.

Communication – that’s what it comes down to.

Andrew

Reply
Michael Michelini
to Andrew
show details Mar 30 (5 days ago)
I live in china. Its friday night 1130pm and im out with clients paying for a yearly sponsorship deal with heromeetshero.com for 20k usd….and they keep asking me whats wrong as im stressing about these emails on my mobile phone….I’m losing their confidence in this sponsorship deal because I’m getting emotional with you about an order that maybe make $300usd

I know this was our first business but at its best it made 3k usd a month and none of us can make a living off that

reply
Andrew
to me
show details Mar 30 (5 days ago)

Yeah, true.

Well, I dunno – maybe you can call or shoot him an email in reply tomorrow. Just explain straight up whats going on…at least then he’s not left hanging.

In the mean time do a shot for me…I’m here chugging coffee and burping up Jameson and coffee flavored belches.

Andrew

reply
Michael Michelini
to Andrew
show details Mar 30 (5 days ago)

We both want nybs to live on…actually to be honest i want it to live on so i dont need to explain why it closed….

Blog posting coming soon

Thinking to turn off shopping cart and maybe keep the www site up for drinking quotes….

Rather that then sell it to some 00000000 for free….

We both learned so much from this business, and it has helped both of us get to the positions we’re currently in.

Can u pls help me deal with tony…or tell him OOOOOOOOOOO took over and call them directly

Reply
Andrew
to me
show details Mar 30 (5 days ago)
I can call him and ask him to give 0000000 a call but 1) does 000000 already have the order and 2) can 00000000 take his payment?

Andrew

reply
Michael Michelini
to Jimi, Andrew
show details Mar 30 (5 days ago)
Jimi
Can u pls help me close thing thing down

the fact of the matter, i’m boxed in, I put my inventory in other people’s hands, and shipping rates are outrageous, I have been selling off inventory for a year and not restocking.

this day, and this blog post, was coming.

So you can call it a failure, call it a learning experience. I am calling it like it is, its too much work, too many supply chain issues, too much inventory risk, to be a viable business model. I can keep letting it hold me back or I can look forward, learn from it, and focus on the things that are currently helping me succeed.

Comparing the business advice from experts, I believe the more successful and intelligent business people have told me to take it down. Move on, learn, grow.

Pivot.

I’ll offer these resellers products from Chinese dropshippers and factories that I can supply better.

I am confidently doing this, and I am not turning back. And I’m going to keep it real here.

  • http://larrysalibra.com/ Larry Salibra

    Congrats for finally making a decision on this!

  • http://mikesblog.com Michael Michelini

    thanks Larry….
    its been emotional but once its official its relieving

  • http://www.tropicalmba.com Dan

    Cheers man. Love to see the tough stuff. That’s how it gets done. Excited to see what’s next. 

  • http://www.facebook.com/eglobal Attila Steven C

    Sometimes you just have to move on. Its hard letting go. I made the big move away from China. It wasn’t easy but I knew I had to do it. 

    Its not worth to get yourself overwhelmed or stressed out when things aren’t going “wrinkle free” way. Small to mid size businesses will ALWAYS have hurdles, issues, problems and more. Its until they get to the point of overcoming 95% of the hurdles is when the business will grow into a much larger business. And then things will go consistently and a whole lot smoother. Wishing you the best Mike, as always.

  • Anonymous

    Excellent decision… 

  • http://damianthompson.com Damian Thompson

    I think you are probably making the right move here, and there are plenty of lessons to learn from and grow.

    Your friend Andrew was spot on, regardless of what’s happening behind the scenes, you HAVE to communicate with clients to appease their fears. Human nature and people’s imaginations do some crazy things when contact is not being made consistently.

  • Marshall

    Wow tough decision Mike.  I’m sure it will turn out to be the right decision in the long term though and as you pointed out, there are just too many physical logistics issues involved.  Your time is better spent elsewhere.

  • http://www.facebook.com/vladimir.pashkov Vladimir Pashkov

    Hey, every closed door opens 10 more. I failed over 15 businesses and I know why. It was important experience and with this knowledge I can build something big. You have huge network and able to do big things. Keep fighting bro.

  • Irma nina weinzierl

    Thank you Mike for you Blog.  I really appreciate your honesty and courage… “When God closes a door, He opens a window of opportunity.”  May you be truly blessed for your integrity … You are amazing and wonderful Mike. You made the right decision. Thanks for your Blog.. Aunt Nina

  • http://shenzhenlocalmusic.com/ Gabree Kwan

    Hey Mike. It’s great to see you are writing about it. I’ve seen how you struggled in the past two months. You are having so many opportunities everyday that can make you 80 times more successful and filthy rich some day. You can’t focus on these possibilities while you constantly have to deal with 12 USD refunds. THIS IS A SMART MOVE. Not a failure. See how much resource you have, how much value you can offer! You are one of the smartest and most strong minded entrepreneurs I know.

  • Norn

    Mike-I was a little behind in reading your blog. I’m sorry to hear about NYBS. I know that was not an easy decision to make…it was your first “baby” that you shared with your friends. You poured your heart and soul into it. To close it, it was like abandoning the baby or cutting off one of your appendages. I know you know this…this was not a failure. It was a learning experience. All the info you gained from opening/closing this company along the way made you more knowledgeable. I am glad you shared this on your blog. It shows your determination to never give up and move forward. Still sorry about the closure and still proud of you. Norn

About Mike

American internet dude living in China (since '07) helping western companies leverage Chinese social media for business.

Passionate for working with more like-minded internet entrepreneurs. Love international business & connecting, and working on ways to give hard working people global opportunities. (Read More...)

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