My first official LLC was a simple resale business operated out of my garage like many others. I was familiar with PC hardware as I exposed myself at a young age, building computers for my friends and family. I wanted to capitalize on this, but the margins in the PC building scene we minimal. That is when I decided to enter the world of resale. So, I started calling up wholesalers, trying to see if anyone was willing to work with me. Lo and behold, Best Buy had a program that played into exactly what I was looking to do. I signed a contract with Best Buy for the right to bid on their damaged and overstock goods. My plan was to fix the items up and sell them on my platform.
Table of Contents
Big Tech Outlet
One of the fun parts about starting a business is selecting a name. I went through iterations ranging from complex yet meaningful to simple and direct. I opted for the latter and Big Tech Outlet was formed. Luckily my roommate had some graphic design skills and mocked up a simple logo for me to use.
As this was my first LLC, I had a lot of learning to do. From state registration and articles of incorporation, to opening a business bank account, registering a DBA, and tracking expenses properly. It took a while to get my legs under me, but before long I was up and running. Here was the plan:
- Officially open the business & necessary accounts
- Sign the Best Buy contract as the business
- Identify a profitable pallet to kick off the business
- Start by selling on Ebay as I build credibility on my personal website
- Over time, sell on Amazon
- Prioritize website sales
- Open a physical location if demand necessitates it
Challenges
Imports and Exports
I had much more limited space than imagined. I had an extra bedroom to store things in, but that is it. To address this, I had to buy smaller lots to start. I eventually moved to a house where the garage was repurposed.
I had limited ability import as I lived in a semi-inaccessible apartment complex. While I waited to move as mentioned above, I would regularly schedule a drop off at a nearby Walmart parking lot or dead end road. Thankfully, every truck driver I worked with was very cooperative and understanding. If I was not obviously a young newbie, I’m not sure I’d have the same luck. I would then load up my 06′ Honda Pilot with the goods and drive it back to the complex, unload it, and hope that nobody took what was remaining in the parking lot or end of the road. I would prioritize high value items first to minimize risk. Unfortunately, I lived on the third floor of the complex and there were no elevators, so unloading took a good amount of time. Don’t get me started on winter/rain unloads.
Credibility, Customers, and Capacity
Building credibility on Ebay was challenging. My no-status account trying to sell items below expected costs made sales volumes low to start. I couldn’t charge more and risk items not selling as there was limited space I had to store goods. If the spare bedroom was full, I would be unable to purchase more goods to sell.
Customer service was brutal. As I really got rolling in the world of resale, I quickly found the pains of customer service. Someone didn’t read the description, a package was lost, a package was damaged, product swapping upon delivery… This ended up being my #1, #2, or #3 reason to close down the business.
Constant shipping along with my class work at the time meant that I was always taking pictures of items, boxing them up, driving to the mail office, ordering more items, responding to inquires, etc. To try to balance the load, one of my friends helped deliver packages to the mail office when my availability was limited. This was another one of my top three reasons to close the business. If I was spending more of my time working on the tech that came in rather than taking pictures of it and boxing it up, this may have been more enjoyable.
The simple solution to some of these issues is to hire support. Unfortunately, my volume was low enough where I didn’t have reasonable capital to pay anyone as my margins were slim. Additionally, as I read about how to actually do this. The complexities involved with hiring someone were more than I felt comfortable trying to tackle on my own. I wanted insight from legal/HR individuals and unfortunately, I didn’t have the funding for that.
Lessons Learned
In addition to the above challenges and efficient ways to address them, I learned a handful of valuable lessons through this venture:
Money vs Time
I was operating at approximately 20% net margins and spending all of my free time running the business. While I could have continued this, I learned how to more appropriately evaluate how I should balance my time and income.
Fulfillment
This process taught me that I value impact. One may be able to argue that was I was doing was impactful (providing cheaper goods to the public), but I did not feel fulfilled with this work. I now know that, in order to feel successful and happy, I need to be doing something meaningful.
Similarly, I realized that my ego plays a role in that sense of satisfaction. There was a concept of “scalping” that aligned closely with what I was doing. I got a hold of items cheaply, so that I could charge more for them. The negative connotation associated with this term made me self conscious and not proud of the business I had started.
Business Accumen
One of the hard skills that I learned was how the business registration process works. Knowing this opened the door to following through on my ideas and other projects.
Quality vs Quantity
After a while, I have a high volume of sales. This led to the high shipping needs and posting challenges that I mentioned before. Due to this, I learned the value in selling higher value items rather than many lower value items, even if the margins may be slightly better. The challenge associated with the higher value items is the customer service risks mentioned above. If I am out one of the high value items, it could throw a whole month’s worth of income off.
Timing, Timing, Timing
Timing is everything. I was operating during a time of great GPU price inflation. People wanted the newest cards for gaming, people wanted the cards to mine crypto, people wanted the cards to resell. This product niche is where I was able to generate the most income as I grew familiar with the tricks and appropriate price for each item on the market.
Events
Because of the market conditions mentioned above, there were also events being held to help people get their hands on these cards. Because I was so in-tune to this market, I became aware of when these were happening. Out of everything I did with BTO, these events were the most profitable. These events enabled me to increase my margins to over 100% due to the current market price for the cards. Simply being aware of a specific market opens up great opportunities.
Shady Business and Anticompetitiveness
The last of my top three reasons to close this business was the shady competitors I was around. For players that have been in the game for over a decade, there was a reason. I was able to get insight into some of their numbers and it was shocking. Some organizations had direct lines to manufacturing, some sold faux goods, some had models that incorporated periodic scams alongside their legitimate business, and some even had deals with suppliers that make it nearly impossible to compete against.
The first though to cross my mind was how do I get some of these connections and become as profitable as them. Luckily, I stopped myself in that thought process and asked if that is really what I wanted to be doing, despite the profitability. It was not. So, I closed the business in hopes that not all industries are like what I had experienced in the world of resale.