Don’t toss away your cash: An expensive lesson in making faults
WHEN Pat Cash won Wimbledon in 1987, he was asked how it could be improved. “I guess they could hold it in summer” he replied with classic Aussie irreverence. So when we met years later, I knew we’d get on well, and I ran my new idea past him: a website to sell high quality tennis racquets. There were no patent issues, and I would sell a close replica of a very successful well-known racquet, and even source them from the very same factory.
What was radical was that I wanted to sell mine at cost price – about £20. Well-known brands sold theirs at up to ten times that price. “Er, you won’t make any money doing that, will you, Richard?” “No, you’re right, Pat, but I want to build a brand. The business, MegaAge.com, will become known as a reliable seller of good quality, low priced racquets, and as we add other products we will get lots of sales. With the brand name and lots of people visiting our site, we can figure out how to make money later.” “Not quite sure I understand all that mate, but I’m sure you know what you’re doing.” So Pat agreed to endorse the product and MegaAge.com opened serve in mid 1997. Not being completely mad, I had in mind a business budget of £250,000.
Then my mistakes began. Like many new businesses, I proceeded with unbounded confidence. I was so sure the racquets would sell, I ordered 10,000 and sent them to warehouses in the UK and US. So with that and building the website it only left about £50,000 for other costs. I thought marketing was a waste of money, and I only budgeted for newspaper ads over a few days as a launch. The ads were small but cool, “Pat Cash in Love” – with MegaAge racquets. When we ran them we sold about 25 racquets a day, but when we stopped, the sales dropped to a handful. Weird things happened too. Because of the low price, people questioned the quality, which was nonsense. And the Aboriginal colours I chose happened to match the German flag (a big mistake in the UK). The big sales revolution I expected didn’t happen. The only time I laughed about it all was at a charity function, when I won a door prize: two tennis racquets.
I even hired a guy to push sales, and off we went to a trade fair in Atlanta. He was expensive but little use, which dawned on me when I saw the big posters he’d prepared didn’t have the name of the company or product.
So having blown the budget, I called it a day and sold the business for almost nothing. Lessons? Use the first year of a business as a research project, and test the concept by spending as little as possible. Marketing is not a waste of money, but too much stock is.
Since the mid-1990s Richard Farleigh has operated as a business angel, backing more early-stage companies than anyone else in the United Kingdom.