#7 How to Reinvent Your Business

Hey, I'm John Henry and this is Open for Business, a branded podcast from eBay and Gimli Creative about building a business from the ground up. Welcome to the very first episode of Season 2, we're super excited to be back and we have a great season planned for you guys. This season we're going to feature stories and lessons about how to finance your business, how to kill it at customer service, how to fail at business and live to tell the story. That's all coming up on Season 2 of OFB, but today we're going to kick off this episode at a root beer stand. It was sort of a hole in the wall building, I think. This is Debbie Harrison and that hole in the wall building belonged to her grandparents. In the summer of 1927, they got married and moved to Washington, DC, with a dream to start a business. When they got there, it was a typical, hot, human DC summer and so they decided they'd start out by selling cold frosty mugs of root beer. That's what they did in that hole in the wall spot. All they sold was a mug of root beer for a nickel, a mug. There was just barely enough room behind the counter for a server to be there. I don't think there was even enough room inside the root beer stand to have extra tables. It was so tiny. It sat nine people total and that summer those tools were almost always full. Business was going great, but as summer came to a close, Debbie's grandparents knew they'd have to change things up. No one would want to buy an ice cold mug of root beer on a freezing winter day. Their root beer stand happened to be close to the Mexican embassy at the time and so one day Debbie's grandma enlisted their neighbor's help in expanding their venue. My grandmother who had majored in Spanish in college and spoke fluent Spanish went to the Mexican embassy and knocked on the door and she charmed the chef and he invited her in and he taught her how to make tamales and chili and there was no kitchen in the first root beer stand. So she would make the food in her apartment and walk it over every day. So with help from that friendly neighbor by the winter of 1927, the nine stool root beer stand was transformed into a tamale and chili restaurant. Just briefly, here's what happened next. After the tamales, Debbie's grandparents added hamburgers and hot dogs to the menu. They named their restaurant a hot shop. They opened one hot shop after another. A few years in, they offered curb service. In 1937, they took advantage of the dawn of air travel and expanded into inflight catering. They kept growing and evolving the business for three decades until 1957. After 30 successful years in the restaurant business, an executive at the company had an idea which he floated to Debbie's grandpa one day. Instead of opening another restaurant, let's try something totally new. Eisenhower has just built all of these freeways and everybody's out exploring the country and people can't wait to get in their cars with their families and go on vacations. Why don't we take this land and build a motor hotel on this land instead and let's try it. Debbie's grandparents built their first motel in DC right near the Pentagon. And that decision reinvented their entire business. And here's where I tell you that Debbie Harrison has a maiden name. It's Maria. The nine stool root beer stand that my grandparents started in 1927 in Washington, DC has evolved to be the largest hotel company in the world as Marriott International. Today, Marriott International has about 675,000 employees and is currently valued at about $34 billion. Debbie's grandparents, Jay Willard and Alice Marriott, founded a root beer stand, but they continuously evolved over the years and 30 years in, they reinvented the company completely. Do you ever think about the fact that someone had to actually make that decision and say, we're going to steer this whole company in another direction? Oh sure, we think about that a lot. Where would we have been if we stayed at just in the restaurant business and we probably actually would be out of business? You have to keep reinventing yourself or you fail. On today's show, how to reinvent your business. So here are some other companies you may have heard of that started out as something else completely. American Express began as a mailing and shipping company, Shell Oil Company started out selling actual shells like decorative sea shells. Flickr was a multiplayer gaming company when they first began, Abercrombian Fitch sold sporting goods, Taco Bell's first product, hamburgers. And longtime podcast listeners may know that Twitter started out as a podcasting company. Evolution, reinvention, whatever you want to call it, sooner or later every successful business faces the need to change and sometimes that change has to be dramatic. As a business owner, you don't usually get to choose when to reinvent your business and when the time comes, it can be scary and confusing. And what we know is that no matter the size of your business, Debbie Marriott Harrison is right. Coming up, we have stories and lessons from two very different business owners who face this exact dilemma. Re-invention or failure. This is Betsy Helmuth, founder of affordable interior design. We're meeting her at a storefront in Dobbs, Ferry, New York. On the outside, her store has a bright blue turquoise awning. It's a small pop of color and a small town mainstream. Inside, Betsy's store doubles as a gallery, featuring inexpensive furniture and accessories that look modern and stylish. But before she started this business, Betsy was interning with a fancy Manhattan interior designer. She knew from the outset that that was in her thing. So, she decided to start a business. This was 12 years ago, back in 2005. In when it came to not name her business, she turned to a long time trusted advisor. So I watched a lot of CNBC and I watched Donny Deutsch, the big idea with Donny Deutsch. Welcome back to the big idea tonight. We've got ideas so simple. You want to slap yourself in this next. He said something during one episode that changed my entire life. He said, "If your business name doesn't say exactly what you do, change it tonight." And I changed my business name that very night. Betsy grew affordable interior design methodically. She financed it without loans or outside money and she built her client base one by one. She was head down, growing her business year after year until. I think it was maybe about five years into my business when I saw a competitor and they seemed kind of interesting. This was around 2010 and the competition took Betsy off guard. Naturally, Betsy wanted to check them out. This new upstart company was having a party in Manhattan to recruit designers and Betsy decided to attend. And I was like, "I need to know everything. I need to know how they're working, I need to know what their model is." As soon as she walked into the party, it was clear to Betsy that not only was his new company going after her exact client base, they were going after it in a big way with a vision and a strategy and a Brian. They had a guy at a desk, I remember. I remember his name too. His name was Brian and they were like, "This guy is here. He practically sleeps in the back and all he's doing is business strategy." I was like, "Oh, shoot." We didn't have Brian sleeping in my basement, doing social media. They had a whole big dry erase board with their strategy and so I was taking notes fast and furiously, while they were presenting about paint or something, I'm like, "Oh, my God. 100 designers and 2,000 clients and "Oh, my gosh." They were going after that budget client, that client who wants a really nice space but rents or is moving in a year, it was my exact same client, which of course confirmed my worst fears. So I remember feeling like, "How can I keep up?" It's just me. How can I compete? Betsy left that party feeling pretty freaked out. But by the time she got home, she'd made a decision. Betsy decided that night back in 2010 to ignore the competition. She was going to keep her eyes on her own paper, do the best possible job she could for her clients, and trust that her business would keep growing. And that plan worked for a surprisingly long time. Her business grew year after year, until last year. In March of 2016, Betsy decided to take on the first major expansion in her then-11 year-old business. She hired three designers, and the very same week she brought them into the store for training, Betsy noticed that something felt different. I noticed that the phone was not ringing, and I noticed that the assistant was just watching me watch the training, and I'm like, "Is the ring a rock?" And I literally said, "Is the ring a rock?" And she said, "Oh, yeah, it's been on all day." So I'm like, "Oh, great." Okay, let's keep going. And on the inside, I'm freaking out because the phones aren't ringing and it's day after day. We had gone from being very busy, and all of a sudden it's like, "Wait, nobody is calling me." And it was like the lights got turned off. The worst part was that Betsy had no idea why the phone had stopped ringing. For the first time in 11 years, Betsy had more time in her hands than she knew what to do with. So she hadn't touched with an old friend and suggested they have lunch. And we were at lunch, and she's like, "So what's going on in your business?" And I said, "Well, you know, I've just hired these designers, and the phone is not ringing, and I don't know what's going on." And she's in the startup world. So she's constantly thinking about that world, and she said, "You know why, right?" And I said, "No, I have no idea why." And she said, "Well, your biggest competitor got a $20 million cash investment." And I was like, "What did you say?" I remember exactly where it was. We were at a Korean restaurant. It was super loud. It was really tiny. It was in Midtown. And I was like, "Oh, what, what, what, what did you say?" My stomach literally dropped. I'm sure I went white as a ghost. I wasn't even sure I'd heard her correctly. And I wasn't sure she even knew who my biggest competition was. It's not like we talked about it a lot. So I said, "Who are you talking about?" And she said, "Well, home polish." Home polish. These were the same folks who threw that party Manhattan back in 2010, with the whiteboard and the strategy and the Bryan, and Betsy had the same impulse she'd had the first time when she heard about them. She wanted to keep ignoring the competition. Until that friend, her name is Donna, said Betsy straight, right there and then. "Do you know what I brought up to her? This was so depressing. I said, "Well, Donna, it's okay, because my clients are very happy. I have got this model down to a science," and she said, "Betsy, nobody cares." It was terrifying. Terrifying, because of this time, Betsy couldn't keep doing what she'd been doing up until that point. She had to reinvent her business, or she'd fail. What she did next, right after the break. When we left Betsy Helmuth, she was sitting in a busy Korean restaurant in Midtown, Manhattan. Shell shocked. After having learned that her closest competitor had raised $20 million, and she'd already felt the effects for the first time in her 11 years running her company, Business was dead. Before she left that restaurant, her friend Donna, the one who broke the news, told Betsy that she was willing to help. Donna wasn't just in the start of the world. She happened to be a business strategist, so they set up a meeting at Donna's apartment, and when the day came, the first order of business was to break out the dry erase markers and get to mapping. She said, "Let's make a map of all your competitors, of anybody in the interior design space." Because of course, in those six years, while I've had my head down, there have been tons of small companies that have come up. It's not just me and one competitor now. It's me and 12 competitors. She actually mapped them all out, and a really big list, there were people I didn't even know about. She's like, "No, now you are a ninja, and you must know all your competitors. You must know what they're good at and what they're bad at, and you must know them in and out." She's like, "No more looking at your own paper. It's time to look up." This is lesson number one when you're reinventing your business. Adjust for what's called the hidden competition curve. It's common for the competitive landscape around your business to shift completely while you're busy building your business. And you need to know that competitive landscape in and out before you can reinvent your business to fit in it. I am mid-range now. Now when people hear "fortable and tear design," they have expectations that it's going to be like 50 bucks. Like I used to be low and low, low tech, low price. You couldn't get better than me, right? And now I'm like, I'm no longer a "fortable and tear design." What does that freaking mean? Lesson number two. When you reinvent, you must also redefine your business. Be honest with yourself about your place in that new competitive landscape. Creating a picture of the entire landscape gave me a clear vision that there's room for me. I saw this big hole in the middle and I was like, oh yeah, that's where I fit and my competitor isn't there. This brings us to lesson number three. When reinventing your business, you also have to find and reach new customers. For Betsy, this meant going after a new clientele. She'd always had the young, transient city dwellers who just wanted a nice place to have a cocktail party. Now, she'd also have to get the homeowners who want a beautiful home to raise a family in. Somebody who wants the perfect thing, who is that person? That's a mom, that who has kids and who has clutter and who can't see straight. People with problems want to pay for the right solution. They don't want to hire four cheap people. They want to hire one right person, even if that means paying a little bit more. So Betsy surveyed the competition and went after a new client base. But she also looked internally at what set her part as a business owner. That's lesson number four. It's your USP or unique selling proposition. Basically, all that means is, what do you have that other people don't? Betsy is a pro at building her brand beyond just her paying customers. What have I got that $20 million came by? How good? And the answer's not much. But, one thing is I do a ton of content. I already have a weekly podcast that I was just doing for fun. But how can I turn content into cash? How can I turn content into visibility? Like, I'm holding masterclass. So how can I turn content into clients? The main thing Betsy's doing differently now is that she's working on the business, not in it. The competition forced her to reinvent her business, but it also helped her discover who she is now as an entrepreneur. I no longer feel misplaced in the landscape of interior design. I know where I am, I know who I am. I don't want to say this out loud. But I'm really glad that I got a competitor. Oh, god. I just said that all up. Because it upleveled me. You know, before I was just working for myself, I saw they wanted a hundred designers and I'm like, I need some more designers. I need to be able to take time and focus on the larger picture. I feel like this competitor keeps forcing me to like kick myself in the butt. And I don't like it. But it's made me a better entrepreneur. Sometimes, you have to reinvent your business because you get a competitor. Sometimes, you have to reinvent your business because armed federal agents tell you to. That's what happened to Ray Weiman. I'm Ray Weiman, owner of JR Boutique. Ray lives in Rousse's Point, New York, just on the US side of the American Canadian border. He's been selling on eBay since 2004. And he's also had a day job that whole time with an American law enforcement agency. He doesn't want to say which one. Working at that agency is how Ray got the idea to sell one very specific product. Retractable ID holders branded with the logo of the agency where he works. Law enforcement officers most of them have a lot of pride in their uniform. Many of them come from the military and they like to look sharp. It's a matter of respect. If you've ever had a badge, you have to swipe or tap to get into work. You've seen these things. They clip on to your bell and allow you to zip out your badge really quickly. Ray's specialty is that little plastic guy that your badge pulls out from the ID holder. And he started selling them because he wanted a better looking one. That had the logo of his agency on it. And so he found one on eBay and when he worked to work all his co-workers and the law enforcement officers, they want to one too. He realized that his colleagues were a market, a market of law enforcement employees who wanted their retractable ID holders to look cooler. And so just like that, Ray started selling tons of these things at work. His unnamed law enforcement agency is gigantic and so he sold thousands of them. And he not only sold them, he designed them, matching the logo perfectly to his badge, playing with the metallic colors, making them sturdier, he loved the work. It was a creative outlet for him. Soon he opened his eBay store and between 2004 and 2010, selling ID holders to his colleagues at his day job became Ray's side business. And that business was booming until one day in July of 2010 when Ray checked his email. I got this email at work in my work email address and it said, "Please call me at your earliest convenience." And it gave a signature of agent so-and-so. I'm like, "Hmm, I wonder why they want to talk to me." So I called them and he said, "We want to come talk to you at your address about an issue. Do you tell me what the issue is?" "No, you'll find out when we get there." I said, "Well, do I need any sort of legal representation to be with me?" "Well, you're welcome to have it if you think you need it." I said, "Well, I don't really know if I need it or not because I don't know what the subject of the conversation is going to be." They came and we met in a conference room two armed agents in suits just like you see on TV. They had suit and tie on with their firearm on their side and then they immediately handed me this letter. And we want to know who your suppliers are. We want to know everything about your business. Remember, Ray is selling retractable ID holders. The stuff he was selling was all over the internet. Why would they care who his suppliers are? Then that's when it came up that, you know, well, you're supposed to be an authorized vendor and we can't enter into a contract with you because you work for us. Ray's business posed a conflict of interest. He couldn't work at the federal law enforcement agency and sell to its employees at the same time. Ray couldn't afford to quit that day job. So, after talking with lawyers, he realized he'd have to quit his side job. I felt like a small child that had just done something wrong and I was chastised by his parents. I've worked so hard to be here and now you're taking it away from me. That very same day in July of 2010 when the agents sold him he had to shut down his business, Ray received a $5,000 shipment of ID holders. All in, he had $20,000 of inventory sitting in his basement, a ton of money for Ray. He wouldn't be able to sell any of it. Half my business. That was half, maybe even more than half of my business and I was just devastated. I didn't know what I was going to do next. One by one, Ray took down his listings from his eBay store and his own site and then he got really depressed. And I just went through this period of kind of like morning, not really having a desire to expand or do anything new at all. It was a terrible feeling. That depression lasted almost two years. Ray would occasionally go down to the basement and visit that $20,000 of unselable inventory just sitting down there. And it wasn't just the money. He loved designing the products and growing the business. All of that was gone in one day. So Ray spent those years going to work each day, feeling lost and unsure of what to do next. But he couldn't help himself from researching the market. He'd look at other people's eBay stores. He'd read about similar products that were coming out. And one day after that two-year run, Ray had an epiphany. He doesn't remember exactly how it happened, but suddenly a simple thought popped into his head. If he couldn't sell to his law enforcement agency, maybe he could sell to all the other ones. He'd realize there's an entire market out there. Thousands of law enforcement officials and employees at other agencies across the country who might buy his stuff. Ray realized he'd define his products too narrowly. If he expanded what he offered and to who, maybe he could sell again. This is lesson number five. When reinventing your business, you have to be open to expanding what you offer, whether you're selling a product or a service. For Ray, that meant getting into selling new products that he'd never considered. I was so focused on this narrow field that I ran out of creative ideas. Now, Ray sells retractable ID holders to people working at law enforcement agencies all over the country. He also sells tons of other stuff, lapel pins, key chains, wallets. Over the past five years, his business has grown beyond his wildest expectations. Last year, I hit officially $1,000,000 in eBay sales, just eBay sales since 2004, who would ever think I'd sell $1,000,000 worth of items. His goal for 2017 is $500,000 in revenue. He thinks he can do it and if he does, I'm attempting to save my entire salary from my day job this year. And if I can save my entire salary, I'm putting in my notice and I'm going to work full time from home. Sayonara. I never dreamed it would be possible, but I can taste it now. It can happen. Ray, tell me something. When you finally put in that notice, are you turning right back around to those co-workers and going to sell them those retractable badge holders? I'm you're absolutely correct, soon as I quit, guess what I'm selling. Ray lost everything. He could have just retreated back to his day job, but he didn't. He expanded his field of vision and took advantage of product opportunities that he hadn't even considered before. Now, raise on a path to half a million dollars in revenue this year. So to recap our lessons, this is lesson number one. Just for what's called the hidden competition curve, it's common for the competitive landscape around your business to shift completely while you're busy building your business. Lesson number two, when you reinvent, you must also redefine your business. This may mean completely switching your company's identity. Lesson number three, rethink your target customer, whether that's shifting from one type of customer to another like Betsy, or broadening your customer base like Ray. Lesson number four, lean in to what sets you apart as a business owner. Ask yourself, what do you have that other people don't? You're going to need it when you're reinventing. And finally, lesson number five, when you're reinventing your business, be open to expanding the products or services you're offering. Thanks for listening. To learn more, check out ebay.com/openforbusiness. Open for business is a co-production of ebay and gimli creative. We were produced this week by Francis Harlow, RMW, Nicole Wong, Caitlin Bogooki, Abbie Rezika, and Grant Irving, with creative direction from Nazanine Roffs and Johnny. And thanks so much to Christine Driscoll, Zach Schmidt is our engineer. Our theme song is by Volphek. And a very special thanks to the people who took time to talk with us for this episode. Designer Paulina Execnick, Kim Shanahan, CEO of Bookbook K, and Noah Santos, CEO of Home Polish. Noah was super gracious with this time. We wish Betsy all the best for their business. Next week on Open for Business, how to kill it at customer service when you're selling online. We'll hear stories from entrepreneurs who screwed up. I just had to pick myself up and begin the process of apologizing, apologizing to customers for things that I did do, apologizing for things that I didn't do. How to fix it when you have a customer service disaster. It's coming up next week on Open for Business. If you like Open for Business, please subscribe to us on iTunes or wherever you get your podcasts. And please leave us a review to tell us why. It really helps people find our show. I'm John Henry. Thanks so much for listening. [BLANK_AUDIO]