Making A Physical Product: How I Lost $100,000 & Turned It Around To Build a 7-Figure Business

Jan 20, 2019

I'm proud to say I built a multi-million dollar e-commerce business that sells physical products of my own design (and my co-founder's). Today, things are good – we were just named one of the fastest growing companies in the US. However, to get here I’ve gone through some incredibly tough times. This is the story of my first time making a physical product, how I screwed up spectacularly... and eventually survived to turn things around to build a thriving 7-figure e-commerce business.

I’ll allow the title to foreshadow how badly I screwed up. The mistakes I made ARE avoidable. Hopefully you can learn from my journey making a physical product.

Starting Out

In 2011 I began tinkering with my first physical product idea. At the time I was the founder of a struggling project management software startup. In the evenings, as a creative outlet I would sketch physical product ideas. I loved software and apps, but there’s something to be said about creating something tangible. I wanted to invent something that you could touch and hold. The thought of making a physical product became a bit of an obsession.

One of the many ideas I came up with was a bedding product. It would solve problems with making the bed. My solution was simple, but one I thought was unique and would sell well.

The idea eventually became Smart Bedding (later re-named to Primary Goods).

The Physical Product Idea

If you break down what goes into “making your bed” it’s a couple actions that can be improved upon. The way I saw it, making the bed consists of:

  1. Re-aligning the top sheet and duvet from getting misaligned in the night. Sometimes you wake up and the top sheet is in a ball bunched at your feet below the duvet. Other times it’s on the floor.
  2. Tucking in the sheet. It usually sticks out from the duvet cover because they’re cut to be longer and wider than duvet covers. You’re forced to either spend time tucking it in or you live with the messy look.

I reasoned that if you could eliminate those issues, you effectively didn’t have to make your bed. The best way to solve those problems would be to create a new bedding line with a few simple features. They were:

  • A simple connection system along the left and right edge of the duvet cover and top sheet. The two would snap together, but still feel like they flowed freely at the top near your head.
  • The duvet and top sheet would be cut to be roughly the same size. No more tucking in the sheet along the edges.
The Smart Bedding connection system

With this design, “making the bed” would be a simple act of fluffing the duvet / top sheet combo. I found a local seamstress and began making prototypes with them until I was happy with the design.

The first prototype snap system along the two edges.

Side note: I’m well aware there are people that don’t use top sheets. This product wasn’t for them. The Smart Bedding launch actually caused a hilarious internet debate between people that do and don’t use top sheets. Many people on both sides didn't realize people sleep differently than they do.

Finding a Co-Founder

I met Jon on Twitter around the same time I was prototyping the concept with a seamstress. He had just left his startup DailyBooth. He was also tinkering with his own physical product ideas, so it was natural that we immediately hit it off. We were two former software guys both getting into physical products.

Eventually I asked Jon to partner with me on Smart Bedding. He agreed and we quickly worked out equity.

One of the first photos Jon and I ever took together. Just a couple of kids
Years later at my wedding, Jon was my best man.

It was our first product together and the catalyst for what kicked off a relationship that spawned a portfolio of brands and products we would build together over the years.

Jon and I became great friends through this. During our Smart Bedding discussions, we thought up even more product ideas together. Because we had a pile of ideas, it became clear we would build multiple projects together. This lead to us deciding to run things all under an umbrella company. Jon owned the domain but wasn’t doing anything with it yet, so we used it and named the company Need/Want.

The plan was for Need/Want to be a “a company that makes companies” — basically all of our ideas together would go under it.

The Need/Want website

Finding a Factory

Full of excitement, the next step to building our little empire would be finding a manufacturer. With little money, we figured we would need to find and vet factories ourselves.

We searched far and wide for a manufacturer that fit our needs. We received quotes from about 50 different factories from around the world, then narrowed it down to 5. From there, we ordered samples from all of them. Our favorite ended up being a factory in India which we learned is a popular place for textile production.

Our point of contact at the factory was named Mathusuthanan. He was quick to communicating with us whenever we had questions and to top it off, he was extremely polite. It was hard not to love him. Because we struggled to pronounce his name, we called him ‘buddy’ for short. It was intended to be endearing.

Making your own physical product? I wrote a guide to making physical products (the right way). Get the book for free here.

After some back and forth clarifications, the pre-production samples we received were great. The material was soft and our designs were 100% accurate to the specs we provided. They even smelled great!

We locked in material choices with the factory, agreed on minimum order quantities, received final production costs, and were given a timeline for production. Manufacturing would take 30 days, and an additional 30 days would be needed for shipping the goods from the factory to the USA by boat.

Successfully Kickstarting The Idea

Now that we had found a manufacturer and calculated costs for a first production run, it was time to figure out how to fund it.

We were confident in the concept, but we wanted to be sure people would actually pay for the product. From this, we decided to try our hand at Kickstarting the idea. At the time only a few big product ideas had been funded on Kickstarter.

Kickstarter is a website that allows you to host a “campaign” to raise funds for projects. People can “back” your project by contributing money at different tiers in exchange for project items. You can raise money for almost any kind of project.

In July that same year we launched our Kickstarter campaign with a modest goal of $10,000 to fund the first production run. $10,000 was the approximate cost of the minimum order quantity required by the factory.

We produced a comedic video to pitch the product. I starred as the pitchman. It makes me cringe now...

By backing the Kickstarter, people were essentially pre-ordering a Smart Bedding set of their own. The promise to early backers was we would ship them their order later that year by Christmas. We used the timeline the factory gave us, and built in 2 months of extra time as a buffer for gathering customer color choices, and for any unforeseen delays. Oh how naive we were.

After launching the campaign we hit our $10k goal in 40 hours and ultimately raised $57,506 in 30 days from pre-order backers / customers. The project was covered by NPR and other notable publications. We were ecstatic. Our little baby had legs!

The Kickstarter Numbers

Starting Manufacturing

With almost $60k in the bank from the Kickstarter, we set out to begin production. The goal was to take Smart Bedding from an idea and turn it into a proper company.

We placed an initial production order for 800 bedding sets with our new Indian manufacturer. The payment terms were 50% upfront and 50% upon completion. Full of excitement, we wired the factory the initial 50% payment.

Shortly after finishing the Kickstarter campaign, we launched a website and opened up pre-orders. People kept pre-ordering Smart Bedding on our website immediately after the Kickstarter campaign ended. Money was flowing in and production was under way to deliver our new product to customers.
Enough inventory was ordered to cover the initial pre-orders plus extra stock to keep us ahead for future orders.

We created a cute little builder flow for the original Smart Bedding website.

The Factory Blows Every Deadline

Shortly after placing the order, we started to get weird vibes from the factory.

Prior to wiring the money, our point of contact was prompt in replying to us whenever we had a question. Although shortly after wiring the money, they became slower to respond. At first I called them out on it. They assured us it was because they were out of the office and coordinating / overseeing the production. At the time this made sense to us so we shrugged it off and kept working.

We started to feel uneasy again when we started receiving excuses that things would be delayed. When it became clear to us we were having trouble with the factory, we paused pre-orders on the website.

The worry entered our minds.

“Are we getting scammed by this factory?”

During all of this, we were relaying the delays to our backers as best we could. What sucked is it would take forever to get a straight answer out of the factory on when things would be finished. We would be incredibly stern that they have to stick to the timeline. We would then relay that info to our customers… and then the timeline would be blown. This happened over and over. It was maddening for us, and our customers. It was at this point that our integrity began to be questioned by all pre-order customers.

Feeling Trapped & Becoming Depressed

We felt horrible. Even though we wanted nothing more than to deliver our product to customers, we were starting to look like scammers to some people. They questioned if we actually intended to ever deliver a product. Smart Bedding had our names on it personally – we weren’t a faceless corporation. Our reputations were very public. Being called out in a public setting was tough.

The vicious cycle became: communicate to backers what we’re being told by the factory, that timeline then wouldn’t happen. This would repeat over and over again. We were caught in the middle in the most horrible way. We knew it was our responsibility to deliver, but we felt completely stuck.

The public scrutiny and desire to make it right really took its toll on me personally. It was around this time I suffered my first panic attack. Shortly after experiencing that, I went to see my doctor. He informed me my blood pressure was incredibly high and if I didn’t get it down, he would put me on high blood pressure medication. I was 24 or 25 at the time — too young to be experiencing high blood pressure. Luckily I got it down and figured out how to deal with the stress.

Side note: I recommend reading The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph — by Ryan Holiday.  It’s available on Amazon.

Fatal Mistakes & The Timeline of Failures

When we first kicked things off with production, we did something unfortunate.

Shortly after wiring the initial 50% payment, a 2nd payment was sent to the factory. In looking back at our email threads, I believe it was because we realized we needed to increase order quantities to keep up with the pre-orders we kept receiving on our website after the Kickstarter. Because of all of this, the amount of our money in the factory’s hands made it impossible switch to a different factory. We were in too deep with them.

Everything that I could ever imagine going wrong did… and then more.

Jon and I both already put every last dollar we had into starting Need/Want and Smart Bedding, so we didn’t have enough money to start a new manufacturing run with a different factory.

Even though it was delay after delay, and lie after lie from the factory, we had to make it work. We didn’t have any other option – or so we thought at the time.

A brief list of things that went wrong

  • At first we received believable excuses for why things were getting delayed – “the dyeing of the fabric wasn’t accurate to our Pantone colors, so we’re re-doing it.”
  • Things quickly became infuriating when it was excuse after excuse though – family issues, trouble with workers, delays with receiving raw materials, etc.
  • I would ask what the new timeline would be, but wouldn’t get a reply for several days. Days later I would get a basic email with something like “Sorry, will get back to you tonight on Skype”. I’d wait on Skype all night, and they’d never show up. At this point I was blowing up their inbox, Skype, phone numbers… anything i could do to get a hold of them.
  • Eventually, half of the order was shipped to us via sea freight. For weeks we never got information on a way to track it and know when it was arriving to the US port. Typical direct sea freight takes approximately 30 to 40 days. This was communicated to our customers, but then weeks went by and we couldn’t get a hold of anyone at the factory, nor the vessel information. An excuse was given that the sea freight company hadn’t been sending them information either.
  • Finally they shipped the second shipment, while we were still waiting on information for the first one to arrive.
  • We received the second shipment, while the first was completely missing. The material quality was NOTHING like what we originally approve during our sampling stage. We were furious… what was supposed to be a glimmer of hope turned out to be more problems.
  • The first shipment was eventually “found”. It had been on a joy ride around the world. Supposedly the information sent with the shipment was bad. To this day I’m not sure if I believe this. They informed us it would be sent back to the factory to be re-packed and re-shipped. When it did return them, it was water damaged due to poor packing and a ride around the world. They would have to claim the insurance on it and go back to square one and restart production.

At every stage, I requested demanded our money back, including when the damaged shipment needed to be re-produced. They always refused or deflected the question.

Over 1 year after we were originally supposed to deliver product to our customers, the factory stopped replying to us completely. To this day, the factory still owes us over $40,000 USD for products that were never delivered. Furthermore, the products they did deliver (1+ year late) were nothing close to the quality we approved.

How We Stayed Afloat

Along the way, we were doing our best to keep it together. While we had got ourselves into a horrible situation, we were quite lucky as well. Earlier in this story, I mentioned Jon and I had a pile of product ideas we had thought up.

One of the ideas we launched shortly after the Kickstarter finished for Smart Bedding (but before things went bad with the factory) was a company called Mod Notebooks. Mod was a product/service hybrid. We designed and sold a premium paper notebook for notes and journaling. The cool part was the back page had a hidden prepaid shipping envelope for the notebook. When you were done filling it, you could mail it off to our scanning partner where your pages would be digitized and uploaded to our companion app. All of this was included in the initial cost the customer paid for the Mod Notebook.

Here's a brief promo video we produced showing how it worked:

We were fortunate Mod Notebooks had done well. It wasn’t making millions, but it was keeping us afloat. There was enough revenue coming in from Mod that Jon and I could survive by living incredibly modestly while we kept trying to figure things out with Smart Bedding.

Any pre-order customers that had enough of the delays were refunded with the extra money we made from Mod Notebooks.

Note: Mod Notebooks was acquired a couple years ago and later shut down by the buyers.

The Turnaround

While being stuck in limbo on Smart Bedding, Jon and I eventually “called it” and gave up on the manufacturer. That said, we refused to be one of “those” Kickstarter projects that failed and never delivered to their backers. For a while, I was quite depressed due to the fiasco. Eventually I snapped out of it and made the decision we were going to fix it… somehow.

Jon and I spent a lot of time asking ourselves, “how can we begin to make it up to our customers, and turn this thing around?”

Luckily due to the revenue of our other products and a financial backer that agreed to lend us money, we began seeking a new factory. We had to dig deep and put together a lot of money to do this.

All in, we had to put together an extra $100,000 to do a new production run to re-launch the product.

Making The Product Better to Make It Right With Our Customers

To begin to make it up to our customers, the plan was to create an improved product. It would be our way of saying “THANK YOU” to those that had hung on for the long ride.

We formulated a plan to create a “Smart Bedding 2.0” – we decided to find a new factory and make the product out of the best material we could get our hands on. The best material turned out to be linen.

The new product would cost us over double the original production costs. This was due to our choice to use linen instead of cotton. All in, we had paid for our customer’s bedding 3x over – the original production fiasco + the 2nd production run that cost double.

Instead of being manufactured in India, the linen would be sourced from one of the best regions in France for growing linen, then sewn in Shenzhen, China.

We physically visited the factory in Shenzhen, and oversaw every stage of production. As you can imagine, we micromanaged everything. There would be no screw ups this time around.

Reviewing technical drawings at the factory to make sure everything is correct.

We loved the new factory team. (NOTE: the masks are to help protect from lint particles in the air)[/caption]

When production finished, it was then shipped via sea freight again. Only this time we used a trusted freight company called Flexport. We received it in our US warehouse and promptly shipped product to all customers.

Watching the boat sail from Shenzhen to our warehouse.

It was only then that we took a massive sigh of relief.

For the record, I’d highly recommend using Flexport for shipping from your factory, wherever they may be in the world.

If any of our original Smart Bedding pre-order customers are reading this: I can’t apologize enough for the fiasco we put you through. I’m so thankful for the patience we were extended by those that did hang on to the end. Thank you again.

The Re-Launch

On January 25th, 2016 we re-launched Smart Bedding to the public again. This time it was made from linen, we had a new manufacturer, and tons of hard-won experience.

You could finally buy the product, and it would ship immediately!

Smart Bedding 2.0 product photos. Ahhhh relief!

On the new launch day we sold $13,500 and $51,200 in first 7 days. Our goal was to do more than the original Kickstarter launch. We smashed that goal. Once we kicked in advertising, things really started to take off!

Eyeing further growth, we decided to expand Smart Bedding and began work on new products in the home goods space. For this expansion, we opted to rebrand and find a name that would work for a home goods company that sold more than just bedding. We eventually settled on the name Primary and acquired the domain

Roughly 1 year after the re-launch of Smart Bedding 2.0, we announced two major items:

  1. Smart Bedding would be re-named Primary
  2. Primary launched a mattress line
The Primary Mattress

The Acquisition

By this point, we were doing millions of dollars in combined annual revenue from the collection of e-commerce brands we started under Need/Want. For reasons I’ll write about in a future blog post, we decided we needed focus on less. We were just spread too thin.

We decided to sell Primary and began reaching out to our network. After a small bidding war started, we decided on a buyer we were excited about. Unfortunately, I’m contractually not allowed to disclose the acquisition price publicly, but we are happy with the acquisition. It gave us an infusion of cash and freed up our attention to focus on our other projects at Need/Want.

Primary is in good hands.

Lessons Learned Making A Physical Product

Smart Bedding was my first physical product that I created from scratch. I feel like I made every mistake in the book in building this business. Some lessons I learned the hard way:

  1. Make something that people actually want. As tough as the public scrutiny was, we knew people still wanted our product. This helped keep us going.
  2. Vet your manufacturer extremely well on the front end - contract a quality control agent to visit the factory, visit it yourself, or both.
  3. Use a trusted freight company. We now use Flexport for all of our shipments and have enjoyed a great relationship with them.
  4. Side projects can save you. In our case, having multiple sources of revenue helped us to survive and turn things around. There's a lot of blanket advice thrown around about focusing on 1 idea at a time, which I largely agree with. However, you have to figure out what's best for you at any given time. Having a couple projects going at the time is the single reason we were able to survive and turn things around.
  5. Kickstarters can be a blessing and a curse. It's awesome that you can fund a product with customer money and pre-orders. But if problems arise with your project, your failures are very public. You've made a commitment to your backers. If we had the money upfront to launch Smart Bedding and skipped Kickstarter altogether, our early failures and struggles would have been private. Everything would have been much less painful. It's a tradeoff.

Being stuck between a dishonest factory and 500 angry customers was one of the worst things I’ve ever gone through, but I’m glad we owned it. It was our fault for getting ourselves into the mess. As bad as things got, I’m glad we kept pushing and got through to the other side. The journey was infinitely longer and harder than I ever expected, but it was worth it – for the wisdom and the financial reward.

Want To Learn How To Make A Physical Products Of Your Own?

Have you always wanted to create a physical product? Not sure where to start, or stuck on something? I’ve been there. I’ve learned a ton on this journey building a 7-figure physical product business. I don’t want others to make the same mistakes I did.

I wrote a free book where I teach how to invent & manufacture physical products. It's an introduction to

  • ideation
  • prototyping
  • samples
  • sourcing
  • manufacturing
  • quality control
  • importing
  • and more

You’ll be equipped with the knowledge to build a profitable physical product business. Signup here to get the book for free ->

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