Process Solutions: The Process of Startups

This year, I plan to write about a more personal journey. A couple years ago, I, along with a former business associate and my wife, started a new soap business called Ti LeBlanc. While BPTrends has some of the finest business process practitioners in the world working with them, I don't see too much content for small business owners.

In fact, a few years ago when I was speaking on the topic of BPM for small business in London, I was shocked to find that they had put me in the biggest room at the conference. I figured with all the people representing larger corporations there, nobody would be interested in what I had to say. Was I ever wrong. The room was packed. Apparently, bigger organizations were hoping they could learn some tricks from people who work with smaller organizations.

Thus, I find myself back in the same situation, only this time I will be writing instead of speaking. I hope to publish a few Columns this year to share our progress and offer insight into what we learned as we apply everything we know about process management. This will by no means be a promotion of our business. I will be sharing some of the dirty underside as well as our victories.

First, Some Background

Dana, my former business associate, and I had remained friends after going our separate ways professionally. Prior to working together, we had both had successful startups. Neither of us were independently wealthy after selling our businesses, so we still have a desire to realize that dream. We also both have a background with business process management, although from different perspectives as you will learn. My wife, Elizabeth, has only been married to an entrepreneur, which I suppose makes her somewhat qualified.

When Dana approached me to tell me he was starting a soap company, I was intrigued. We had both been in the high tech industry for a long time although his former business was a furniture company, so he has more experience in low-tech enterprises than I. Why soap? He felt there was an unexploited opportunity in the marketplace and he convinced me of the same (more about this later). At the time, Elizabeth was looking to do something different and I thought this might be a fun business for her. Even though I had a job, I figured it would be fun to get my hands wet in entrepreneurship again.

So our saga began. I suspect that this year will be an interesting one for our little company. It isn't that often that people with experience in both BPM and startups try to bring all that they know to bare on a fledgling business. Hopefully, what happens this year will allow us to learn together.

Starting Small

You don't hear too much about process with regard to young businesses. This is for good reason. Small businesses have a number of advantages over larger organizations:

  • Everyone in a startup is an expert at something
  • Most processes are executed by exactly one person
  • There is less of everything (suppliers, customers, transactions)

There is less complexity in everything, too. In our company, Elizabeth does the online marketing and website updates, Dana handles sales, and I handle operations. Each of us has considerable general experience in our respective areas of responsibility. However, none of us has ever run a soap company before, so we must learn many things as we go.

Three and half years ago, I wrote a review of a book called The Lean Startup right here on BPTrends. That book has since become somewhat of a seminal work on the idea that startups are best run by iterating quickly with the goal of learning something and adapting in each iteration. I wanted to use these principles at the core of everything we do to see it work in practice (in my day job, which I still have, I use them successfully for different purposes).

When Dana came to us with his idea, he had already taken a soapmaking class. Elizabeth purchased some books and started experimenting with soapmaking recipes. I was the last of our triumvirate to learn the process. Nonetheless, given my role in the company, production level soapmaking largely falls to me these days, although both Dana and Elizabeth lend a hand when they are available.

The First Pivot

Eric Ries, the author of The Lean Startup, refers to the concept of a pivot. A pivot differs from the normal iterations that result in continuous improvement in that it entails an abandonment of the current direction.

When Dana started the company (before bringing us in), his notion was a company that would sell high quality, handcrafted soap to spas and boutiques. We decided to begin with online sales and eventually add retail. He chose the name Ti LeBlanc because is sounds like a French designer. Our tagline was “The Spa Experience.” At that time, we decided that we would contract with local soap makers to produce the product, thinking we could bring it in house as our volume grew.

We worked with our first soap maker to design our product and we were off to the races. Having had experience building websites, I created an ecommerce site. Most of our initial online sales were from people we knew. Despite considerable effort, we were not getting traction in online sales. We started to think that maybe our branding was not consistent with the types of people that would be likely to buy soap online.

After months of trying different approaches and even talking to a few retail outlets, we started to realize that our branding wasn't working. We reasoned that if we were to sell soap online, we should have a brand that speaks to millennials. One day, the idea of “Dirty Soap” came to me. It has a paradoxical quality about it that grabs one's attention. After some research, we discovered that we were not the first to think of it.

Additional brainstorming yielded our new brand “Gritty Soap.” We filed for an assumed name and acquired the URL. Basically, we started over. We needed a new website, new packaging and a new brand image. We were officially “edgy.” Our first tagline was “Kickin' Dry Skin's Ass!” Elizabeth didn't like it, but Dana and I thought is was just the sort of “in your face” message we wanted to send. We started talking with some millennials we know to get their feedback. They all seemed to like the branding concept, but only a few seemed interested in buying better soap. There was nothing left to do but to put it out there and see what happens.

Pivot Number Two…and Three!

After more months of blogging, promoting, making videos…basically doing all the things the online marketing books say you need to do…crickets. The website was not drawing sales. This had two effects, first we were not buying enough from our soap maker (now on our second due to some quality concerns with our first) to keep them interested in a wholesale relationship; and second, the realization none of us had ever built a successful online company. We were not playing to our strengths.

Most of Dana's experience in sales has been business to business or retail. So, we made two decisions at once: A) we would bring production in-house, and B) we would maintain the website, but focus on retail sales. These represented big changes, but indications are so far that they were the right choices.

Having consulted with many manufacturing businesses over the years, I felt somewhat qualified to productionize soapmaking. After all, people have been making soap this way for thousands of years. The process is called saponification. Basically, you create a chemical reaction by mixing fat with sodium hydroxide (lye) and water. This mixture is left to cure for varying amounts of time depending of what sort of fats you use. Different fats have different properties. Soap can contain animal fats or plant based fats (or a mix). We had already decided from the start to stay with plant based, sustainably produced fats. The hot mixture is poured into a mold to cool as the chemical reaction takes place.

The Basis for Choices

We could have purchased expensive equipment to productionize soap making this way. Most of the people who make soap like this are crafters who produce in small batches. We wanted to make sure that whatever we do could scale up. This informed our decision to design some of the key components of our production apparatus. Here, too, we applied the idea of iterations to create a mold that holds 10 pounds of soap, is easy to clean, and stores in a small area. After two iterations and some help from a neighbor, I was able to come up with a mold design that is easy to clean, stores flat and doesn't take too long to set up.

One observation that is key in designing manufacturing equipment is the amount of setup. Since all of us in the business at the moment are partners, our time is all “sweat equity.” As long as we are able to keep up, additional effort to complete steps in the process cost us nothing. However, I remain acutely aware that as we grow, I will be paying someone else to do this work. At that point, time will be real money.

We are noticing that in the very early stages of getting a business off the ground, revenue is in short supply. Thus, decisions are mostly optimized around conserving cash. The trade-off is almost always our time. As revenue begins to build, the equation shifts back towards time.

A good example of this is our cutter. We make soap in logs that must be cut into bars. Early research into available cutters quickly sent me back to the prototyping drawing board. Large cutters cost in excess of $500. I like to think of costs in terms of the number of bars of soap we need to sell. That's a lot of bars! So, using materials I had on-hand and some inexpensive components, I assembled the first prototype. It doesn't work very well, so I use it to mark the log in 1″ increments and then I cut it by hand. It currently takes me about 45 minutes to de-mold, cut and clean up after a 10 lb batch.

I already have ideas that could reduce the whole process to as little as 10 minutes. However, it will cost me a lot of bars of soap. We're not there yet.

The Journey Continues…

We've had our product in a few retail outlets for a bit over a month now. We've started to learn about retail merchandising and have had a few iterations to try to improve. In my next installment, I will discuss the experiments we conducted and the struggles we face in trying to isolate the effect of changes in an uncontrolled environment.

Tom Bellinson

Tom Bellinson

Mr. Bellinson has been working in information technology positions for 30 years. His diverse background has allowed him to gain intimate working knowledge in technical, marketing, sales and executive roles. Most recently, Mr. Bellinson finds himself serving as President of a BPM related software start-up company called UnaPage that provides solutions based on Microsoft SharePoint. From 2008 to 2011 Bellinson worked with at risk businesses in Michigan through a State funded program which was administered by the University of Michigan. Prior to working for the University of Michigan, Mr. Bellinson served as Vice President of an ERP software company, an independent business and IT consultant, as chief information officer of an automotive engineering services company and as founder and President of a systems integration firm that was a pioneer in Internet services marketplace. Bellinson holds a degree in Communications with a Minor in Management from Oakland University in Rochester, MI and has a variety of technical certifications including APICS CPIM and CSCP.
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Comments

  1. Claude Patou says:

    Much time is lost by startupers = much money.
    They begin from nothing, they recruit one person for one thing, and Go… Increment after increment, they run…
    And if they use stressing organization, it is able to drive directly in wall.
    Experiment has limits. Ok to innovate in the Grey Zone, but use good practices is not over…

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