Let’s rewind to when I started. Before I knew what I now know. Back to 2007.

I wanted to leave my full time employment with Qantas and wanted to break into a new business. I wanted a business that made money with minimal effort. A business that sold products online. Via my own website. I had no idea what to sell or where to even start looking. I was sure that because the world was now connected to the internet there were customers all over the world just waiting to give me money! And lots of it. It was just a matter of putting a website up on the internet and people would find me and beg to hand over their credit card details for my products.

I had big dreams and even bigger blinkers on.

When I started my online business journey, the old business models still had a strangle hold on the economy. The new internet economy was still taking shape. If you wanted to sell something on the internet you had to decide on which model you would adopt;

1. Purchase from an importer or wholesaler a product, then sell direct to customer via your own website.
2. Purchase from an importer or wholesaler a product, then sell to a reseller who in turns sells to the customer via their own website and sales staff. Your website would be purely for information not sales.
3. Import your own products.
4. Make your own product and sell to resellers and have your own information website.
5. Make your own product and sell direct to customers via you own website with shopping cart.

I finally decided to leave Qantas in mid 2007 and started a small vacuum business with a man I met in a business networking group. My new partner had used method 4 for years and years and he assured me that he knew what he was doing and was almost a business heavyweight. There was no way we could fail. So that’s what we started with. Trying to sell a very narrow range of pneumatic vacuum pumps that we manufactured to resellers to sell to their client base. What did I know. It sounded like a good plan. I should have realized it was a dud business model as he was broke and owed money all over the place. I must have looked like the Goose with a nest full of Golden eggs. More money than sense.

So we started a new business that was basically an old business model with a website. I was full of energy and enthusiasm. We rented a small factory space. I forked out tens of thousands of dollars to manufacture these venturi pumps and paid us both a wage out of my voluntary redundancy and worked my butt off trying to get them all sold.

The vacuums were costly to produce, the design had some unique features but was basically a venturi vacuum pump with quite a few competing products and the profit was low. The only way this selling model would work was if we could get volume sales and that meant as many resellers as possible. It was basically one product that had quite a few competitors in the market. The resellers wanted 30-60 day accounts which meant once they sold a pump you didn’t get paid until 30-60 days starting from the following month. It also meant that you had to front up all of the money to produce them. Then when you sold them to resellers you had to offer a discount of at least 25% and sometimes up to 35% or the reseller wouldn’t try and sell them. Then even if you agreed to the 25-35% discount the reseller had hundreds of other products and they sometimes would want the manufacturer to help pay for promotion.

I paid to get 100 pumps made. After two months we had sold about 10 pumps. I was about $35,000 out of pocket and starting to feel sick.